UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012
oTRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-27873
CROWN MARKETING
(Exact name of registrant as specified in its charter)
Wyoming
98-0178621
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
1340 Environ Way, Chapel Hill, North Carolina
27517
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number: (919) 913-4762
Indicate by check mark whether registrant (1) has filed all reports 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. o Yes x No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). xYes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer (Do not check if smaller reporting company) | o | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
There were 190,067,600 shares of common stock issued and outstanding as of November 14, 2012.
CROWN MARKETING
PART I. FINANCIAL INFORMATION
Page(s)
Item 1.
Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2012 (unaudited) and
June 30, 2012
4
Unaudited Condensed Consolidated Statements of Operations for the three
month
periods ended September 30, 2012 and 2011
5
Unaudited Consolidated Statements of Cash Flows for the three month periods ended
September 30, 3012 and 2011
6
Notes to the Unaudited Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
13
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
16
Item 4.
Controls and Procedures
16
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
17
Item 1A.
Risk Factors
17
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
17
Item 3
Defaults Upon Senior Securities
17
Item 4.
Mine Safety Disclosures
17
Item 5.
Other Information
17
Item 6.
Exhibits
17
Signatures
18
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
3
CROWN MARKETING
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| SEPTEMBER 30 |
| JUNE 30, |
|
| 2012 |
| 2012 |
|
| (unaudited) |
|
|
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash and cash equivalents | $ | 15,229 | $ | 381 |
|
|
|
|
|
Total Current Assets |
| 15,229 |
| 381 |
|
|
|
|
|
Other Assets |
| 350 |
| 250 |
|
|
|
|
|
TOTAL ASSETS | $ | 15,579 | $ | 631 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
Notes payable | $ | 150,366 | $ | 9,666 |
Accrued interest |
| 235 |
| 91 |
Accounts payable |
| 5,193 |
| 5,193 |
Accounts payable - related party |
| 15,026 |
| 44,781 |
|
|
|
|
|
Total Current Liabilities |
| 170,820 |
| 59,731 |
|
|
|
|
|
Total Liabilities |
| 170,820 |
| 59,731 |
|
|
|
|
|
Stockholders' Deficiency |
|
|
|
|
Preferred stock, no par value, unlimited |
|
|
|
|
shares authorized; no shares issued and outstanding |
| -- |
| -- |
Common stock, no par value; unlimited shares |
|
|
|
|
authorized; 190,067,600 and 43,467,600 shares |
|
|
|
|
issued and outstanding, respectively |
| 49,260 |
| 21,160 |
Common stock subscription receivable |
| (112,298) |
|
|
Accumulated Deficit |
| (92,203) |
| (80,260) |
|
|
|
|
|
Total Stockholders' Deficiency |
| (155,241) |
| (59,100) |
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' |
|
|
|
|
DEFICIENCY | $ | 15,579 | $ | 631 |
See accompanying Notes to Consolidated Condensed Financial Statements.
4
CROWN MARKETING
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|
|
|
|
|
|
|
| FOR THE |
|
| FOR THE |
|
| FOR THE |
|
| PERIOD |
|
| THREE |
|
| THREE |
|
| JULY 8, 2009 |
|
| MONTHS |
|
| MONTHS |
|
| (INCEPTION) |
|
| ENDED |
|
| ENDED |
|
| THROUGH |
|
| SEPT. 30, 2012 |
|
| SEPT. 30, 2011 |
|
| SEPT. 30, 2012 |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
|
|
|
|
|
|
|
|
REVENUES | $ | -- |
| $ | -- |
| $ | 4,500 |
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD |
| -- |
|
| -- |
|
| 456 |
GROSS PROFIT |
|
|
|
|
|
|
| 4,044 |
|
|
|
|
|
|
|
|
|
EXPENSES |
| 12,097 |
|
| 1,118 |
|
| 96,310 |
|
|
|
|
|
|
|
|
|
Operating Loss |
| (12,097) |
|
| (1,118) |
|
| (92,266) |
|
|
|
|
|
|
|
|
|
OTHER INCOME (LOSS) |
|
|
|
|
|
|
|
|
Interest expense |
| 154 |
|
| -- |
|
| 63 |
|
|
|
|
|
|
|
|
|
NET OTHER INCOME (LOSS) |
| 154 |
|
| -- |
|
| 63 |
|
|
|
|
|
|
|
|
|
NET LOSS | $ | (11,493) |
| $ | (1,118) |
| $ | (92,203) |
|
|
|
|
|
|
|
|
|
Net Loss per share - basis and diluted | $ | (0.00) |
| $ | (0.00) |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
- basic and diluted |
| 64,793,687 |
|
| 43,467,600 |
|
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
5
CROWN MARKETING
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
| FOR THE |
|
| FOR THE |
|
| FOR THE |
|
| PERIOD |
|
| THREE |
|
| THREE |
|
| JULY 8, 2009 |
|
| MONTHS |
|
| MONTHS |
|
| (INCEPTION) |
|
| ENDED |
|
| ENDED |
|
| THROUGH |
|
| SEPT. 30, 2012 |
|
| SEPT. 30, 2011 |
|
| SEPT. 30, 2012 |
|
| (Unaudited) |
|
| (Unaudited) |
|
| (Unaudited) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | $ | (11,943) |
| $ | (20,175) |
| $ | (92,203) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
|
|
used in operating activities: |
|
|
|
|
|
|
|
|
Increase in accounts payable |
| -- |
|
| -- |
|
| 5,193 |
(Increase) in inventory |
| -- |
|
| (456) |
|
| -- |
Increase in accrued interest |
| 144 |
|
| -- |
|
| 235 |
Increase (decrease) in accounts payable related party |
| (29,755) |
|
| (5,000) |
|
| 15,026 |
Net cash used in operating activities |
| (41,554) |
|
| (6,574) |
|
| (71,749) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payment to acquire other assets |
| -- |
|
| -- |
|
| (250) |
Net cash used by investing activities |
| -- |
|
| -- |
|
| (250) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants |
| 55,702 |
|
|
|
|
| 55,702 |
Proceeds from sale of common stock |
|
|
|
|
|
|
|
|
and warrants |
| -- |
|
| -- |
| -- | 13,500 |
Proceeds from notes payable |
| 700 |
|
| -- |
|
| 10,366 |
Contribution to capital by officer |
| -- |
|
| -- |
|
| 7,660 |
Net cash provided by financing activities |
| 56,402 |
|
| -- |
|
| 87,228 |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and |
|
|
|
|
|
|
|
|
cash equivalents |
| 14,848 |
|
| (6,574) |
|
| 15,229 |
Cash and cash equivalents, beginning of period |
| 381 |
|
| 6,725 |
|
| -- |
Cash and cash equivalents, end of period | $ | 15,229 |
| $ | 151 |
| $ | 15,229 |
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
| |
Interest paid | $ | -- |
| $ | -- |
| $ | -- |
Income taxes paid | $ | -- |
| $ | -- |
| $ | -- |
|
|
|
|
|
|
|
|
|
Supplemental non cash activities: |
|
|
|
|
|
|
|
|
Fair value of common stock issued in exchange |
|
|
|
|
|
|
|
|
for the assignment of patent | $ | 100 |
| $ | -- |
| $ | 100 |
Stock subscription receivable | $ | 112,298 |
| $ | -- |
| $ | 112,298 |
See accompanying Notes to Condensed Consolidated Financial Statements
6
CROWN MARKETING
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2012
NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Company
Green4Green was organized as a Wyoming corporation on July 8, 2009. On July 14, 2010, Crown Marketing (the "Company"), a successor by merger to SPCL Holding Corporation, acquired Green4Green pursuant to an Agreement and Plan of Reorganization (the Agreement). The Company acquired all of the outstanding shares of Green4Green in exchange for 4,000,000 newly issued shares of the Company's Common Stock. Pursuant to the Agreement, the issued and outstanding common shares of Green4Green were exchanged on a one-for-one basis for common shares of the Company. After the merger was completed, the Green4Green shareholders owned approximately 98% of the outstanding shares of common stock of the Company. The transaction was accounted for as a reverse merger (recapitalization) with Green4Green deemed to be the accounting acquirer and the Company deemed to be the legal acquirer. The financial statements presented herein are those of the accounting acquirer given the effect of the issuance of 89,080 shares of common stock upon completion of the transaction. After the acquisition, the Company closed on the issuance of 240,000 shares of common and warrants for cash of $12,000 (See Note 5).
The Company is engaged in the wholesaling of generic pharmaceuticals to the developing world. The Company has not realized revenues from its planned principal business purpose and is considered to be in its development state in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities” (formerly Statement of Financial Accounting Standards (“SFAS”) No 7, “Accounting and Reporting by Development State Enterprises.”)
These consolidated financial statements include the accounts Green4Green and the Company. All intercompany transactions and accounts have been eliminated in consolidation.
Interim Financial Statements
The accompanying consolidated financial statements as of and for the periods ended September 30, 2012 and 2011 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the consolidated financial position, results and operations, changes in stockholders' deficiency and cash flows at September 30, 2012 and 2011 and for all periods presented herein, have been made. The results of operations for the periods ended September 30, 2012 and 2011 are not necessarily indicative of the operating results for the full years. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The results for the periods ended September 30, 2012 are not necessarily indicative of the results of operations for the full year.
Revenue Recognition
The Company recognizes sales in accordance with the United States Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”. The Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. Revenue is not recognized until title and risk of loss is transferred to the customer, which generally occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have been met.
7
CROWN MARKETING
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2012
NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Estimates
The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others, the fair value of shares issued for services. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.
Fair Value Measurements
Fair value measurements are determined using authoritative guidance issued by the FASB, with the exception of the application of the guidance to non-recurring, non-financial assets and liabilities as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.
Level 3—Unobservable inputs based on the Company's assumptions.
The Company is required to use observable market data if available without undue cost and effort.
The Company’s financial instruments include cash and cash equivalents, accounts payable, and accrued expenses. Management has estimated that the carrying amounts approximate their fair value due to the short-term nature.
Loss Per Share
Basic loss per share has been computed using the weighted average number of common shares outstanding and issuable during the period. Diluted loss per share is computed based on the weighted average number of common shares and all common equivalent shares outstanding during the period in which they are dilutive. Common equivalent shares consist of shares issuable upon the exercise of stock options, warrants or other convertible securities such as convertible notes. As of September 30, 2012 and September 30, 2011, common stock equivalents were comprised of warrants exercisable into 2,400,000 shares of the Company’s common stock. For the three months ended September 30, 2012 and 2011, and the period July 8, 2009 (inception) to September 30, 2012, common stock equivalent shares have been excluded from the calculation of loss per share as their effect is anti-dilutive.
8
CROWN MARKETING
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2012
NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-Based Compensation
The Company periodically issues stock instruments, including shares of its common stock, stock options, and warrants to purchase shares of its common stock to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option awards issued and vesting to employees in accordance with authorization guidance of the FASB whereas the value of stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service period. Options to purchase shares of the Company’s common stock vest and expire according to the terms established at the grant date.
The Company accounts for stock options and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete.
Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2011- In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. ASU No. 2011-4 does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Company adopted ASU No. 2011-04 effective January 1, 2012 and it did not affect the Company’s results of operations, financial condition or liquidity.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. The ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, and instead requires consecutive presentation of the statement of net income and other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. ASU No. 2011-5 is effective for interim and annual periods beginning after December 15, 2011. The Company does not expect that the adoption of ASU 2011-05 will affect the Company’s results of operations, financial condition or liquidity.
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU No. 2011-11 will be applied retrospectively and is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company does not expect adoption of this standard to have a material impact on its consolidated results of operations, financial condition, or liquidity.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
9
CROWN MARKETING
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2012
NOTE 2 - GOING CONCERN
The Company incurred a net loss of $11,943 for the nine months ended September 30, 2012. The Company's liabilities exceed its assets by $15,241 as of September 30, 2012. The Company has received limited revenues to date. These factors create substantial doubt about the Company's ability to continue as a going concern. The Company's management plans to continue as a going concern revolves around its ability to achieve, as well as raise necessary capital to pay ongoing general and administrative expenses of the Company.
The ability of the Company to continue as a going concern is dependent on securing additional sources of capital and the success of the Company's plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - RELATED PARTY TRANSACTIONS
Accounts payable-related party represent funds advance to the Company from an officer of the Company. The advances are unsecured, due on demand, and non-interest bearing.
During the year ended June 30, 2012, the Company had outstanding accounts payable of $44,781 due to Mr. Learned Hand, which represented expenses paid by him on behalf of the Company. Mr. Learned Hand did not have any relationship with the Company as of June 30, 2012; however in September 2012, he was elected as the Company’s director, and Chief Executive and Financial Officer following the resignation of predecessor director and Chief Executive Officer, Mr. Igor Produn. In the quarter ended September 30, 2012, Mr. Hand was repaid $40,000 of this amount, but he advanced an additional $6,244 during the quarter for Company expenses. In addition, a warrantholder exercised her warrants for the purchase of 8,000,000 shares at the exercise price of $56,000; however, this warrant holder paid $60,000 to the Company and the balance of $4,000 is being treated as a related party payable. The Company intends to repay these $4,000 presently.
NOTE 4 – INCOME TAXES
As of September 30, 2012 and June 30, 2012, the Company had net operating loss carryforwards of approximately $92,203 and $80,260, which expire in varying amounts between 2017 and 2027. Realization of this potential future tax benefit is dependent on generating sufficient taxable income prior to expiration of the loss carryforward. The deferred tax asset related to this (and other) potential future tax benefits has been offset by a valuation allowance in the same amount. The amount of the deferred tax asset ultimately realizable could be increased in the near term if estimates of future taxable income during the carryforward period are revised.
Deferred income tax assets of $32,271 and $28,091 at September 30, 2012 and June 30, 2012, respectively were offset in full by a valuation allowance.
The components of the Company's net deferred tax assets, including a valuation allowance, are as follows:
As of
As of
Sept. 30, 2012
June. 30, 2012
Net deferred tax assets before
valuation allowance
$
32,271
$
28,091
Less: Valuation Allowance
(93,271)
28,091
Net deferred tax assets
--
--
10
CROWN MARKETING
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2012
NOTE 4 – INCOME TAXES - CONTINUED
A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:
As of
As of
September 30, 2012
June 30, 2012
Tax expense at the U.S.
statutory income tax
$
35%
(35%)
Statutory state income tax
--
--
Increase in valuation allowance
35%
35%
Effective tax rate
--
--
Due to the inherent uncertainty in forecasts and future events and operating results, the Company has provided for a valuation allowance in an amount equal to gross deferred tax assets resulting in the above figures for the periods audited.
NOTE 5 – STOCKHOLDERS’ DEFICIENCY
The Company has authorized an unlimited number of shares of preferred stock, no par value, with such rights, preferences and designation and to be issued in such series as determined by the Board of Directors. No shares of preferred stock are issued and outstanding at September 30, 2012 or June 30, 2012.
The Company has authorized an unlimited number of shares of no par value common stock, of which 190,067,600 and 43,467,600 shares are outstanding at September 30, 2012 and June 30, 2012, respectively. All share numbers in these financial statements have been retroactively adjusted for a 10-for-1 forward stock split declared in September 2012 and effective for shareholders of record as of October 2, 2012.
In the fiscal year ended June 30, 2011, the Company issued 957,600 shares in the reverse acquisition as described in Note 1.
In July 2010, the Company sold 240,000 units of its common stock for an aggregate consideration of $12,000. Each unit consisted of 10 shares of common stock and 100 warrants to acquire a share of the Company’s common stock at an exercise price of $0.007 per share with expiration date on December 31, 2014 (24,000,000 warrants in aggregate). As of June 30, 2012 and 2011, the Company has outstanding and exercisable warrants of 24,000,000 resulting from this transaction.
In March 2011, the Company sold 110,000 shares of its common stock for cash for net proceeds of $1,100.
The officer and director contributed $7,200 in cash to the Company in March, 2011, and $60 in the quarter ended December 31, 2011.
11
By resolution of the Board of Directors dated August 30, 2012, the Company authorized a 10-for-one forward stock split for all shareholders of record as of October 2, 2012. All share amounts in these financial statements have been retroactively restated to reflect the stock split as if it had been effected at the beginning of the earliest period presented.
Class A Warrants to purchase 8,000,000 shares were exercised for cash of $56,000 on August 14, 2012, and the remaining Class A Warrants to purchase 16,000,000 shares were exercised on August 28, 2012 in exchange for promissory notes in the amount of $112,000. During the three months ended September 30, 2012, the Company accrued interest receivable of $298 in connection with these notes.
By resolution dated September 20, 2012, the Board of Directors authorized the issuance of 122,600,000 restricted shares and a promissory note in the amount of $140,000 for the assignment of two patents and the related intellectual property from a party which was non-affiliated at the time; in connection with this assignment, the party nominated a new President, Chief Financial Officer and director who is an affiliate of the assignor. The assignment took effect on September 22, 2012. The Company has valued the patent and shares exchanged at the predecessor basis in the property exchanged because the assignor gained control of the Company after the transaction.
NOTE 6 – NOTE PAYABLE
The note payable represents (a) amounts loaned to the Company during fiscal 2012 and the three months ended September, 2012 quarter, and (b) a note payble for $140,000 issued in connection with the acquisition of intellectual property. Both notes are represented by written unsecured notes with interest at 4%; the first note is payable on demand and the other note is payable in five years.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statement Notice
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Crown Marketing,(“we”, “us”, “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
Plan of Operations
Critical Accounting Policies and Estimates
Principles of consolidation. The condensed consolidated financial statements include the accounts of the Company and its subsidiary. All significant inter-company balances and transactions are eliminated on consolidation.
Use of estimates. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation on useful lives of property, plant and equipment. Actual results could differ from those estimates.
Plan of Operations
We did not enjoy any revenues until the quarter ended December 31, 2011. We had losses of $12,097 and $1,118 for the three months ended September 30, 2012 and 2011, respectively. Our operating expenses in the 2011 quarter consisted primarily of costs related to the purchase, warehousing and transport of inventory; in the 2012 quarter, the expenses primarily were incurred in connection with the costs of being public and effecting a forward stock split. With the acquisition of the controlled release technology in September, 2012, the Company intends to ramp up its level of operations in connection with the development and exploitation of that technology. We expect that our operating, research and development costs and marketing costs will increase substantially through June 30, 2013 and we expect to require a total of $862,000 in cash during that time period. We received $56,000 in August 2012 from the exercise of Class A Warrants. We believe we will be able to receive, prior to December 31, 2012, the remaining $112,000 due on promissory notes from warrants exercised in the quarter ended September 30, 2012, and that this amount will cover our operating expenses through that time. After December 31, 2012, we will need approximately $750,000 for marketing and development. Due to our limited operating history, we believe that we will not be able to obtain conventional bank loans to provide our cash needs and we will need to sell common equity to raise the required funds. We have no arrangement or understanding pursuant to which we might obtain such funding.
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Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. ASU No. 2011-4 does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Company adopted ASU No. 2011-04 effective January 1, 2012 and it did not affect the Company’s results of operations, financial condition or liquidity.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. The ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, and instead requires consecutive presentation of the statement of net income and other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. ASU No. 2011-5 is effective for interim and annual periods beginning after December 15, 2011. The Company does not expect that the adoption of ASU 2011-05 will affect the Company’s results of operations, financial condition or liquidity.
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU No. 2011-11 will be applied retrospectively and is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company does not expect adoption of this standard to have a material impact on its consolidated results of operations, financial condition, or liquidity.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
Forward Looking Statements
Information included in this report includes forward looking statements, which can be identified by the use of forward-looking terminology such as may, expect, anticipate, believe, estimate, or continue, or the negative thereof or other variations thereon or comparable terminology. The statements in "Risk Factors" and other statements and disclaimers in this report constitute cautionary statements identifying important factors, including risks and uncertainties, relating to the forward-looking statements that could cause actual results to differ materially from those reflected in the forward-looking statements.
Since we have not yet generated any signnificant revenues, we are a development stage company as that term is defined in Section 915 - Development Stage Entities, of the FASB Accounting Standards Codification. Our activities have mostly been devoted to seeking capital; seeking supply contracts and development of a business plan. Our auditors have included an explanatory paragraph in their report on our financial statements, relating to the uncertainty of our business as a going concern, due to our lack of operating history or current revenues, its nature as a start up business, management's limited experience and limited funds. We do not believe that conventional financing, such as bank loans, is available to us due to these factors. We have no bank line of credit available to us. Management believes that it will be able to raise the required funds for operations from one or more future offerings, in order to effect our business plan.
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Our future operating results are subject to our attaining certain milestones, including:
o our success in entering into favorable arrangements to license or exploit our technolog;
o the success of our marketing efforts;
o our ability to obtain additional financing; and
o other risks which we identify in future filings with the SEC.
Any or all of our forward looking statements in this report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward looking statement can be guaranteed. In addition, we undertake no responsibility to update any forward-looking statement to reflect events or circumstances which occur after the date of this report.
Contractual Obligations and Off-Balance Sheet Arrangements
We do not have any contractual obligations or off balance sheet arrangements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company’s principal executive officer and its principal financial officer, based on his evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d -14 (c) as of September 30, 2012. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective to enable us to accurately record, process, summarize and report certain information required to be included in the Company’s periodic SEC filings within the required time periods, and to accumulate and communicate to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2012 that have materially affected or are reasonably likely to materially affect our internal controls.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to or otherwise involved in any legal proceedings.
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
Item 1A. Risk Factors.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
There have been no events which are required to be reported under this Item.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
31. Certification of CEO and CFO.
32. Certification pursuant to 18 U.S.C. Section 1350 of CEO and CFO
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Dated: November 19, 2012 | By: | /s/ Learned Hand |
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| CEO and Chief Financial Officer (chief financial and accounting officer and duly authorized officer) |
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CERTIFICATION
I, Learned Hand, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Crown Marketing;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 19, 2012 |
EXHIBIT 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Crown Marketing (the "Company") on Form 10-Q for the period ending September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Learned Hand, Chief Executive and Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
November 19, 2012
/s/ Learned Hand
Learned Hand
Chief Executive and Financial Officer
(Principal Executive Financial Officer)
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Commitment and Contingencies
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Sep. 30, 2012
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| Commitments and Contingencies Disclosure | NOTE 2 - GOING CONCERN
The Company incurred a net loss of $11,943 for the nine months ended September 30, 2012. The Company's liabilities exceed its assets by $15,241 as of September 30, 2012. The Company has received limited revenues to date. These factors create substantial doubt about the Company's ability to continue as a going concern. The Company's management plans to continue as a going concern revolves around its ability to achieve, as well as raise necessary capital to pay ongoing general and administrative expenses of the Company.
The ability of the Company to continue as a going concern is dependent on securing additional sources of capital and the success of the Company's plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. |