10-K 1 g2910.txt ANNUAL REPORT FOR THE YEAR ENDED 12-31-08 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURUTIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2008 Commission File Number 333-144287 Rosca, Inc. (Exact name of Registrant as specified in its charter)
Nevada 5810 20-8552192 (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employee incorporation or organization) Classification Code Number) Identification No.)
1286 University Ave. #708, San Diego, CA 92103 775-352-4149 (Address of principal executive offices) (Registrant's telephone number, including area code) With copies to: Christian Mancillas, CEO Jill Arlene Robbins, Attorney at Law 1286 University Ave. #708 1224 Washington Ave. San Diego, CA 92103 Miami Beach, Florida 33139 Phone: 775-352-4149 Telephone: (305) 531-1174 Fax: 775-981-9119 Fax: (305) 531-1274 (Name, address and telephone number of agent for service) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Stock, $.001 par value Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 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 [ ] Accelerated Filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do Not Check if a Smaller Reporting Company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] As of February 9, 2009, the registrant had 8,500,000 shares of common stock issued and outstanding. No market value has been computed based upon the fact that no active trading market had been established. ROSCA, INC. TABLE OF CONTENTS Page No. -------- Part I Item 1. Business 3 Item 1A. Risk Factors 8 Item 2. Properties 12 Item 3. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Securities Holders 13 Part II Item 5. Market for Common Equity and Related Stockholder Matters 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 8. Financial Statements 19 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 29 Item 9A. Controls and Procedures 29 Part III Item 10. Directors and Executive Officers 32 Item 11. Executive Compensation 33 Item 12. Security Ownership of Certain Beneficial Owners and Management 34 Item 13. Certain Relationships and Related Transactions 34 Item 14. Principal Accounting Fees and Services 34 Part IV Item 15. Exhibits 35 Signatures 35 2 PART I ITEM 1. BUSINESS OVERVIEW OF OUR BUSINESS Since our inception, our business plan has been to operate tequila bars located in major tourist locations on the east and west coasts of Mexico. Our plan focused on beginning operations with our first tequila bar location in the western state of Baja, Mexico at Cabo San Lucas. We chose to open our first site in Cabo San Lucas because it is one of Mexico's fastest growing popular tourist cities. The reality of a world-wide financial slowdown and recessionary economic trends have forced us to dramatically slow down our operating plans and postpone our initial tequila bar opening until 2009. We estimate that we will not be able to generate significant revenues from sales during the next twelve months. In order to achieve our business plan goals, we will need to generate additional funding. At this time in the financial markets there has been a major reduction in investor and lender willingness to provide capital to new businesses throughout the world. Our efforts to seek additional funding this year have encountered high levels of resistance to our inquiries for new sources of cash flows. We realize we must generate new sources of funding in addition to that provided by our director. We intend to continue our efforts to find new sources of capital funding over the next twelve months. If we do secure additional funding, our plan is to locate and secure a lease site for our first proposed tequila bar business in 2009. We estimate we need a leased site of approximately 800 square feet at a cost of approximately $350 per month. With proper funding we plan to remodel the rental site and purchase furniture and equipment at estimated cost of $2,800. Our initial purchase of liquor inventory is estimated at $2,000 and food inventory at estimated $800. We will need to secure our first liquor license at an estimated cost of $500. We plan to hire one bartender and one assistant at $600 per month. Our director has loaned and has committed verbally to continue to loan our company funds in order to maintain operating capital in our start-up phase. We are now seeking outside sources of capital in order to open our retail tequila bar business. While we seek additional funding, we will continue advance our business plan at a slower pace and remain current in our corporate filings and obligations while financial resources are available. We are seeking additional capital through possible sales of our equity securities or through loans from banks or third parties to continue our business plan. Our shares are listed on the OTCBB under the symbol RSCA. To date there has been no active trading market. We have a total of 75,000,000 authorized common shares with a par value of $0.001 per share and 8,500,000 common shares issued and outstanding as of December 31, 2008. Of the outstanding shares 4,000,000 shares are held by Christian Mancillas, our officer and director, and 4,500,000 shares are held by 45 independent investors. PRINCIPAL PRODUCTS AND THEIR MARKETS Rosca, Inc. intends to market and sell bottled and blended tequila in retail locations throughout Mexico. We intend to market and sell various distillations of tequila styles. Our plan is to open retail stores to sell artisan and hand-crafted tequila by the bottle or case to retail consumers. 3 Our plan is to utilize the experience of management in the tequila industry to develop product lines, inventory, and distribution channels to the bottled spirits industry. We intend to have small tequila bars that provide an atmosphere for tequila tasting. Customers will be able to sit and sip various tequilas, tequila blended drinks, and enjoy an assortment of appetizers. Customers will be able to purchase tequila by the case or bottle during their patronage of our establishment. TEQUILA is a Mexican liquor distilled from the fermented juices obtained from the hearts of blue agave plants grown in the Tequila Region. The liquor gets its name from the town of Tequila located in the state of Jalisco where production started more than 200 years ago. Contrary to popular thought, tequila is not made from cactus. The agave is a member of the Lily family, a plant also known as Maguey in Mexico. Tequila comes from five states in Mexico: Jalisco, Nayarit, Guanajuato, Michoacan and Tamaulipas. There are more than 400 agave varieties. Only one type, however, is permitted in the production of tequila. The Agave Tequilana Weber or Blue Agave. Each plant, or pina, can grow to as much as 150 pounds and take 8 to 12 years to reach maturity. The blue agave has long bluish green spiny leaves with sharp points and a large heart (called pina or pineapple) from which the juices are extracted and then distilled twice. One liter of distilled tequila requires about seven kilos (15 pounds) of agave pulp. Tequila is famous around the world for its unique taste and bouquet and it is also the great mixer used in Margaritas, a popular cocktail. HOW TEQUILA IS MADE BLUE AGAVE The process of tequila begins when a blue agave plant is ripe, usually 8 to 12 years after it is planted. Leaves are chopped away from its core by a "jimador" who assesses the plants ripeness. If the plant is harvested too soon, there won't be enough sugars to do the job. Too late and the agave's sugars will have already been used to form a once-in-a-lifetime stem "quiote" that springs 25 to 40 feet high so that the seeds grown at the top of the stem can scatter with the wind. The jimador's task is a crucial one; once he decides that the plant is ready, he wields a special long knife known as a "coa" to clear the core. The cores or pinas weigh an average of 40 to 70 pounds, and can weigh up to 200 pounds. Pinas are hauled to the distillery where they are cut in half or chopped and put to roast. Starches turn to sugar as the pinas are roasted in furnaces called "hornos". Modern distilleries use huge steam ovens to increase output and save on energy. Roughly speaking, seven kilos (15 lb.) of agave pina are needed to produce one liter (one quart U.S.) of tequila. FERMENTATION The roasted pinas are then shredded, their juices pressed out and placed in fermenting tanks or vats. Some distilleries use the traditional method to produce tequila. In this method -artesian tequila- the cores are crushed with a 4 stone wheel at a grinding mill called "tahona" and the fibers are dumped into the wooden vat to enhance fermentation and to provide extra flavor. Once the juices are in the vats yeast is added. Every distiller keeps its own yeast as a closely guarded secret. During fermenting, the yeast acts upon the sugars of the agave plant converting them into alcohol. DISTILLATION Juices ferment for 30 to 48 hours then they are distilled twice in traditional copper stills or more modern ones made of stainless steel or in continuous distillation towers. The first distillation produces a low-grade alcohol and the second a fiery colorless liquid that is later blended before being bottled. Alcohol content may be between 70 and 110 Proof. All types of tequila start with this colorless distilled spirit. Each type will be called depending on its aging. TYPES OF TEQUILAS Tequila can only be produced in Mexico, in the Tequila Region, and must comply with strict Mexican government regulations. In order to satisfy an ever-growing demand and a multitude of consumer's preferences and tastes, tequila is produced in two general categories and four different types in three of those categories. The two categories are defined by the percentage of juices coming from the blue agave: TEQUILA 100% AGAVE Must be made with 100% blue agave juices and must be bottled at the distillery in Mexico. It may be Blanco, Reposado, or Anejo. TEQUILA Must be made with at least 51% blue agave juices. This tequila may be exported in bulk to be bottled in other countries following the NOM standard. It may be Blanco, Gold, Reposado, or Anejo The NOM standard defines four types of tequila: BLANCO OR SILVER This is the traditional tequila that started it all. Clear and transparent, fresh from the still tequila is called Blanco (white or silver) and must be bottled immediately after the distillation process. It has the true bouquet and flavor of the blue agave. It is usually strong and is traditionally enjoyed in a "caballito" (2 oz small glass). ORO OR GOLD Is tequila Blanco mellowed by the addition of colorants and flavorings, caramel being the most common. It is the tequila of choice for frozen Margaritas. 5 REPOSADO OR RESTED It is Blanco that has been kept (or rested) in white oak casks or vats called "pipones" for more than two months and up to one year. The oak barrels give Reposado a mellowed taste, pleasing bouquet, and its pale color. Reposado keeps the blue agave taste and is gentler to the palate. These tequilas have experienced exponential demand and high prices. ANEJO OR AGED It is Blanco tequila aged in white oak casks for more than a year. Maximum capacity of the casks should not exceed 600 liters (159 gallons). The amber color and woody flavor are picked up from the oak, and the oxidation that takes place through the porous wood develops the unique bouquet and taste. RESERVA Although not a category in itself, it is a special Anejo that certain distillers keep in oak casks for up to 8 years. Reserva enters the big leagues of liquor both in taste and in price. We have been unable to maintain or increase our cash balance this year. We will need additional funds which we plan to raise through sales of our equity securities and possibly loans from banks or third parties to continue our business plan. No assurances can be given that we will be able to raise additional funds to satisfy our financial requirements. At some point, even with reduced operations, we may determine we our business operations will cease due to a lack of financial resources. We may seek other potential business opportunities that might be available to us. There are no assurances that we will be successful in finding other business opportunities, or that we will have financial resources required to secure any other possible business opportunities. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCTS We have not publicly announced any new products. COMPETITION Businesses specializing in unique segments of the bar service industry are plentiful and very competitive. Our competitors range from small boutique bars to well established large bar chains. A few of these competitors include Housongs, Senor Frog, and Delirio's. We plan to locate our proposed Tequileria bars in resort and tourist areas within easy walking distance to hotels and marinas that service cruise ships. We believe we will need to provide quality bar products, good service, and a friendly atmosphere in order to be successful in business against the many competitors that will continue to exist in the future. Those competitors will continue to be unique boutique bars with many loyal local patrons and the large bar chains that have greater capital and advertising resources than us. 6 SOURCES AND AVAILABILITY OF PRODUCTS We will purchase our food, beverages and supplies from company-approved local suppliers. All products will have to meet standards and specifications set by the company. Management will constantly monitor the quality of the spirits, food, beverages and supplies provided. We will negotiate price concessions from suppliers for bulk purchases of food and miscellaneous supplies used by us. We believe that these arrangements will achieve cost savings as well as excellent quality and consistency. DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS We feel that, because of the potential wide base of customers, there will be no problem with dependence on one or few major customers. PATENTS AND TRADEMARKS We currently have no patents or trademarks for our products or brand name; however, as business is established and operations expand, we may seek such protection. Despite efforts to protect our proprietary rights, since we have no patent or trademark rights unauthorized persons may attempt to copy aspects of our business. Any encroachment upon our proprietary information, including the unauthorized use of our brand name, the use of a similar name by a competing company or a lawsuit initiated against us for infringement upon another company's proprietary information or improper use of their trademark, may affect our ability to create brand name recognition, cause customer confusion and/or have a detrimental effect on our business. Any litigation or adverse proceeding resulting from such could result in substantial costs and diversion of resources and could seriously harm our business operations and/or results of operations. NEED FOR GOVERNMENTAL APPROVAL OF PRINCIPAL PRODUCTS Prior to opening our Tequileria we will be subject to new licensing and regulation by health and safety and fire agencies in the city in which we are located. The failure to receive or retain the required permit or license could have a material adverse effect on operations. The failure to comply with other applicable laws, such as wage and hour laws, may also materially and adversely affect our business. GOVERNMENT AND INDUSTRY REGULATION We will be subject to federal laws and regulations that relate directly or indirectly to our operations including securities laws. We will also be subject to common business and tax rules and regulations pertaining to the operation of our business, including, but not limited to, those that impose restrictions, levy a fee or tax, or require a permit or license on the service of food and alcoholic beverages. RESEARCH AND DEVELOPMENT ACTIVITIES Other than time spent researching our proposed business we have not spent any funds on research and development activities to date. 7 ENVIRONMENTAL LAWS Our operations are not subject to any environmental laws. EMPLOYEES AND EMPLOYMENT AGREEMENTS We currently have one employee, our executive officer who devotes 5 hours per week to our business and is responsible for all aspects of our business. There are no formal employment agreements between the company and our current employees. REPORTS TO SECURITIES HOLDERS We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements, including filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. RISK FACTORS WE ARE A DEVELOPMENT STAGE COMPANY AND MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN AND MAY NOT BE ABLE TO CONTINUE OPERATIONS WITHOUT REVENUES. A note provided by our independent auditors in our financial statements for the year ended December 31, 2008 contains an explanatory note that indicates that we are a development stage company and our ability to continue as a going concern and to emerge from the development stage is dependent on our ability to attain profitable operations. We have limited capital and have accumulated losses since inception. These factors raise substantial doubt about our ability to continue as a going concern. To date there has been no revenues. In a development stage company, management devotes most of its activities to raising capital and developing a market for its products and services. The accompanying consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize assets and discharge liabilities in the normal course of business. We have not generated any revenues and have never paid any dividends. Nor are we likely to pay dividends or generate significant earnings in the immediate or foreseeable future. Our accumulated losses since inception are $57,257. These factors raise substantial doubt regarding our ability to continue as a going concern. 8 This "going concern" note to our financial statements may make it more difficult for us to raise equity or debt financing if needed in the future to run our business and is not viewed favorably by analysts or investors. WE LACK AN OPERATING HISTORY AND HAVE LOSSES THAT WE EXPECT TO CONTINUE INTO THE FUTURE. IF OUR LOSSES CONTINUE, WE MAY HAVE TO SUSPEND OR CEASE OPERATIONS. We have had no significant operating history upon which an evaluation of our future success or failure can be made. Since inception on February 21, 2007, our cumulative net loss is $57,257. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to generate revenues from our planned business operations. Without the generation of any revenues we will likely have to suspend or cease the initiation of our business plan. Based upon current plans, we expect to incur $34,000 in operating losses in the next 12 months. This will happen because there are expenses associated with the development and implementation of our business plan. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues or raise any financing if needed may cause us to go out of business. WE ARE NEW TO THE TEQUILERIA MARKETPLACE WITH A LIMITED HISTORY OF OPERATIONS AND, AS A RESULT, OUR ABILITY TO OPERATE AND COMPETE EFFECTIVELY MAY BE AFFECTED NEGATIVELY. We are relatively new to the Tequileria marketplace and have no operating history upon which to judge our current operations. As a result, it is difficult to fairly assess our future operating performance or our future financial results or condition by comparing our limited operating history against our past or present equivalents. Also, the development, management and marketing of alcohol products are characterized by rapid changes, including frequent introductions of new products, services, and industry standards. Our future success will depend on our continued ability to adapt to these changes and continually improving our products and services, as well as, the development and maintenance of the organizational infrastructure necessary to support our proposed business. There is the risk that we will not be able to effectively adapt to the continual industry changes. Also, if we are unable to develop and introduce enhanced or new products and services quickly enough to respond to market or industry requirements or to comply with emerging industry standards, or if our products and services do not achieve market acceptance, we may not be able to compete effectively. WE MAY NOT HAVE SUFFICIENT FUNDS TO COMPLETE OUR PROPOSED PLAN OF OPERATION AND WE MAY HAVE TO SUSPEND OR CEASE OPERATIONS. Our business plan of operation is limited and restricted by the amount of working capital that we have and are able to generate from business operations. 9 Currently we do not have sufficient funds to complete our proposed plan of operation. As a result, we may have to delay or cease our operations. As of December 31, 2008, we had $4,388 in cash. At any phase of our plan of operation our cost estimates exceed our projections, and we find that we do not have adequate funds to complete a phase, we may have to suspend our operations and attempt to raise more money so we can proceed with our business operations. If we cannot raise the capital to proceed, we may have to suspend operations until we have sufficient capital. We will also require additional financing if the costs of the proposed phases of the plan of operation are greater than anticipated. Furthermore, we will require additional financing to sustain our business operations if we are not successful in earning revenues from our business operations. We can provide no assurance to investors that we will be able to find additional financing if required. Any sale of additional shares will result in dilution to existing shareholders, which may, as a result, depress our stock price, if a trading market in our common stock develops. FAILURE TO SUCCESSFULLY COMPETE IN THE TEQUILERIA INDUSTRY WITH ESTABLISHED DISTRIBUTORS, WHOLESALERS AND RETAILERS MAY RESULT IN OUR INABILITY TO CONTINUE WITH OUR BUSINESS OPERATIONS. The Tequileria industry is experiencing rapid growth and expansion in all areas of product offerings to consumers. It is intensely competitive and is expected to become even more competitive in the near future. We compete with a number of companies which have considerably greater financial, personnel, marketing, and technical and operating resources. Consequently, such competitors may be in a better position than us to take advantage of market needs and opportunities, and devote greater resources to the marketing and sale of their products and services. Many of our current competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. Some of these well established competitors include Housongs, Senor Frog, and Delirio's. Some of our competitors may be able to secure merchandise from suppliers on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing or inventory availability policies, and devote substantially more resources to their product acquisition and marketing activities than we do. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We cannot assure you that we will be able to compete successfully against current and future competitors. Competitive pressures created by any one of our competitors could have a negative impact on our business, results of operations and financial condition and as a result, we may not be able to continue with business operations. OUR OFFICER AND DIRECTOR CURRENTLY DEVOTES ONLY PART TIME SERVICES TO THE AFFAIRS OF OUR COMPANY. ACCORDINGLY, HE MAY ENCOUNTER A CONFLICT OF INTEREST REGARDING TIME COMMITMENTS TO OTHER BUSINESS OBLIGATIONS. THIS MAY NEGATIVELY AFFECT OUR OPERATIONS. 10 Our officer and director has other obligations that currently prevents him from devoting his full time to our operations. Accordingly, he will devote only an amount of his time that he, in his sole discretion, feels is necessary for our success and is not consumed by other commitments. This time may not be sufficient for us to be successful. This will slow our operations and may reduce our chance to be successful and as a result, we may not be able to continue with our business operations. SINCE OUR MANAGEMENT LACKS ANY FORMAL TRAINING OR EXPERIENCE IN OPERATING A TEQUILERIA, WE MAY HAVE TO HIRE OR RETAIN QUALIFIED PERSONNEL, INCLUDING INDEPENDENT CONSULTANTS. IF WE ARE UNABLE TO HIRE OR RETAIN ANY QUALIFIED PERSONNEL, WE MAY HAVE TO SUSPEND OR CEASE OPERATIONS. Although we believe that our management possesses significant experience with tequila, such experience has been primarily limited to management in a tequila manufacturer and not the Tequileria business. Because of this limited experience, we may be forced to hire or retain qualified management, employees or consultants to perform administrative, sales or marketing roles related to our business. In addition, since our management has limited experience in these areas, he may not be fully aware of all of the specific requirements related to working within this industry. Accordingly, management's decisions and choices may not take into account standard managerial approaches companies may commonly use. Consequently, our operations, earnings, and ultimate financial success could suffer irreparable harm due to management's lack of experience in this industry. As a result, we may have to suspend or cease operations. WE WILL BE DEPENDENT UPON THIRD PARTIES AND CERTAIN STRATEGIC RELATIONSHIPS, INCLUDING THE SUPPLIERS AND DISTRIBUTORS OF THE PRODUCTS WE INTEND TO SELL. We will be dependent on our relationships with certain retailers, brokers, suppliers and distributors. We do not have long term contracts or arrangements with any supplier of products; therefore there is no assurance of availability of inventory. Our failure to obtain the services of any person or entity upon which we are dependent, or the inability to replace such relationship, if lost, or if our suppliers were to stop supplying us products on acceptable terms or at all, would have a negative effect on our business. Specifically, all or any of these would have a material adverse impact on our business prospects, financial condition and results of operations. This would be especially true if we were not able to acquire products from other suppliers in a timely manner and on acceptable terms. OUR BUSINESS EXPOSES US TO POTENTIAL PRODUCT LIABILITY CLAIMS, AND WE MAY INCUR SUBSTANTIAL EXPENSES IF WE ARE SUBJECT TO SUCH LIABILITY CLAIMS OR LITIGATION; THIS CAN RESULT IN A NEGATIVE IMPACT ON OUR BUSINESS ESPECIALLY SINCE WE DO NOT MAINTAIN LIABILITY INSURANCE COVERAGE. 11 Tequila products involve an inherent risk of product liability claims and associated adverse publicity. We may be held liable if any product we sell causes injury or is otherwise found unsuitable. Currently, we do not carry any product liability insurance or general business coverage. A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs. These costs would have the effect of increasing our expenses and diverting management's attention away from the operation of our business, and could harm our business. CONSUMER PREFERENCES ARE DIFFICULT TO PREDICT AND MAY CHANGE A significant shift in consumer demand away from our products, if one develops, or tequila products, in general, or our failure to maintain a market position, if one develops, could reduce our sales, which could harm our business. While we plan to diversify our product offerings, we cannot be certain that there will be a demand for our products, or if one develops, if it will continue in the future. Our business will be primarily focused on sales of tequila products in markets geared to consumers of tequila, which, if consumer demand for such categories were to decrease, could harm our business. OUR GROWTH, IF ANY, IS DEPENDENT ON THE ABILITY TO INTRODUCE NEW PRODUCTS AND IMPROVE EXISTING PRODUCTS Our intended growth depends in large part on our ability to generate and implement improvements to our existing product lines and to introduce new products to consumers. The innovation and product improvements are affected by the level of funding that can be made available, our success or failure to test new product prototypes, and the success of our management in securing suppliers of the product. If we are unsuccessful in implementing product offerings that satisfy the demands of consumers, our business could be harmed. ITEM 2. PROPERTIES We do not own any property. We maintain our corporate offices at 1286 University Ave. #708, San Diego, CA 92103. Our telephone number is (775) 352-4149. Our director provides us with this office space at no charge. We do not currently maintain any other office facilities, and do not anticipate the need for maintaining any additional office facilities at any time in the foreseeable future. We currently have no investment policies as they pertain to real estate, real estate interests or real estate mortgages. ITEM 3. LEGAL PROCEEDINGS We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions. 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the security holders during the year ended December 31, 2008. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is listed on the Over-the-Counter Bulletin Board (OTCBB) under the symbol RSCA. There has been no active trading in our shares. PENNY STOCK RULES The Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). A purchaser is purchasing penny stock which limits the ability to sell the stock. Our shares are considered penny stock under the Securities and Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the Commission, which: - contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; - contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities Act of 1934, as amended; - contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the bid and ask price; - contains a toll-free telephone number for inquiries on disciplinary actions; 13 - defines significant terms in the disclosure document or in the conduct of trading penny stocks; and - contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer: - the bid and offer quotations for the penny stock; - the compensation of the broker-dealer and its salesperson in the transaction; - the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and - monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities. HOLDERS As of December 31, 2008, we have 8,500,000 shares of $0.001 par value common stock issued and outstanding held by 46 shareholders of record. The stock transfer agent for our securities is Island Stock Transfer. DIVIDENDS We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on its common stock. Any future determination to pay dividends will be at the discretion of the Board of Directors and will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects, and other factors that the board of directors considers relevant. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS There were no shares of common stock or other securities issued to the issuer or affiliated purchasers during the year ended December 31, 2008. 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS STATEMENTS CONTAINED HEREIN WHICH ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS AS THAT TERM IS DEFINED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED. THE COMPANY CAUTIONS INVESTORS THAT ANY FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, WITHOUT LIMITATION: ESTABLISHED COMPETITORS WHO HAVE SUBSTANTIALLY GREATER FINANCIAL RESOURCES AND OPERATING HISTORIES, REGULATORY DELAYS OR DENIALS, ABILITY TO COMPETE AS A START-UP COMPANY IN A HIGHLY COMPETITIVE MARKET, AND ACCESS TO SOURCES OF CAPITAL. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS FORM 10-K. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE CAUTIONARY STATEMENTS MADE IN THIS FORM 10-K SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS FORM 10-K. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE. RESULTS OF OPERATIONS We have generated no revenues since inception and have incurred $57,257 in expenses through December 31, 2008. The following table provides selected financial data about our company for the years ended December 31, 2008 and 2007. Balance Sheet Data: 12/31/08 12/31/07 ------------------- -------- -------- Cash $ 4,388 25,444 Total assets $ 4,388 25,444 Total liabilities $ 31,645 25,945 Shareholders' equity $(27,257) (501) From inception of the Company (February 21, 2007) to December 31, 2008, the Company issued 8,500,000 common shares. 4,000,000 shares were issued at $0.003 per share for total proceeds of $12,000. These shares were issued to the director and officer of the Company. 4,500,000 shares were issued at $0.004 per share for total proceeds of $18,000 pursuant to the company's SB-2 Registration Statement filed with the U.S. Securities and Exchange Commission which became effective on July 25, 2007. The shares were issued to 45 unaffiliated shareholders. The offering was completed on August 31, 2007. We have been unable to maintain or increase our cash balance this year. We will need additional funds which we plan to raise through sales of our equity securities and possibly loans from banks or third parties to continue our business plan. No assurances can be given that we will be able to raise 15 additional funds to satisfy our financial requirements. At some point, even with reduced operations, we may determine we our business operations will cease due to a lack of financial resources. We may seek other potential business opportunities that might be available to us. There are no assurances that we will be successful in finding other business opportunities, or that we will have financial resources required to secure any other possible business opportunities. PLAN OF OPERATION If we are able to secure additional funding, our plan is to locate and secure a lease site for our first proposed tequila bar business during 2009. We estimate we need a leased site of approximately 800 square feet at a cost of approximately $350 per month. With proper funding we plan to remodel the rental site and purchase furniture and equipment at estimated cost of $2,800. Our initial purchase of liquor inventory is estimated at $2,000 and food inventory at estimated $800. We will need to secure our first liquor license at an estimated cost of $500. We plan to hire one bartender and one assistant at $600 per month. Our director has loaned and has committed verbally to continue to loan our company funds in order to maintain operating capital in our start-up phase. We are now seeking outside sources of capital in order to open our retail tequila bar business. While we seek additional funding, we will continue to advance our business plan at a slower pace and remain current in our corporate filings and obligations while financial resources are available. We are seeking additional capital through possible sales of our equity securities or through loans from banks or third parties to continue our business plan. LIQUIDITY AND CAPITAL RESOURCES Our cash balance at December 31, 2008 was $4,388. We believe our existing cash balance plus loans from our director and possible additional funding from the sale of our equity securities or outside loan sources will be sufficient to fund our operations for the next twelve months during our development stage. Our director has agreed to loan the company funds on a month by month basis as needed. In the event our director does not provide such funding and we are unable to secure additional funding, our business will likely fail, cease operations, and investors will likely lose their money. We are a development stage company and have generated no revenue to date. We have sold $30,000 in equity securities to pay for our operations. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. CRITICAL ACCOUNTING POLICIES BASIS OF PRESENTATION The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles applicable to development stage enterprises. 16 FISCAL PERIODS The Company's fiscal year end is December 31. USE OF ESTIMATES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $4,388 in cash and cash equivalents at December 31, 2008. START-UP COSTS In accordance with the American Institute of Certified Public Accountants Statement of Position 98-5, "Reporting on the Costs of Start-up Activities", the Company expenses all costs incurred in connection with the start-up and organization of the Company. INCOME TAXES Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with SFAS Number 109, "Accounting for Income Taxes", which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. EARNINGS (LOSS) PER SHARE In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. SFAS No. 128 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of SFAS No. 128 effective February 21, 2007 (inception). Basic net earnings (loss) per share amounts is computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company. 17 RECENT ACCOUNTING PRONOUNCEMENTS In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company's financial position, statements of operations, or cash flows at this time. In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company's financial position, statements of operations, or cash flows at this time. In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB statement No. 133 ("SFAS 161"). SFAS 161 expands the disclosure requirements in Statement 133 about an entity's derivative instruments and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact of adopting FAS 161. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51 ("SFAS 160"). SFAS 160 changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent's equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentation and disclosure requirements, which will apply retrospectively. We are currently evaluating the impact of adopting FAS 160 on our consolidated results of operations and financial condition. In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations ("SFAS 141R"). SFAS 141R replaces SFAS No. 141. SFAS 141R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. SFAS 141R also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We will apply SFAS 141R prospectively to business combinations completed on or after that date. There will be no impact upon adoption to our current consolidated results of operations and financial condition. 18 ITEM 8. FINANCIAL STATEMENTS Chang G. Park, CPA, Ph. D. * 2667 CAMINO DEL RIO SOUTH PLAZA B * SAN DIEGO * CALIFORNIA 92108 * * TELEPHONE (858)722-5953 * FAX (858) 761-0341 * FAX (858) 764-5480 * * E-MAIL changgpark@gmail.com * Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Rosca, Inc. (A Development Stage Company) We have audited the accompanying balance sheet of Rosca, Inc. (A Development Stage "Company") as of December 31, 2008 and 2007 and the related statements of operations, changes in shareholders' equity and cash flows for the years ended then and for the period from February 21, 2007 (inception) to December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rosca, Inc. as of December 31, 2008 and 2007, and the result of its operations and its cash flows for the years ended then and for the period from February 21, 2007 (inception) to December 31, 2008 in conformity with U.S. generally accepted accounting principles. The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company's losses from operations raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Chang Park ---------------------------- CHANG G. PARK, CPA February 6, 2009 San Diego, CA. 92108 19 ROSCA, INC. (A Development Stage Company) Balance Sheets
December 31, December 31, 2008 2007 -------- -------- ASSETS Current Assets Cash $ 4,388 $ 25,444 -------- -------- Total Assets $ 4,388 $ 25,444 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable $ 2,200 $ -- Loans Payable 29,445 25,945 -------- -------- TOTAL LIABILITIES 31,645 25,945 -------- -------- STOCKHOLDERS' EQUITY Common Stock $.0.001 par value; 75,000,000 shares authorized; 8,500,000 issued & outstanding at June 30, 2008 8,500 8,500 Additional Paid in Capital 21,500 21,500 Deficit Accumulated (57,257) (30,501) -------- -------- TOTAL STOCKHOLDERS' EQUITY (27,257) (501) -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,388 $ 25,444 ======== ========
The accompanying footnotes are an integral part of these financial statements 20 ROSCA, INC. (A Development Stage Company) Statement of Operations
For the Period For the Period (Inception) (Inception) Year Ended February 21, 2007 to February 21, 2007 to December 31, December 31, December 31, 2008 2007 2008 ---------- ---------- ---------- REVENUES Revenues $ -- $ -- $ -- ---------- ---------- ---------- TOTAL REVENUES -- -- -- ---------- ---------- ---------- OPERATING EXPENSE Administrative Expense 26,756 30,501 57,257 ---------- ---------- ---------- NET (LOSS) $ (26,756) $ (30,501) $ (57,257) ========== ========== ========== Basic and diluted earnings per share $ (0.00) $ (0.01) ========== ========== Weighted average number of common shares outstanding 8,500,000 5,342,357 ========== ==========
The accompanying footnotes are an integral part of these financial statements 21 ROSCA, INC. (A Development Stage Company) Statements of Changes in Shareholders' Equity For the Period from February 21, 2007 through June 30, 2008
Common Additional Common Stock Paid-in Deficit Stock Amount Capital Accummulated Total ----- ------ ------- ------------ ----- Stock issued for cash on March 26, 2007 4,000,000 $4,000 $ 8,000 $ -- $ 12,000 Stock issued for cash on August 31,2007 4,500,000 4,500 13,500 18,000 Net loss through December 31, 2007 (30,501) (30,501) ---------- ------ ------- -------- -------- Balance December 31, 2007 8,500,000 8,500 21,500 (30,501) (501) ---------- ------ ------- -------- -------- Net loss through December 31, 2008 (26,756) (26,756) ---------- ------ ------- -------- -------- Balance December 31, 2008 (Unaudited) 8,500,000 $8,500 $21,500 $(57,257) $(27,257) ========== ====== ======= ======== ========
The accompanying notes are an integral part of these financial statements 22 ROSCA, INC. (A Development Stage Company) Statement of Cash Flows
For the Period For the Period (Inception) (Inception) Year Ended February 21, 2007 to February 21, 2007 to December 31, December 31, December 31, 2008 2007 2008 -------- -------- -------- CASH FLOW FROM OPERATING ACTIVITIES Net income(loss) $(26,756) $(30,501) $(57,257) Adjustments to reconcile net loss to net cash provided by(used in) operating activities; Changes in operating assets and liabilities: Accounts Payable 2,200 -- 2,200 -------- -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (24,556) (30,501) (55,057) -------- -------- -------- CASH FLOW FROM INVESTING ACTIVITIES -- -- -- -------- -------- -------- NET CASH PROVIDED BY(USED IN) INVESTING ACTIVITIES -- -- -- -------- -------- -------- CASH FLOW FROM FINANCING ACTIVITIES Loan Payable 3,500 25,945 29,445 Issuance of common stock -- 8,500 8,500 Additional paid-in capital -- 21,500 21,500 -------- -------- -------- NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES 3,500 55,945 59,445 -------- -------- -------- Net increase (decrease) in cash (21,056) 25,444 4,388 Cash at beginning of period 25,444 -- -- -------- -------- -------- Cash at end of period $ 4,388 $ 25,444 $ 4,388 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ -- $ -- $ -- ======== ======== ======== Income Taxes $ -- $ -- $ -- ======== ======== ========
The accompanying footnotes are an integral part of these financial statements 23 ROSCA, INC. (A Development Stage Company) Notes to Financial Statements December 31, 2008 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Rosca, Inc. (the "Company") was incorporated in the State of Nevada on February 21, 2007. The Company is a development stage company that intends to operate Tequilerias. The Company's activities to date have been limited to its formation, the preparation of the business plan and raising capital. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF PRESENTATION The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles applicable to development stage enterprises. B. FISCAL PERIODS The Company's fiscal year end is December 31. C. USE OF ESTIMATES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. D. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $4,388 in cash and cash equivalents at December 31, 2008. E. START-UP COSTS In accordance with the American Institute of Certified Public Accountants Statement of Position 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES", the Company expenses all costs incurred in connection with the start-up and organization of the Company. 24 ROSCA, INC. (A Development Stage Company) Notes to Financial Statements December 31, 2008 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) F. INCOME TAXES Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with SFAS Number 109, "ACCOUNTING FOR INCOME TAXES", which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. G. EARNINGS (LOSS) PER SHARE In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. SFAS No. 128 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of SFAS No. 128 effective February 21, 2007 (inception). Basic net earnings (loss) per share amounts is computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company. H. RECENT ACCOUNTING PRONOUNCEMENTS In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company's financial position, statements of operations, or cash flows at this time. In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting 25 ROSCA, INC. (A Development Stage Company) Notes to Financial Statements December 31, 2008 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company's financial position, statements of operations, or cash flows at this time. In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, AN AMENDMENT OF FASB STATEMENT NO. 133 ("SFAS 161"). SFAS 161 expands the disclosure requirements in Statement 133 about an entity's derivative instruments and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact of adopting FAS 161. In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB 51 ("SFAS 160"). SFAS 160 changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent's equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentation and disclosure requirements, which will apply retrospectively. We are currently evaluating the impact of adopting FAS 160 on our consolidated results of operations and financial condition. In December 2007, the FASB issued SFAS No. 141 (Revised 2007), BUSINESS COMBINATIONS ("SFAS 141R"). SFAS 141R replaces SFAS No. 141. SFAS 141R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. SFAS 141R also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We will apply SFAS 141R prospectively to business combinations completed on or after that date. There will be no impact upon adoption to our current consolidated results of operations and financial condition. 26 ROSCA, INC. (A Development Stage Company) Notes to Financial Statements December 31, 2008 NOTE 3 - CAPITAL STOCK A) AUTHORIZED STOCK: The Company has authorized 75,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought. B) SHARE ISSUANCE: From inception of the Company (February 21, 2007) to December 31, 2008, the Company issued 8,500,000 common shares. 4,000,000 shares were issued at $0.003 per share for total proceeds of $12,000. These shares were issued to the director and officer of the Company. 4,500,000 shares were issued at $0.004 per share for total proceeds of $18,000 pursuant to the company's SB-2 Registration Statement filed with the U.S. Securities and Exchange Commission which became effective on July 25, 2007. The shares were issued to 45 unaffiliated shareholders. The offering was completed on August 31, 2007. NOTE 4 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At December 31, 2008, the Company has an accumulated deficit of $57,257, cash in the amount of $4,388 and has earned no revenues since inception. The Company intends to fund operations through equity financing arrangements until it realizes revenues, which may be insufficient to fund its capital expenditures, working capital and other cash requirements. The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 5 - INCOME TAXES The Company has incurred operating losses of $57,257, which, if utilized, will begin to expire in 2027. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been off set by a valuation allowance. 27 ROSCA, INC. (A Development Stage Company) Notes to Financial Statements December 31, 2008 NOTE 5 - INCOME TAXES (continued) Details of deferred tax assets are as follows: December 31, 2008 -------- Deferred tax assets: Net operating loss (from inception to December 31, 2008) $ 57,257 Statutory tax rate (combined federal and state) 34% -------- Deferred tax assets 19,467 Valuation allowance (19,467) -------- $ -- ======== The potential future tax benefits of these losses have not been recognized in these financial statements due to uncertainty of their realization. When the future utilization of some portion of the carryforwards is determined not to be "more likely than not," a valuation allowance is provided to reduce the recorded tax benefits from such assets. NOTE 6 - RELATED PARTY TRANSACTIONS The director of the company has advanced funds to the company to pay for organizational costs and operating expenses. The loan is interest free and has no specific terms of repayment. The balance due to Mr. Mancillas was $29,445 on December 31, 2008. There is no management contract in place between the Company and Mr. Mancillas. However, he receives a monthly fee of $400 for management services. The Company has an account payable of $2,200 to him as of December 31, 2008. 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: - Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; - Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and - Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. As of December 31, 2008 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. 29 The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of December 31, 2008. Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. This annual report does not include an attestation report of the Corporation's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Corporation's registered public accounting firm pursuant to temporary rules of the SEC that permit the Corporation to provide only the management's report in this annual report. MANAGEMENT'S REMEDIATION INITIATIVES In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures: We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. We anticipate that these initiatives will be at least partially, if not fully, implemented by December 31, 2009. Additionally, we plan to test our updated controls and remediate our deficiencies by December 31, 2009. 30 CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. CEO AND CFO CERTIFICATIONS Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented. 31 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS Directors are elected by the stockholders to a term of one year and serves until his or her successor is elected and qualified. Officers are appointed by the Board of Directors to a term of one year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. The Board of Directors has no nominating, auditing or compensation committees. The name, address, age and position of our officer and director is set forth below: Name and Address Age Position(s) ---------------- --- ----------- Christian Mancillas 32 President, Secretary, CEO, CFO 1286 University Ave. #708 San Diego, CA 92103 The person named above is expected to hold said offices/positions until the next annual meeting of our stockholders. The officer and director is our only officer, director, promoter and control person. BACKGROUND OF OUR EXECUTIVE OFFICER AND DIRECTOR CHRISTIAN MANCILLAS EMPLOYMENT EXPERIENCE Destiladora San Nicolas / Tequila 1999-Present - Manager/ Supervisor * Manage operations and staff for tequila manufacturer. EDUCATIONAL BACKGROUND Preparatory School, Guamuchil Mexico, Graduated in 1991. Esc. Pre. Augustina Monteverde Secondary School, Guamuchil Mexico, Graduated in 1988. LEGAL PROCEEDINGS Our Director and Executive Officer, Christian Mancillas, has not been involved in any legal action during the past five years. CONFLICTS OF INTEREST Our Officer and Director, Christian Mancillas, does not currently devote all of his business time to our operations. 32 CODE OF ETHICS We do not currently have a code of ethics, because we have only limited business operations and one officer and director, we believe a code of ethics would have limited utility. We intend to adopt such a code of ethics as our business operations expand and we have more directors, officers and employees. ITEM 11. EXECUTIVE COMPENSATION In July, 2007 we began paying our officer and director a monthly salary of $400 for his services during the development stage of our operations. He is reimbursed for any out-of-pocket expenses he incurs on our behalf. We do not currently have any benefits, such as health insurance, life insurance or any other benefits available to our employee. Our officer and director is not party to any employment agreements. SUMMARY COMPENSATION TABLE
Change in Pension Value and Non-Equity Nonqualified Incentive Deferred All Name and Plan Compen- Other Principal Stock Option Compen- sation Compen- Position Year Salary Bonus Awards Awards sation Earnings sation Totals ------------ ---- ------ ----- ------ ------ ------ -------- ------ ------ Christian 2007 2,400 0 0 0 0 0 0 0 Mancillas, 2008 2,400 0 0 0 0 0 0 0 President, CEO and Director
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
Option Awards Stock Awards ----------------------------------------------------------------- ---------------------------------------------- Equity Incentive Equity Plan Incentive Awards: Plan Market or Awards: Payout Equity Number of Value of Incentive Number Unearned Unearned Plan Awards; of Market Shares, Shares, Number of Number of Number of Shares Value of Units or Units or Securities Securities Securities or Units Shares or Other Other Underlying Underlying Underlying of Stock Units of Rights Rights Unexercised Unexercised Unexercised Option Option That Stock That That That Options (#) Options (#) Unearned Exercise Expiration Have Not Have Not Have Not Have Not Name Exercisable Unexercisable Options (#) Price Date Vested(#) Vested Vested Vested ---- ----------- ------------- ----------- ----- ---- --------- ------ ------ ------ Christian 0 0 0 0 0 0 0 0 0 Mancillas
33 DIRECTOR COMPENSATION
Change in Pension Value and Fees Non-Equity Nonqualified Earned Incentive Deferred Paid in Stock Option Plan Compensation All Other Name Cash Awards Awards Compensation Earnings Compensation Total ---- ---- ------ ------ ------------ -------- ------------ ----- Christian 0 0 0 0 0 0 0 Mancillas
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of the date of this annual report, the total number of shares owned beneficially by each of our director, officer and key employee, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholder listed below has direct ownership of his shares and possesses sole voting and dispositive power with respect to the shares. Name and Address No. of Percentage Beneficial Owner Shares of Ownership ---------------- ------ ------------ Christian Mancillas 4,000,000 47% 1286 University Avenue #708 San Diego, CA 92103 All Officers and Directors as a Group (1) 4,000,000 47% ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On April 4, 2007, 4,000,000 shares of common stock were issued to Christian Mancillas, the officer and director of the company, in exchange for $12,000, or $.003 per share. These securities were issued in reliance upon the exemption contained in Section 4(2) of the Securities Act of 1933. These securities were issued to the promoter of the company and bear a restrictive legend. The director of the company has advanced funds to the company to pay for organizational costs and operating expenses. The loan is interest free and has no specific terms of repayment. The balance due to Mr. Mancillas was $29,445 on December 31, 2008. We do not currently have any conflicts of interest by or among our current officers, director, key employees or advisors. We have not yet formulated a policy for handling conflicts of interest; however, we intend to do so prior to hiring any additional employees. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES For the year ended December 31, 2008, the total fees charged to the company for audit services, including quarterly reviews were $10,000. No fees were charged for audit-related, tax or other services. For the year ended December 31, 2007, the total fees charged to the company for audit services, including quarterly reviews, were $6,000. No fees were charged for audit-related, tax or other services. 34 PART IV ITEM 15. EXHIBITS The following exhibits are included with this filing: Exhibit Number Description ------ ----------- 3(i) Articles of Incorporation* 3(ii) Bylaws* 31.1 Sec. 302 Certification of CEO 31.2 Sec. 302 Certification of CFO 32.1 Sec. 906 Certification of CEO 32.2 Sec. 906 Certification of CFO ---------- * Included in our original SB-2 filed with the Securities & Exchange Commission on July 17, 2007 under File Number 333-144287. SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date --------- ----- ---- /s/ Christian Mancillas President, Secretary, Treasurer, 2/9/08 ------------------------------ Chief Executive Officer, Chief Financial Officer and Sole Director /s/ Christian Mancillas Chief Financial Officer & Principal 2/9/08 ------------------------------ Accounting Officer
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