0001213900-13-000279.txt : 20130122 0001213900-13-000279.hdr.sgml : 20130121 20130122064406 ACCESSION NUMBER: 0001213900-13-000279 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20121130 FILED AS OF DATE: 20130122 DATE AS OF CHANGE: 20130122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XODTEC LED, INC. CENTRAL INDEX KEY: 0001407704 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 208009362 STATE OF INCORPORATION: NV FISCAL YEAR END: 0317 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-148005 FILM NUMBER: 13538906 BUSINESS ADDRESS: STREET 1: 112 NORTH CURRY STREET CITY: CARSON CITY STATE: NV ZIP: 89703 BUSINESS PHONE: (775) 321-1013 MAIL ADDRESS: STREET 1: 112 NORTH CURRY STREET CITY: CARSON CITY STATE: NV ZIP: 89703 FORMER COMPANY: FORMER CONFORMED NAME: Xodtec Group USA, Inc. DATE OF NAME CHANGE: 20090831 FORMER COMPANY: FORMER CONFORMED NAME: Sparking Events, Inc. DATE OF NAME CHANGE: 20070724 10-Q 1 f10q1112_xodtecled.htm QUARTERLY REPORT f10q1112_xodtecled.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
 
(Mark One)
   
o
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  FOR THE QUARTERLY PERIOD ENDED November 30, 2012
   
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM __________ TO __________
 
COMMISSION FILE NUMBER: 333-148005

XODTEC LED, INC.
 (Exact name of registrant as specified in its charter)

 Nevada
 
 20-8009362
(State or other jurisdiction of incorporation or
organization)
 
(I.R.S. Employer Identification No.)

P.O. Box 172
Bahama, NC 27503
 (Address of principal executive offices, Zip Code)

(267) 350-6511
 (Registrant’s telephone number, including area code)

2F, No.139, Jian 1st Rd., Jhonghe City,
Taipei County 235, Taiwan (R.O.C.)
(Former address)

Copies to:
Asher S. Levitsky P.C.
Ellenoff Grossman & Schole LLP
120 East 42nd Street; 11th floor
New York, New York 10017
Phone: (212) 370-1300
Fax: (646) 895-7182
E-mail: alevitsky@egsllp.com

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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  o     No  o
 
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). o Yes    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 definitions of “large accelerated filer,”  ”accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   o
Accelerated filer                   o
Non-accelerated filer     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).
Yeso  Noo

The number of shares of registrant’s common stock outstanding, as of October 17, 2012: 104,757,357
 
 
 

 
 
XODTEC LED, INC.
Form 10-Q
For the Quarter Ended November 30, 2012

TABLE OF CONTENTS
 
   
Page
PART I. - FINANCIAL INFORMATION
Item 1.
Financial Statements
 
 
Condensed Consolidated Balance Sheets as of November 30, 2012 (unaudited) and February 29, 2012
2
 
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the nine and three months ended November 30, 2012 and 2011
3
 
Consolidated Statements of Cash Flows for the nine months ended November 30, 2012 and 2011
4
 
Notes to Unaudited Condensed Consolidated Financial Statements.
5
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
11
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
13
Item 4.
Controls and Procedures.
13
     
 
PART II - OTHER INFORMATION
 
Item 6.
Exhibits.
14
 
FORWARD LOOKING STATEMENTS
 
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
 
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K for the year ended February 29, 2012 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC.   You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
 
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
 
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
  
 
1

 
 
XODTEC LED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
   
November 30, 2012
   
February 29,
2012
 
   
(Unaudited)
       
ASSETS
           
  Current assets
 
 
   
 
 
Cash
  $ 16,405     $ -  
Current assets of the entity spun off
    -       105,784  
Total current assets
    16,405       105,784  
                 
Property and equipment, net
    -       -  
 
               
 Other Assets
               
Deferred assets
    41,792       180,500  
  Total other assets
    41,792       180,500  
Non-Current assets of the entity spun off
    -       184,963  
                 
Total assets
  $ 58,197     $ 471,247  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
  Current liabilities
               
Loans from related parties
  $ 125,100     $ 843,022  
Other current liabilities
    57,500       46,667  
Current liability of the entity spun off
    -       1,303,929  
Total current liabilities
    182,600       2,193,618  
                 
Total liabilities
    182,600       2,193,618  
Commitments and contingencies
               
Stockholders' deficit
               
Series A  convertible preferred stock, par value $0.001 per share, 10,000,000
               
shares authorized and 5,000,000 and zero shares issued and outstanding,
               
at November 30, 2012 and February 28, 2012, respectively
    5,000       -  
Common stock( 225,000,000 authorized shares, par value $0.001 per share;
               
194,757,357 and 81,771,107 shares issued and outstanding)
    194,757       81,771  
Additional paid in capital
    8,022,945       6,227,924  
Accumulated deficit
    (8,347,105 )     (7,755,802 )
Accumulated other comprehensive gain - translation adjustments
    -       (276,264 )
                 
Total stockholders' deficit
    (124,403 )     (1,722,371 )
Total liabilities and stockholders' deficit
  $ 58,197     $ 471,247  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
2

 
 
XODTEC LED, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS
 
   
Nine months ended November 30,
   
Three months ended November 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Revenue
  $ -     $ -     $ -     $ -  
                                 
Cost of revenue
    -       -       -       -  
                                 
Gross profit
    -       -       -       -  
                                 
Selling, general and administrative expenses
    268,903       490,792       92,178       71,792  
                                 
Net operating (loss)
    (268,903 )     (490,792 )     (92,178 )     (71,792 )
                                 
Other income (expense)
                               
Interest expense
    (91,945 )     -       (91,945 )     -  
Total other income (expense)
    (91,945 )     -       (91,945 )     -  
                                 
Net loss from continuing operations before income taxes
    (360,848 )     (490,792 )     (184,123 )     (71,792 )
                                 
Income taxes
    -       -       -       -  
                                 
Net loss from continuing operations
    (360,848 )     (490,792 )     (184,123 )     (71,792 )
Loss from the operation of the entity spun off
    (230,455 )     (1,268,256 )     -       (618,834 )
Net Loss
  $ (591,303 )   $ (1,759,048 )   $ (184,123 )   $ (690,626 )
                                 
Translation adjustments
    11,028       158,182       -       56,735  
                                 
Comprehensive loss
  $ (580,275 )   $ (1,600,866 )   $ (184,123 )   $ (633,891 )
                                 
Net loss per share
                               
Net loss per share from continuing operations
  $ (0.00 )   $ (0.01 )   $ (0.00 )   $ (0.00 )
Net loss per share from entity spun off
  $ (0.00 )   $ (0.02 )   $ -     $ (0.01 )
Basic and Diluted loss per share*
  $ (0.01 )   $ (0.03 )   $ (0.00 )   $ (0.01 )
                                 
Weighted average common shares outstanding
                               
- Basic and Diluted
    113,407,257       51,103,794       177,374,857       81,771,107  
 
The accompanying notes are an integral part of the financial statements.
 
* Weighted average number of shares used to compute basic and diluted loss per share is the same as the effect of dilutive securities are anti dilutive.
 
 
3

 
 
XODTEC LED, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
             
   
Nine months ended November 30,
 
   
2012
   
2011
 
             
Cash Flows from operating activities:
           
Net (loss)
  $ (591,303 )   $ (1,759,048 )
Adjustments to reconcile net loss to net cash used in operating activities
               
provided by (used in) operating activities:
               
Amortization of deferred assets
    138,708       490,792  
Loss (Gain) on extinguishment of debt
    91,945          
Decrease (Increase) in liabilities:
               
Other current liabilities
    43,459       -  
                 
Net cash used in operating activities from continuing operations
    (317,191 )     (1,268,256 )
Net cash provided by (used in) operating activities of the entity spun off
    46,599       327,211  
Net cash used in operating activities
    (270,592 )     (941,045 )
                 
Cash Flows from Investing activities:
               
Net cash used in investing activities of the entity spun off
    -       (34,185 )
Net cash used in investing activities
    -       (34,185 )
                 
Cash flows from financing activities:
               
Proceeds from related parties
    205,996       -  
Net cash provided by financing activities  from continuing operations
    205,996       -  
Net cash provided by financing activities of the entity spun off
    81,001       974,847  
Net cash provided by financing activities
    286,997       974,847  
                 
Effect of exchange rate changes on cash and cash equivalents
    -       383  
                 
Net increase in cash and cash equivalents
    16,405       -  
Cash, beginning of the year
    -       -  
                 
Cash, end of the year
  $ 16,405     $ -  
                 
Supplemental disclosures of cash flow information:
               
Interest paid
  $ 3,193     $ 6,725  
Income taxes paid
  $ 2,549     $ 3,395  
                 
Non-cash financing activities
               
Issuances of preferred and common stock in exchange for release of loans from related parties and other current liabilities
  $ 851,945     $ -  
 
The accompanying notes are an integral part of the financial statements.
 
 
4

 
 
XODTEC LED, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2012
 
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
 
Xodtec LED, Inc. (the “Company”) is a Nevada corporation incorporated on November 29, 2006 which previously was under the name Sparking Events, Inc.  On June 28, 2009, the Company changed its corporate name to Xodtec Group USA, Inc. and on May 17, 2010, the Company changed its corporate name to Xodtec LED, Inc.
 
On May 31, 2012, the Company had three wholly-owned subsidiaries, Xodtec Technology Co., Ltd. (“Xodtec”), Targetek Technology Co., Ltd. (“Targetek”), and UP Technology Co., Ltd. (“UP”), which were organized under the laws of the Republic of China (Taiwan).  Xodtec LED, Inc. also owned 35% interest in Radiant Sun Development S.A., a company organized under the laws of the Independent State of Samoa (“Radiant Sun”).
 
On July 13, 2012, pursuant to agreements dated June 5, 2012 and July 13, 2012, the Company entered into agreement with Hui-Yun Lo (“Ms. Lo”), who was then a director, pursuant to which all equity interest in its subsidiaries and its 35% interest in Radiant Sun were transferred to Ms. Lo for the cancellation of notes payable to Ms. Lo in the total principal amount of $100,000. As a result of these transactions, the Company had spun off the wholly-owned subsidiaries as of November 30, 2012 and for period July 13, 2012 to November 30, 2012.
 
At November 30, 2012, the assets of the spun off subsidiaries were not included in assets, and, for the period ended November 30, 2012, the results of operations of the spun off entities through July 13, 2012 are reflected as a net loss from spun off entities.
 
On July 14, 2012, Morgan Stanley Smith Barney Custodian fbo Terry Butler Roth IRA (“Butler Roth IRA”) acquired, for nominal consideration, 24,988,621 shares of common stock from Ms. Lo and 19,401,160 shares of common stock from  Yao-Ting Su, as well as all notes payable by the Company to Ms. Lo and Mr. Su through the date of the transfer.  As a result of the transfer of shares to the Butler Roth IRA, the Butler Roth IRA acquired 44,389,781 shares of common stock, constituting 54.3% of the outstanding common stock. These shares are in the process of being issued in the name of Terry Butler.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
The accompanying unaudited interim condensed consolidated financial statements (“Interim Financial Statements”) of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these Interim Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. These Interim Financial Statements should be read in conjunction with the consolidation financial statements and notes thereto for the fiscal year ended February 29, 2012 included in the Company’s Form 10-K. In the opinion of management, the Interim Financial Statements included herein contain all adjustments, including normal recurring adjustments considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the periods presented. The operating results and cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

Certain prior year amounts have been reclassified to conform with the current period's presentation, none of which had an impact on total assets, stockholders' deficit, net loss, or net loss per share.

The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the consolidated financial statements, during the nine months ended November 30, 2012, the Company generated no revenue, incurred an operating loss and a net loss of approximately $591,000.  The Company had a negative cash flow in operating activities amounting approximately $271,000 in the nine months ended November 30, 2012, and as of November 30, 2012, the Company’s accumulated deficit was approximately $8 million, substantially all of which was generated by operations which have been spun off. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
Use of Estimates
 
The preparation of consolidated financial statements in conformity 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 disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.
 
 
5

 
 
Advertising and Promotion Costs

Costs associated with advertising and promotions are expensed as incurred. The Company did not incur any advertising and promotion costs for six and three months ended November 30, 2012 and 2011.

Segment Information
 
ASC 280 requires companies to report information about operating segment in interim and annual financial statements. It also requires segment disclosures about products and services geographic and major customers. The Company has determined that it does not have any separately reportable operating segments.

Fair Value of Financial Instruments

The fair values of the Company’s trade accounts receivable, income taxes receivable/payable, accounts payable, accrued expenses and other current liabilities approximate their carrying values due to the relatively short maturities of these instruments. The carrying value of the Company’s short and long term debt approximates fair value based on management’s best estimate of the interest rates that would be available for similar debt obligations having similar terms at the balance sheet date.

Revenue Recognition
 
The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.   Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.
 
Cost of Sales
 
The cost of sales represents, primarily, the cost of manufacturing by third party manufacturers based on a contract price, as well as warehousing costs, shipping and handling costs, and any cost related inventory adjustment, including write downs for excess and obsolete inventory.
 
Shipping and Handling Costs
 
The Company records all payments for outbound shipping and handling as revenue, and compounding, shipping and handling costs are classified as cost of goods sold.
 
Impairment of Long-Lived Assets
 
The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, Property, Plant and Equipment. The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.
 
The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded.
   
Income Taxes
 
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
 
The Company adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.
 
 
6

 
 
Net Loss per Share
 
The Company calculates its basic and diluted earnings per share in accordance with ASC 260. Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and options and convertible securities. There were 5,000,000 convertible securities outstanding during the nine months ended November 30, 2012.  The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested stock options and unexercised warrants. Because the Company incurred losses for the nine months ended November 30, 2012, the number of basic and diluted shares of common stock is the same since any effect from outstanding warrants would be anti-dilutive.
 
Gain (Loss) on Exchange
 
Foreign-currency transactions, which related to the operations of the spun-off entities, are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into NTD, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income.
 
Translation Adjustment
 
The Company’s financial statements are presented in the U.S. dollar ($), which is the Company’s reporting and functional currency. The functional currency of the Company’s subsidiaries is NTD. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of operations.
 
In accordance with ASC 830, Foreign Currency Matters, the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from NTD into U.S. dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for interim financial statements in accordance with ASC 830, Foreign Currency Matters, are as follows:

   
Average Rate for the Nine months
 
November 30,
 
2012
   
2011
 
Taiwan dollar (NTD)
 
NTD 29.5824
   
NTD 29.4529
 
United States dollar ($)
 
$
1.00000
   
$
1.00000
 
       
   
Exchange Rate at
 
November 30,
  2012     2011  
Taiwan dollar (NTD)
 
NTD 29.0999
   
NTD 30.4405
 
United States dollar ($)
 
$
1.0000
   
$
1.0000
 
 
Comprehensive Income (Loss)
 
Comprehensive income (loss) includes accumulated foreign currency translation gains and losses with respect to the spun-off entities.
 
NOTE 3 - FAIR VALUE MEASUREMENTS
 
The carrying values of cash, accounts receivable, other receivable inventories, prepayments, other current assets, short-term borrowings from banks, accounts payable, other payable, accrued liabilities, loans from related parties and other current liabilities approximate the related fair values due to the short-term maturities of instruments.
 
 
7

 
 
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
 
In July 2012, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2012-02 ("ASU 2012-02"), "Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment." ASU 2012-02 simplifies the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. The guidance allows an organization the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An organization electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is "more likely than not" that the asset is impaired. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is currently evaluating the impact of adopting this amendment, but it is not expected to have a material impact on the Company’s consolidated financial statements.

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.
 
NOTE 5 – DEFERRED ASSETS
 
Deferred assets consisted of the following:
 
   
November 30, 
2012
   
February 29,
2012
 
Deferred professional fee
 
$
41,792
   
$
180,500
 

The Company’s professional fee for the future is as followings:

November 30, 2013
  $ 41,792  

NOTE 6 – RELATED PARTY TRANSACTIONS
 
   
November 30, 
2012
   
February 29,
2012
 
6% interest bearing and payable on demand to Chief Executive Officer of the Company
 
$
125,100
   
$
-
 
Non interest bearing and payable on demand to Prior Chief Executive Officer of the Company
   
-
     
304,392
 
Non interest bearing and payable on demand to its prior directors of the Company
   
-
     
538,630
 
Total
 
$
125,100
   
$
843,022
 

(1)  
A portion of the loans outstanding at November 30, 2012 were acquired by the current chief executive officer from a former director
 
NOTE 7 – CAPITAL STOCK AND SHARE-BASED PAYMENTS

On September 14, 2012, the Company entered into agreement dated September 12, 2012, with Morgan Stanley Smith Barney Custodian fbo Terry Butler Roth IRA (“Butler Roth IRA”) pursuant to which the Company issued 104,829,750 shares of common stock and 5,000,000 shares of a newly-created series of preferred stock, which is designated as the Series A Convertible Preferred Stock, in consideration of the cancellation of debt due to the Butler Roth IRA in the amount of $819,319. Under ASC 470-50, the Company recognized a loss on extinguishment of the debt in the amount of $59,319 which is recorded as interest expense. Terry Butler is the Company’s chief executive officer and sole director and the shares have been issued in the name of Terry Butler.
 
On September 14, 2012, the Company entered into an agreement dated September 12, 2012 with Danny Chan whereby the Company issued 8,156,500 shares of common stock in consideration of the cancellation of debt due to Mr. Chan in the amount of $32,626. Under ASC 470-50, the Company recognized a loss on extinguishment of the debt in the amount of $32,626 which was recorded as interest expense.
 
On September 25, 2012, the Company filed a certificate of designation setting forth the rights, preferences and privileges of a new series of preferred stock designated as the series A convertible preferred stock. Each share of series A preferred stock is convertible into 20 shares of common stock.  However, the series A preferred stock shall not be convertible into common stock until such date as the Company shall increase the number of authorized shares of common stock, either by an increase in the authorized common stock or a reverse split or combination of shares such that there are a number of authorized shares of common stock that are available, free from preemptive rights, equal to the maximum number of shares of common stock issuable upon conversion of the number of authorized shares of series A preferred stock.  Since there are not a sufficient number of shares of common stock available for the conversion of the series A preferred stock, as of the date of this report, the series A preferred stock is not convertible.

 
8

 
 
NOTE 8– INCOME TAXES
 
The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has experienced operating losses for U.S. federal income tax purposes since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.  
 
NOTE 9 – SPIN-OFF OF SUBSIDIARY TRANSACTION
 
On July 13, 2012, pursuant to agreements dated June 5, 2012 and July 13, 2012, the Company entered into agreement with Hui-Yun Lo (“Ms. Lo”), who was then a director, pursuant to which all equity interest in its subsidiaries and its 35% interest in Radiant Sun were transferred to Ms. Lo for the cancellation of notes payable to Ms. Lo in the total principal amount of $100,000. As a result of these transactions, the Company had spun off wholly-owned subsidiaries as of November 30, 2012 and for period July 13, 2012 to November 30, 2012.
 
At November 30, 2012, the assets of the spun off entities were not included in assets, and, for the period ended November 30, 2012, the results of operations of the spun off entities through July 13, 2012 are reflected as a net loss from spun off entities.
 
As a part of the spin off transaction of the Company’s subsidiaries, the net liabilities of the subsidiaries were adjusted to additional paid in capital.
 
The components of loss from operations of the entity spun off for the nine months and three months ended November 30, 2012 and 2011 are shown below:
 
XODTEC LED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
 
 
   
 
 
   
November 30, 2012
   
February 29,
2012
 
   
(Unaudited)
       
ASSETS
           
  Current assets
 
 
   
 
 
Cash
  $ -     $ 4,949  
Accounts receivable, , net of allowances for bad debt of $0
    -       40,075  
Inventories, net
    -       6,280  
Prepayments
    -       1,218  
Other current assets
    -       53,262  
Total current assets
    -       105,784  
                 
Property and equipment, net
    -       91,788  
 
               
 Other Assets
               
Deposits
    -       52,129  
Other assets
    -       41,046  
  Total other assets
    -       93,175  
Total Non-Current assets
    -       184,963  
                 
Current liabilities
               
Short-term borrowings from banks
  $ -     $ 254,421  
Accounts payable
    -       72,490  
Other payable
    -       475,249  
Accrued liabilities
    -       501,769  
Total current liabilities
    -       1,303,929  
                 
Total liabilities
    -       1,303,929  
                 
Net Liability of the entity spun off
  $ -     $ 1,013,182  
 
 
9

 
 
XODTEC LED, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE INCOME
                         
   
Nine months ended November 30,
   
Three months ended November 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Revenue
  $ 38,673     $ 429,378     $ -     $ 33,563  
                                 
Cost of revenue
    18,131       314,606       -       180,304  
                                 
Gross profit
    20,542       114,772       -       (146,741 )
                                 
Selling, general and administrative expenses
    248,016       1,192,319       -       292,790  
                                 
Net operating loss
    (227,474 )     (1,077,547 )     -       (439,531 )
                                 
Other income (expense)
                               
Interest income
    -       134       -       -  
Interest expense
    (3,192 )     (6,725 )     -       (4,782 )
Gain(loss) on currency exchange
    211       218       -       (1,621 )
Other income (expense)
    -       (174,117 )     -       (173,051 )
Total other income (expense)
    (2,981 )     (180,490 )     -       (179,454 )
                                 
Net loss before income taxes
    (230,455 )     (1,258,037 )     -       (618,985 )
                                 
Income taxes
    -       10,219       -       (151 )
                                 
Net loss from entity spun off
  $ (230,455 )   $ (1,268,256 )   $ -     $ (618,834 )
 
 
10

 
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this report. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see “Forward Looking Statements.”

Overview

Prior to July 13, 2012, through our subsidiaries we were engaged in design, marketing and selling of advanced lighting solutions which are designed to use less energy and have a longer life than traditional incandescent, halogen, fluorescent light sources.  
 
On July 13, 2012, pursuant to agreements with one of our former directors, we transferred the stock in our subsidiaries and our 35% ownership in an inactive company to the former director in exchange for cancellation of debt totaling $100,000.  As a result of the transfer of the subsidiaries, we were no longer engaged in the lighting solutions business.  We transferred the stock of the subsidiaries because we felt that, as a result of our continuing losses and our inability to develop the business as we had planned, it was not in our best interest to continue in this business.

On July 14, 2012 Morgan Stanley Smith Barney Custodian fbo Terry Butler Roth IRA (“Butler Roth IRA”) acquired, for nominal consideration, 24,988,621 shares of common stock from the director who acquired the subsidiaries and 19,401,160 shares of common stock from our then chief executive officer, who was also a director.  On July 18, 2012, Morgan Stanley Smith Barney Custodian fbo Terry Butler Roth IRA (“Butler Roth IRA”) and the Company entered into a loan agreement pursuant to which the Butler Roth IRA agreed to lend us up to $150,000, for which we issued our 6% demand promissory note in the principal amount of $150,000.  

On September 14, 2012, we entered into agreement with the Butler Roth IRA pursuant to which we issued 104,829,750 shares of common stock and 5,000,000 shares of a newly-created series of preferred stock, which is designated as the series A convertible preferred stock, in consideration of the cancellation of debt due to the Butler Roth IRA in the amount of $819,319.  Terry Butler is our chief executive officer and sole director.  The shares are have been reissued in Mr. Butler’s name.
 
We initially planned to focus on providing an internet based security system to companies that would like to replace security guards with video cameras that are monitored 24/7.  We would seek to integrate hardware and software to provide a seamless solution.  The 24/7 monitoring would be designed to help prevent crimes and property damage by the constant monitoring.   Through November 30, 2012, we did not generate any revenue from this new proposed business, and we are currently looking for a new business to acquire.  At present we cannot predict the nature of any future business we may conduct.

As a result of the change in our business, at November 30, 2012, the assets of the spun off subsidiaries were not included in assets, and, for the period ended November 30, 2012, the results of operations of the spun off entities through July 13, 2012 are reflected as a loss from operation of entity spun off.  Our balance sheet at February 29, 2012, classifies the assets and liabilities as current or non-current assets and current liabilities of the entity spun off.

Significant Accounting Estimates and Policies
 
The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
Revenue Recognition

Our revenue recognition policies are in compliance with ASC 605. Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.   Discounts provided to customers by us at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.
 
 
11

 
 
Comprehensive Income

Comprehensive income includes accumulated foreign currency translation gains and losses. We have reported the components of comprehensive income on its statements of stockholders’ equity.
 
Income Taxes
 
We account for income taxes in accordance with ASC 740, Income Taxes, which requires that we recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized. 
 
We adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.
 
Property, Plant and Equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Major improvements and addition which can prolong the service life of fixed assets are counted as capital expenditures and recorded as fixed assets. Expenditures on regular repairs and maintenance are recorded as expenses.

Property and equipment are depreciated according to the service life and using the average method, with one-year residual value. Additions are depreciated according to their respective estimated service life. Major improvements are depreciated based on the remaining service lives of fixed assets. While assets are continually in use after the expiration of its service life, the residual values and service lives are estimated and depreciated accordingly and continually. The gain (loss) on disposal of assets is recognized as non-operating revenue (expenditure) in the period of sale or disposal.

Depreciation is computed using the straight-line method over the estimated useful lives as follows:
 
 
Useful Lives
(Years)
Transportation
5 years
Office equipment
3-6 years
Equipment for leases
12 years
Other equipment
3-6 years

Research and development

Research and development costs are expensed as incurred, and are included in general and administrative expenses. These costs primarily consist of cost of material used and salaries paid for the development of our products and fees paid to third parties. We had no research and development expense for the nine months ended November 30, 2012 and November 30, 2011.
 
Recent accounting pronouncements 

We considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.
 
RESULTS OF OPERATIONS

Nine and Three Months Ended November 30, 2012 and 2011
 
We had no revenue for the three or nine months ended November 30, 2012 or 2011.  General and administrative expenses, which consisted primarily of professional fees, were $92,178 for the quarter ended November 30, 2012, as compared to $71,792 for the quarter ended November 30, 2011, a increase of $20,386 or approximately 28.4%.  General and administrative expenses were $268,903 for the nine months ended November 30, 2012, as compared to $490,792 for the nine months period ended November 30, 2011, a decrease of $221,889 or approximately 45.3%.

We incurred interest expense of $91,945 in the three and nine month periods ended November 30, 2012, representing a loss on extinguishment of the debt.
 
 
12

 

The loss from operations spun off represents the net loss from our lighting solutions business, which was discontinued with the spin off of our former subsidiaries, was $618,834, or $0.01 per share, for the three months ended November 30, 2011.  There was no loss for operations spun off for the three months ended November 30, 2012.  The loss from operations spun off was $230,455, or $0.00 per share, for the nine months ended November 30, 2012 and $1,268,256, or $0.02 per share, for the nine months ended November 30, 2011.

As a result of the foregoing, our net loss for the three months ended November 30, 2012 was $184,123, or $0.00 per share (basic and diluted), as compared with a loss of $690,626, or $0.01 per share (basic and diluted), for the three months ended November 30, 2011.  For the nine months ending November 30, 2012, net loss was $591,303, or $0.01 per share (basic and diluted), as compared to a net loss of $1,759,048, or $0.03 per share (basic and diluted), for nine months ended November 30, 2011.  Basic and diluted loss per share is the same since we had no outstanding dilutive securities.
  
Liquidity and Capital Resources
 
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.  At November 30, 2012, we had a cash balance of $16,405, representing the balance of cash lent to us by our chief executive officer, and a working capital deficiency of approximately $166,195, as compared with a working capital deficiency of $2,087,834, at February 29, 2012.  The decrease in the working capital deficiency reflected the elimination of a $1,303,929 million current liability of the entities that were spun off, and the issuance of equity in exchange for the cancellation of debt.
 
During the nine months ended November 30, 2012, we financed our operations principally through the loans from company officers and directors.

During the nine months ended November 30, 2012, we used $317,191 in our continuing operations, which reflected our net loss of $591,303 and the amortization of deferred assets of $138,708.  We had no cash flow from investing activities.  Cash flow from financing activities was $286,997, consisting primarily of proceeds of loans from related parties and financing activities of the entity spin off.

As of November 30, 2012, we had outstanding loans from our chief executive officer of $125,100, which we used for working capital. The borrowings bear interest at 6% and are payable on demand.
 
We believe that we require significant financing for our operations.  Because of the absence of both operating activities, we may difficulty raising additional funds through the sale of our equity or debt securities without a plan to engage in or acquire a specific business.  The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
Not required for smaller reporting companies.
 
ITEM 4.  CONTROLS AND PROCEDURES.
 
Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2012.
 
Evaluation of Disclosure Controls and Procedures
 
Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.
 
Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive and financial officer. Based on that evaluation, our chief executive and financial officer concluded that because of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of November 30, 2012.
 
 
13

 
 
Changes in Internal Controls over Financial Reporting
 
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended November 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  We anticipate that, with our proposed entry into a new business, we will seek to implement effective controls over financial reporting, although we recognize that, in view of the small number of employees, segregation of duties may be difficult.  As of the date of this report, we have one employee.
 
PART II - OTHER INFORMATION
 
ITEM 6. EXHIBITS
 
Exhibit 
Description of the Exhibit
 
31.1 
Rule 13a-14(a)/15d-14(a) certification by the chief executive officer and chief financial officer.
 
32.1 
Section 1350 certification by the chief executive officer and chief financial officer.
 
 
14

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   
XODTEC LED, INC.
 
       
Date:  January 22, 2013
 
/s/ Terry Butler
 
   
Terry Butler
 
   
Chief Executive Officer
 
 
 
15

EX-31.1 2 f10q1112ex31i_xodtecled.htm RULE 13A-14(A)/15D-14(A) CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER. Unassociated Document
Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
 
I, Terry Butler, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Xodtec LED, Inc. (the “Registrant”);

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.
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 my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me 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 my 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 my 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;

5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of 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 control 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.
 
Dated: January 22, 2013
   
/s/ Terry Butler
 
 
   
Terry Butler
 
 
   
Chief Executive and Financial Officer
 
     
(Principal Executive and Financial Officer)
 
 
EX-32.1 3 f10q1112ex32i_xodtecled.htm SECTION 1350 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER. Unassociated Document
Exhibit 32.1

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 Xodtec LED, Inc. (the “Registrant”) on Form 10-Q for the quarter ended November 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Terry Butler, as Chief Executive Officer and Chief Financial Officer, hereby certifies, 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), as applicable of the Securities 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 Registrant.
         
Dated: January 22, 2013
   
/s/ Terry Butler
 
     
Terry Butler
 
 
   
Chief Executive and Financial Officer
 
     
(Principal Executive and Financial Officer)
 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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