|• RELIABRAND FORM 10K 06-30-2012 • SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER • SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER • SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER • SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER • XBRL INSTANCE DOCUMENT • XBRL TAXONOMY EXTENSION SCHEMA • XBRL TAXONOMY EXTENSION CALCULATION LINKBASE • XBRL TAXONOMY EXTENSION DEFINITION LINKBASE • XBRL TAXONOMY EXTENSION LABEL LINKBASE • XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE|
UNITED STATES 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 June 30, 2012
o Transition Report Pursuant to Section 13or 15(d) of The Securities Exchange Act of 1934
COMMISSION FILE NUMBER: 000-54300
(State of Incorporation)
(IRS Employer ID Number)
430 Banks Road Suite 100, Kelowna, BC V1X 6A3
(Address of principal executive offices)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark if disclosure of delinquent filers in pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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 filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act) o Yes x No
State the issuer's revenues for its most recent fiscal year. $13,600
State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and ask prices of such stock as of a specified date within 60 days $19,713,360.
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained in Part III, Item 13.
TABLE OF CONTENTS
This report on Form 10-K and the documents or information incorporated by reference herein contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, among others, the following:
We identify forward-looking statements by use of terms such as "may," "will," "expect," "anticipate," "estimate," "hope," "plan," "believe," "predict," "envision," "intend," "will," "continue," "potential," "should," "confident," "could" and similar words and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual results could differ materially from those contained in the forward-looking statements. You should consider carefully the statements under the "Risk Factors" section of this report and other sections of this report which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.
Forward-looking statements speak only as of the date of this report or the date of any document incorporated by reference in this report. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
ITEM 1 - DESCRIPTION OF BUSINESS OVERVIEW
Our Corporate Organization
The Company was incorporated in the State of Nevada, United States of America on February 22, 2007 as Startale Group, Inc. and its fiscal year end is June 30.
Our name was changed to Alco Energy Inc. effective May 21, 2008 and on June 4, 2009, our name was changed to A & J Venture Capital Group, Inc. On February 4, 2011, we changed our name to Reliabrand Inc.
Our principal offices are located at 430 Banks Road, Suite 100, Kelowna, BC V1x 6A3. Our telephone number is (778) 478-9997.
On January 20, 2011, Reliabrand Inc. fka A & J Venture Capital Group, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Agreement”) with 0875505 B.C. Ltd. (“0875505 BC”), a British Columbia, Canadian company. This transaction closed on April 26, 2011.
The Company acquired multiple patents and trademarks previously owned by Adiri, Inc. (“Adiri”) and ultimately acquired by 0875505 BC. These patents and trademarks relate to a baby bottle and related components that 0875505 BC expended approximately $1,500,000 in acquiring and further development. The Company issued 35,000,000 shares of its common stock, par value $.0001, to 0875505 BC for these assets.
ITEM 1 - DESCRIPTION OF BUSINESS OVERVIEW - continued
Our Business - continued
The Company acquired from 0875505 BC all right, title, interest, applications and registrations of all the trademarks and patents of Adiri acquired by 0875505 BC in the following jurisdictions: Australia, Brazil, Canada, Chile, China, Columbia, the European Union, Hong Kong, Israel, Japan, Mexico, New Zealand, Russia, South Africa, South Korea, Switzerland, Taiwan, and the United States. There are four U.S. patents, one European Patent (EP) patent application (valid until 2019), and one Canadian patent covering Adiri’s unique breast shaped nipple There are additional U.S. utility & design patent applications pending as well as a Patent Cooperation Treaty (PCT) application filed along with numerous International Registered Trademarks.
With the acquisition of these assets including the patents and trademarks, the Company has developed and has begun manufacturing a newer version of the Adiri baby bottles and related components such as sippy cups. The Company intends to aggressively promote and market the bottles and hopes to secure retail distribution outlets for the bottles. To achieve that goal, the Company has begun negotiation with large retail chains to supply the Adiri bottles for sale to retail customers. The Company manufactures the baby bottles and accessories in China.
Presently, the Company is selling the baby bottles through its online website but is seeking retail distribution as well. The Company is presently in discussion with distributors of baby bottles and related products in over 20 countries worldwide. To date, the Company has not entered into any definitive agreements with any of these distributors.
Overall, during the next 12 months, we cannot predict accurately the amount of capital that we will need to accomplish our plan of operations. The capital needed will vary depending on the projects that we seek. If during the next 12 months, we are unsuccessful in effectuating our plan of operations as described above, we expect to incur total expenditures of at least $500,000. In this regard and during such period, we anticipate spending $100,000 on professional fees attributable to fulfilling our reporting obligations under the federal securities laws and $50,000 on general administrative costs and expenditures associated with complying with reporting obligations. We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our marketing plan and operations. We believe that debt financing will not be an alternative for funding the marketing plan. We do not have any agreements or arrangements in place for any future equity financing event. If we are required to raise additional funds, substantial dilution may result to existing shareholders.
Competitive Business Conditions, Competitive Position in the Industry and Methods of Competition
The Company will compete with much larger companies in the baby bottle and related baby products that are much larger, have significantly longer operating histories and are much better capitalized as well as having well-known names that consumers know. The Company’s competitive position within the industry is negligible in light of the fact. Older, well-established baby bottle companies with records of success currently attract customers. The Company expects to compete with these companies based on the unique design of the Company’s baby bottles and components. Mr. Markus, the Company’s sole officer and director, presently devotes his full time to its operations.
Dependence on One or a Few Major Customers
The Company presently has no customers and there can be no assurances that we will be able to secure and retain any customers.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, Including Duration
At present, the Company has the patents and trademarks it acquired from 0875505 BC Ltd. In April, 2011 as described above. The Company has filed additional patent and trademark applications and anticipates making additional filings in the future as the Company begins manufacturing products.
The Company’s web site, www.reliabrand.com, is copyrighted under United States law and is a registered domain name owned directly by the Company.
Need For Governmental Approval of Principal Products or Services
None of the principal products or services offered by the Company requires governmental approval.
ITEM 1 - DESCRIPTION OF BUSINESS OVERVIEW - continued
Research and Development
The Company currently intends to produce the Adiri baby bottle and components. As the Company generates anticipated revenues from the future sales of baby products, the Company may begin research and development into other baby products. At the present time, the Company does not have any research and development (“R & D”) personnel and it may not ever reach the level of operations and revenues which would be required to sustain such an R & D department. If an R & D department is established, there can be no assurances that the R & D would be successful in developing or patenting any new products or enhancements on existing patents or that any such potential patents would generate any significant revenue, if any, to the Company.
The Company has not expended any material amount in research and development activities during the last two fiscal years.
Number of Total Employees and Number of Full-Time Employees
The Company presently has no full time employees with the exception of Mr. Markus, its CEO, who devotes substantially all of his time to the Company’s operations. The Company utilizes the services of outside consultants as needed.
ITEM 1A. - RISK FACTORS
In addition to the other information included in this Form 10-K, the following risk factors should be considered in evaluating the Company’s business and future prospects. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to the Company and its business. You should also read the other information included in this Form 10-K, including the financial statements and related notes.
We lack an operating history and have losses which we expect to continue into the future.
There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, our business will fail. We were incorporated on February 28, 2007 and we have realized minimal revenues to date. We have very little operating history upon which an evaluation of our future success or failure can be made. Our net loss since inception on February 28, 2007 to June 30, 2012 is $1,364,775. Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and are just beginning to generate revenues. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
If we do not obtain additional financing, our business may fail.
Our business plan calls for ongoing expenses in connection with the marketing and sales of our baby products. We have not generated any significant revenue from operations to date. In order to expand our business operations, we anticipate that we will have to raise additional funding. If we are not able to raise the funds necessary to fund our business expansion objectives, we may have to delay the implementation of our business plan. We do not currently have any arrangements for financing. Obtaining additional funding will be subject to a number of factors, including general market conditions, investor acceptance of our business plan and initial results from our business operations. These factors may impact the timing, amount, terms or conditions of additional financing available to us. The most likely source of future funds presently available to us is through the sale of additional shares of common stock.
We have few customers and we cannot guarantee we will ever have any significant amount of customers. Even if we obtain customers, there is no assurance that we will make a profit.
We have few customers. We have not identified any customers and we cannot guarantee we ever will have any. If we are unable to attract enough customers once we commence sales of our baby bottles, we will have to suspend or cease operations.
Because we are small and do not have much capital, we must limit marketing our services to potential customers and distributors. As a result, we may not be able to attract enough customers to operate profitably. If we do not make a profit, we may have to suspend or cease operations.
Because we are small and do not have much capital, we must limit marketing our website and personal contacts to potential customers. The promotion of our products via our website is how we will initially generate revenues. Because we will be limiting our marketing activities, we may not be able to attract enough customers to buy our products to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.
Because our management does not have prior experience in the marketing and sale of products via the Internet, we may have to hire individuals or suspend or cease operations.
Because our management does not have prior experience in retail sales via the Internet, we may have to hire additional experienced personnel to assist us with our operations. If we need the additional experienced personnel and we do not hire them, we could fail in our plan of operations and have to suspend operations or cease operations entirely.
ITEM 1A. - RISK FACTORS - continued
Any change to government regulation/administrative practices may have a negative impact on the ability to operate and profitability.
The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.
The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate profitably.
Because our auditors have expressed substantial doubt about our ability to continue as a going concern, we may find it difficult to obtain additional financing.
The accompanying financial statements have been prepared assuming that we will continue as a going concern. As discussed in Note 2 to the financial statements, we were recently incorporated, and we do not have a history of earnings, and as a result, our auditors have expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.
Risks Related to Our Stock
The OTC Bulletin Board is a quotation system, not an issuer listing service, market or exchange. Therefore, buying and selling stock on the OTC Bulletin Board is not as efficient as buying and selling stock through an exchange. As a result, it may be difficult for you to sell your common stock or you may not be able to sell your common stock for an optimum trading price.
The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last sale prices and volume limitations in over-the-counter securities. Because trades and quotations on the OTC Bulletin Board involve a manual process, the market information for such securities cannot be guaranteed. In addition, quote information, or even firm quotes, may not be available. The manual execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute or the execution of a market order at a significantly different price. Execution of trades, execution reporting and the delivery of legal trade confirmations may be delayed significantly. Consequently, one may not be able to sell shares of our common stock at the optimum trading prices.
When fewer shares of a security are being traded on the OTC Bulletin Board, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Lower trading volumes in a security may result in a lower likelihood of an individual’s orders being executed, and current prices may differ significantly from the price one was quoted by the OTC Bulletin Board at the time of the order entry.
Orders for OTC Bulletin Board securities may be cancelled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received and processed by the OTC Bulletin Board. Due to the manual order processing involved in handling OTC Bulletin Board trades, order processing and reporting may be delayed, and an individual may not be able to cancel or edit his order. Consequently, one may not able to sell shares of common stock at the optimum trading prices.
The dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of securities on the OTC Bulletin Board if the common stock or other security must be sold immediately. Further, purchasers of securities may incur an immediate “paper” loss due to the price spread. Moreover, dealers trading on the OTC Bulletin Board may not have a bid price for securities bought and sold through the OTC Bulletin Board. Due to the foregoing, demand for securities that are traded through the OTC Bulletin Board may be decreased or eliminated.
ITEM 1A. - RISK FACTORS - continued
Risks Related to Our Stock - continued
We are subject to the penny stock rules and these rules may adversely affect trading in our common stock.
Our common stock is a “low-priced” security under rules promulgated under the Securities Exchange Act of 1934. In accordance with these rules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer’s duties in selling the stock, the customer’s rights and remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination approving the customer for low-priced stock transactions based on the customer’s financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent from the customer, and provide monthly account statements to the customer. The effect of these restrictions decreases the willingness of broker-dealers to make a market in our common stock, decreases liquidity of our common stock and increases transaction costs for sales and purchases of our common stock as compared to other securities.
Our stock price may be volatile, which may result in losses to our stockholders.
Historically, the market prices of companies quoted on the Over-The-Counter Bulletin Board, generally have been very volatile and have experienced sharp share price and trading volume changes.
The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:
In general, domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, the market prices for stocks of companies in volatile markets often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely. In certain instances, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.
We will incur increased costs and compliance risks as a result of being a public company.
As a public company, we will incur significant legal, accounting and other expenses. We will incur costs associated with our public company reporting requirements. We also anticipate that we will incur costs associated with recently adopted corporate governance requirements, including certain requirements under the Sarbanes-Oxley Act of 2002, as well as new rules implemented by the SEC and the Financial Industry Regulatory Authority (“FINRA”). We expect these rules and regulations, in particular Section 404 of the Sarbanes-Oxley Act of 2002, to significantly increase our legal and financial compliance costs and to make some activities more time-consuming and costly. Like many smaller public companies, we face a significant impact from required compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires management of public companies to evaluate the effectiveness of internal control over financial reporting and the independent auditors to attest to the effectiveness of such internal controls and the evaluation performed by management. The SEC has adopted rules implementing Section 404 for public companies as well as disclosure requirements. The Public Company Accounting Oversight Board, or PCAOB, has adopted documentation and attestation standards that the independent auditors must follow in conducting its attestation under Section 404. We are currently preparing for compliance with Section 404; however, there can be no assurance that we will be able to effectively meet all of the requirements of Section 404 as currently known to us in the currently mandated time frame. Any failure to implement effectively new or improved internal controls, or to resolve difficulties encountered in their implementation, could harm our operating results, significantly increase our accounting and compliance budget, cause us to fail to meet reporting obligations or result in management being required to give a qualified assessment of our internal controls over financial reporting or our independent auditors providing an adverse opinion regarding management’s assessment. Any such result could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.
ITEM 1A. - RISK FACTORS - continued
Risks Related to Our Stock - continued
We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance if we chose to do so in the future. Thus, we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
If we fail to maintain the adequacy of our internal controls, our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock price to decrease substantially.
We have committed limited personnel and resources to the development of the external reporting and compliance obligations that would be required of a public company. We have taken measures to evaluate how we can address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations in connection with joining a public company, when and as such requirements become applicable to us. Prior to taking these measures, we did not believe we had the resources and capabilities to do so. We plan to obtain additional financial and accounting resources to support and enhance our ability to meet the requirements of being a public company. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls, reporting systems or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.
U.S. investors may experience difficulties in attempting to effect service of process and to enforce judgments based upon U.S. federal securities laws against the company and its sole non-U.S. resident officer and director.
Our director and sole officer, Antal Markus, is not resident of the United States. Consequently, it may be difficult for investors to effect service of process on Mr. Markus in the United States and to enforce in the United States judgments obtained in United States courts against Mr. Markus based on the civil liability provisions of the United States securities laws. Since substantially all of our tangible assets are located in Canada, it may be difficult or impossible for U.S. investors to collect a judgment against us. Further, any judgment obtained in the United States against us may not be enforceable in Canada.
We do not expect to pay dividends in the foreseeable future.
We have never paid any dividends on our common stock. We do not expect to pay cash dividends on our common stock at any time in the foreseeable future. The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our board of directors will consider. Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock.
We have the right to issue additional common stock without the consent of shareholders. This would have the effect of diluting your ownership in the company and could decrease the value of your stock.
There are additional authorized but unissued shares of our common stock that may be later issued by our management for any purpose without the consent or vote of the stockholders that would dilute a stockholder’s percentage ownership of the company. Our articles of incorporation authorize the issuance of up to 150,000,000 shares of common stock.
ITEM 1B. - UNRESOLVED STAFF COMMENTS
ITEM 2 – DESCRIPTION OF PROPERTY
Our principal offices are located at 430 Banks Road, Suite 100, Kelowna, BC V1X 6A3. Our telephone number is (778) 478-9997. We are not obligated under any long term operating leases.
ITEM 3 - LEGAL PROCEEDINGS
No officer, director, or persons nominated for these positions, and no promoter or significant employee of our corporation has been involved in legal proceedings that would be material to an evaluation of our management. We are not aware of any pending or threatened legal proceedings which involve Reliabrand Inc., its directors or officers. Our Bylaws provide that we shall have a minimum of one director. There is no stated maximum number of directors allowed but such number may be fixed from time to time by action of the stockholders or of the directors. Our address for service of process in Nevada is 1645 Village Center Circle, Las Vegas, NV 89134.
ITEM 4 – MINE SAFETY DISCLOSURES
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company’s common stock is currently listed on the OTC Bulletin Board under the symbol “RLIA.” Prior to April 5, 2011, the Company’s stock was listed on the OTC Bulletin Board under the symbols “AJVE”, “ACOE” and “SLEG”.
For the period from November 12, 2007 to date, the table sets forth the high and low closing bid prices based upon information obtained from inter-dealer quotations on the OTC Bulletin Board without retail markup, markdown, or commission and may not necessarily represent actual transactions.
Recent Sales of Unregistered Securities
In April, 2012, we sold 550,000 shares of our common stock to an unrelated third party for $.10 per share. In May, 2012, we sold 2,500,000 shares of our common stock to an unrelated third party for $.10 per share. In May, we issued a total of 13,625,000 shares of our common stock at $.04 per share in connection with debt conversion. The Company relied on exemptions from registration under Regulation S, Regulation D and Section 4(2) of the Securities Act of 1933, as amended.
As of June 30, 2012, we have 59,677,000 shares of our Common Stock issued and outstanding held by 98 shareholders of record.
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - continued
The Company has never paid any cash dividends on its capital stock and does not anticipate paying any cash dividends on the Common Stock in the foreseeable future. The Company intends to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.
Securities Authorized For Issuance under Equity Compensation Plans
Increase of authorized common stock shares
On April 26, 2012, the Company increased its authorized shares of common stock from 100,000,000 to 150,000,000.
ITEM 6 - SELECTED FINANCIAL DATA
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. Please see “Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
The following discussion and analysis of the Company’s financial condition and results of operations are based on the Company’s financial statements, which the Company has prepared in accordance with U.S. generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Plan of Operations
The Company’s strategy is to manufacture baby bottles and the related components initially and to offer those products for sale via the Company’s website or through distributors throughout the world.
Overall, during the next 12 months, we cannot predict accurately the amount of capital that we will need to accomplish our plan of operations. The amount of capital needed will vary depending on the projects that we seek. If during the next 12 months, we are unsuccessful in effectuating our plan of operations as described above, we expect to incur total expenditures of at least $500,000. In this regard and during such period; we anticipate spending $100,000 on professional fees attributable to fulfilling our reporting obligations under the federals securities laws and $50,000 on general administrative costs and expenditures associated with complying with reporting obligations. We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our marketing plan and operations. We believe that debt financing will not be an alternative for funding the marketing plan. We do not have any arrangements in place for any future equity financing. If we are required to raise additional funds, substantial dilution may result to existing shareholders. Our auditors have raised substantial doubt concerning our ability to continue as a going concern. Please see our audited financial statements contained in our Form 10-K for the period ended June 30, 2012.
Results of Operations for the Year Ended June 30, 2012 and the Year Ended June 30, 2011
We had revenues of $13,600 for the year ended June 30, 2012 compared to no revenue for the year ended June 30, 2011.
During the year ended June 30, 2012, we incurred operating expenses in the amount of $813,129. These operating expenses were comprised of amortization and depreciation expenses, accounting and audit fees, consulting fees, rent expense, general and management expenses, and transfer agent fees. This compared to operating expenses of $284,749 for the year ended June 30, 2011.
As of June 30, 2012, we had total assets of $1,806,130 and total liabilities of $165,333 compared to total assets of $1,651,414 and total liabilities of $177,810 as of June 30, 2011. Of the total assets as of June 30, 2012, current assets were $251,550 and consisted of cash of $27,247, inventory of $171,505, deposits of $4,292 and prepaid expenses of $48,506. Other assets were $1,554,580 and consisted of patents of $1,303,348, intellectual properties of $143,828, net furniture of $28,796, and product molds of $78,608.
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
Results of Operations for the Year Ended June 30, 2012 and the Year Ended June 30, 2011 - continued
On January 20, 2011, we entered into an Asset Purchase Agreement (the “Agreement”) with 0875505 B.C. Ltd. (“BC Ltd”), a British Columbia, Canadian company. The Agreement provided for us to acquire multiple patents and trademarks acquired by BC Ltd through a receivership proceeding of Adiri, Inc. (“Adiri”). Adiri was granted the initial patents and trademarks. These patents and trademarks relate to a baby bottle and related components that BC Ltd expended approximately $1,500,000 in cash in acquiring and further development; as of December 31, 2010 the patents and related expenses to acquire and maintain the patents, had a net book value, which approximates fair value, of $1,436,768. As part of the Agreement, the Company also acquired $100,000 in cash, total note receivables and accrued interest in the amount of $63,296, resin inventory of $8,160, pacifier inventory of $6,000, product molds of $5,266, assumed an executory contract with a plastics manufacturer, and assumed accounts payable of approximately $45,176. In exchange, at the closing on April 26, 2011 we issued 35,000,000 shares of our common stock, par value $.0001, post-split. As a condition to the Agreement, we had to implement our previously authorized 100-to-1 reverse stock split (Note 8) and change the Company’s name to “Reliabrand, Inc.” (Note 1).
During the year ended June 30, 2012, our current President was reimbursed for advances made to the Company totaling $20,128.
On May 2, 2011, we issued to our current President 10,000 shares of Class A Preferred Stock in exchange for him returning and cancelling nine million (9,000,000) shares of our common stock.
On September 30, 2010, we issued 7,500,000 shares of our restricted common stock to our current President and director for agreeing to serve our Company in that capacity, valued at $.002 per share for a total expense of $15,000 which is reflected in consulting fees. Additionally, on September 30, 2010, we issued 7,500,000 shares of our restricted common stock to our current President for payment of outstanding invoices, totaling $15,000, owed to him for consulting services.
In January 2011, we rented office space in Canada on a month to month basis for approximately $800 CAD per month (approximately $807 USD per month based on historical rates); beginning in February 2011 we took on more space within the office and began paying approximately $1,860 CAD per month (approximately $1,900 USD per month based on historical rates). Rent expense under this lease was $22,235 and $11,591 for the years ended June 30, 2012 and 2011, respectively.
We began generating revenue for the year ended June 30, 2012 and had revenues of $13,600 for the year ended June 30, 2012. However, we continue to be dependent upon obtaining financing to pursue marketing and distribution activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during the periods shown. The Company does not anticipate paying dividends in the near future, if ever.
Liquidity and Capital Resources
As of June 30, 2012 and 2011, the Company had a cash balance of $27,247 and $29,873, respectively.
Through June 30, 2012, we had sold $493,255 in equity securities to pay for our business operations. We sold 135,000 post-split (13,500,000 pre-split) shares of common stock to 30 unaffiliated shareholders on August 23, 2007 for total proceeds of $29,193 pursuant to Regulation S of the Securities Act. We subsequently filed a Registration Statement on the Form SB-2 for this offering on October 2, 2007 and became effective on October 12, 2007. We have used these funds as working capital for administrative expenses and professional fee payments to third parties. Also, we sold 180,000 post-split (18,000,000 pre-split) shares of common stock to a former officer and directors on June 29, 2007 and August 6, 2007 for total proceeds of $6,000, which shares were returned to treasury and canceled in September 2010.
On May 25, 2010, we sold $35,500 in equity securities to pay for our business operations. We issued a total of 17,750,000 shares of our common stock in this private placement pursuant to Regulation S of the Securities Act.
In September 2010, we issued a total of 15,000,000 shares of our common stock to our current President and Director for agreeing to serve our Company and for his services through September 30, 2010. On May 2, 2011, 9,000,000 of these shares were returned and canceled in exchange for the issuance of 10,000 shares of our preferred Series A stock.
In April 2011, we issued 35,000,000 shares of our common stock to 0875505 BC Ltd. as payment for assets acquired under the Asset Purchase Agreement.
Additionally, we issued 1,199,500 and 225,000 shares as payment to certain vendors for services during the years ended June 30, 2012 and 2011, respectively.
If the Company is not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to it, this could have a material adverse effect on its business, results of operations liquidity and financial condition.
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
Liquidity and Capital Resources - continued
The Company presently does not have any available credit, bank financing or other external sources of liquidity, other than the net proceeds from the Offering. Due to its brief history and historical operating losses, the Company’s operations have not been a source of liquidity. The Company will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, the Company may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that the Company will be successful in obtaining additional funding.
The Company will need additional investments in order to continue operations. Additional investments are being sought, but the Company cannot guarantee that it will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of the Company’s common stock and a downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to collect significant amounts owed to it, or experience unexpected cash requirements that would force it to seek alternative financing. Further, if the Company issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of the Company’s common stock. If additional financing is not available or is not available on acceptable terms, the Company will have to curtail its operations.
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates, and the recognition of revenues and expenses for the reporting periods. These estimates and assumptions are affected by management's application of accounting policies.
Beginning June 1, 2009, we leased office space from our former President under a non-cancelable operating lease for 670 Euros per month (approximately $960 USD per month based on historical rates). The lease expired on May 31, 2010, and converted to a month to month basis on June 1, 2010; we continued the month to month rental from June 2010 through August 2010, when our former President resigned and we closed this office. In January 2011 we rented office space in Canada on a month to month basis for approximately $800 CAD per month (approximately $807 USD based on historical rates); beginning in February 2011 we took on more rental space within the office and began paying approximately $1,860 CAD per month (approximately $1,900 USD based on historical rates). Rent expense was $11,591 and $11,270 for the years ended June 30, 2011 and 2010, respectively. For the year ended June 30, 2011 our current President advanced funds for rent totaling $9,868; this amount was included in the balance owed to him classified under shareholder advances.
In June 2011, the Company entered into an agreement with Nova Genisis Ltd. for it to create product molds for certain types of baby bottles for $52,026. The agreement called for the Company to make a prepaid deposit of $25,000, which the Company paid on June 9, 2011. In September 2011, we entered into an additional agreement for additional product molds for $40,290. The molds were completed in the beginning of October, and put into service on December 1, 2011, and have begun to amortize these over the useful life of three years, in accordance with our intangible assets policy. As of June 30, we have fully paid for the molds.
On September 6, 2011, we entered into a non-cancellable contract to purchase 72,000 baby bottles and components from a 3rd party supplier in the amount of $135,360, and we have fully pre-paid this commitment. In the year ended June 30, 2012, we purchased an additional $119,372 of inventory from the same 3rd party supplier; we have fully paid for all the product shipments. As of June 30, 2012, we found that we had defective and substandard products, we have checked our inventory and have destroyed and disposed of the unusable inventory and recorded an inventory loss of $110,397 which is reflected in our statement of operations.
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Inflation has not materially impacted our results of operations in recent years.
As of June 30, 2012 and 2011, the Company’s management believes that there are no outstanding legal proceedings which would have a material adverse effect on the financial position of the Company.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8 - FINANCIAL STATEMENTS
Board of Directors
Report of Independent Registered Public Accounting Firm
We have audited the consolidated balance sheets of Reliabrand Inc. (formerly A&J Venture Capital, Inc.) as of June 30, 2012 and 2011, and the related statements of operations, stockholders’ equity and cash flows for each of the years then ended and the cumulative period from February 22, 2007 (date of inception) to June 30, 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit over its internal control over financial reporting. Our 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, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Reliabrand Inc. (formerly A&J Venture Capital, Inc.) as of June 30, 2012 and 2011, the results of operations, stockholders’ equity and its cash flows for the each of the years then ended and the cumulative period from February 22, 2007 (date of inception) to June 30, 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has earned $13,600 in revenue since inception and has an accumulated deficit $1,364,775, which raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
/s/ Farber Hass Hurley LLP
Farber Hass Hurley LLP
September 28, 2012
Granada Hills, CA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - continued
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - continued