America Great Health - Quarter Report: 2013 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

oTRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                 

Commission File Number 000-27873

CROWN MARKETING

 (Exact name of registrant as specified in its charter)

Wyoming

98-0178621

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

1340 Environ Way, Chapel Hill, North Carolina

27517

(Address of principal executive offices)

 (Zip Code)

Registrant’s telephone number: (919) 913-4762

Indicate by check mark whether registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding  12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  o  Yes  x  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   xYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer (Do not check if smaller reporting company)	o	Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

There were 190,067,600 shares of common stock issued and outstanding as of November 14, 2013. 

 

CROWN MARKETING

PART I.  FINANCIAL INFORMATION

Page(s)

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and

June 30, 2013

4

Unaudited Condensed Consolidated Statements of Operations for the three month

periods ended September 30, 2013 and 2012

5

Unaudited Consolidated Statements of Cash Flows for the three month periods ended

September 30, 3013 and 2012

6

Notes to the Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of

Operations

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

18

Item 4.

Controls and Procedures

18

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

19

Item 1A.

Risk Factors

19

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

Item 3

Defaults Upon Senior Securities

19

Item 4.

Mine Safety Disclosures

19

Item 5.

Other Information

19

Item 6.

Exhibits

19

Signatures

20

2

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

3

CROWN MARKETING

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

		SEPT. 30,			JUNE 30,
		2013			2013
		(unaudited)
ASSETS
Current Assets
Cash	$	93,503		$	19,746
Total Current Assets		93,503			19,746
Other Assets		350			350
TOTAL ASSETS	$	93,853		$	20,096
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Notes payable - related party	$	35,366		$	35,366
Accounts payable		9,999		$	9,999
Accounts payable and accrued expenses - related party		74,004			62,004
Total Current Liabilities		119,369			107,369
Notes payable -related party, net of current portion		140,000			140,000
Total liabilities		259,369			247,369
Stockholders' Deficiency
Preferred stock, no par value, unlimited
shares authorized; no shares issued and outstanding		--			--
Common stock, no par value; unlimited shares
authorized; 190,067,600 and 190,067,600 shares
issued and outstanding		49,260			49,260
Common Stock subscription receivable		(3,662)			(87,473)
Accumulated Deficit		(211,114)			(189,060)
Total Stockholders' Deficiency		(165,516)			(277,273)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY	$	93,853		$	20,096

See accompanying Notes to Consolidated Condensed Financial Statements.

4

CROWN MARKETING

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

See accompanying Notes to Condensed Consolidated Financial Statements.

5

CROWN MARKETING

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

											FOR THE
					FOR THE			FOR THE			PERIOD
					NINE MONTHS			NINE MONTHS			JULY  8, 2009
					ENDED			ENDED			(INCEPTION)
					SEPT. 30			SEPT. 30			TO SEPT. 30
					2013			2012			2013
					(unaudited)			(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss				$	(22,054)		$	(11,943)		$	(211,114)
Adjustments to reconcile net loss to net cash
used in operating activities:
Increase (decrease) in accounts payable					--			--			9,999
Increase in interest receivable					--			--			(3,373)
Increase (decrease) in accrued interest					--			144			--
Increase (decrease) in accounts payable related party					12,000			(29,755)			74,004
Net cash used in operating activities					(10,054)			(41,554)			(130,484)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to acquire other assets					--			--			(350)
Net cash used by investing activities					--			--			(350)
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of stock subscription receivable					83,811			--			83,811
Proceeds from sale of common stock					--
and warrants					--			--			13,500
Proceeds from exercise of warrants					--			55,702			84,000
Proceeds from note payable					--			700			35,366
Contribution to capital by officer					--			--			7,660
Net cash provided by financing activities					83,811			56,402			224,337
Net increase (decrease) in cash and
cash equivalents					73,757			14,848			95,503
Cash and cash equivalents, beginning of period					19,746			381			--
Cash and cash equivalents, end of period				$	93,503		$	15,229		$	95,503
Supplemental Disclosure of Cash Flow Information:
Interest paid				--	--		--	--		--	--
Income taxes paid				$	--		--	--		--	--
Supplemental Disclosure of Non-Cash Transactions:
Issuance of note payable upon change of control				$	--		$	--		$	140,000
Issuance of common stock for subscription receivable				$	--		$	--		$	84,000

See accompanying Notes to Condensed Consolidated Financial Statements

6

 CROWN MARKETING

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2013

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The Company

Crown Marketing, a Wyoming corporation (the "Company") is the successor by merger to SPCL Holding Corporation.  On July 14, 2010 the Company acquired Green4Green pursuant to an Agreement and Plan of Reorganization (the Agreement).  Green4Green was organized as a Wyoming corporation on July 8, 2009. The Company acquired all of the outstanding shares of Green4Green in exchange for 4,000,000 newly issued shares of the Company's Common Stock.  Pursuant to the Agreement, the issued and outstanding common shares of Green4Green were exchanged on a one-for-one basis for common shares of the Company.  After the merger was completed, the Green4Green shareholders owned approximately 98% of the outstanding shares of common stock of the Company.  The transaction was accounted for as a reverse merger (recapitalization) with Green4Green deemed to be the accounting acquirer and the Company deemed to be the legal acquirer.  The financial statements presented herein are those of the accounting acquirer given the effect of the issuance of 957,600 shares of common stock upon completion of the transaction.  After the acquisition, the Company closed on the issuance of 2,400,000 shares of common stock  and warrants to purchase 24,000,000 shares of common stock for cash of $12,000 (See Note 5).

The Company is engaged in the development of its controlled release technology and, through its Crown Nutraceuticals subsidiary incorporated in March 2013, marketing nutraceutical products.  The Company has not realized significant revenues from its planned principal business purpose and is considered to be in its development state in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities” (formerly Statement of Financial Accounting Standards (“SFAS”) No 7, “Accounting and Reporting by Development State Enterprises.”)

These consolidated financial statements include the accounts of Crown Nutraceuticals, Green4Green and the Company.  All intercompany transactions and accounts have been eliminated in consolidation.

 By resolution of the Board of Directors dated August 30, 2012, the Company authorized a 10-for-one forward stock split for all shareholders of record as of October 2, 2012.  All share amounts in these financial statements have been retroactively restated to reflect the stock split as if it had been effected at the beginning of the earliest period presented.

Basis of Presentation of Unaudited Financial Information

The unaudited financial statements of the Company for the three months ended September, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.  However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of June 30, 2013 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended June 30, 2013 and 2012 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on October 2, 2013. These financial statements should be read in conjunction with that report.

7

CROWN MARKETING

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2013

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Summary of Significant Accounting Policies

Revenue Recognition

The Company recognizes sales in accordance with the United States Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”. The Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. Revenue is not recognized until title and risk of loss is transferred to the customer, which generally occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have been met.

Income tax

We are subject to income taxes in the U.S.  Significant judgment is required in evaluating our uncertain tax  positions and determining our provision for income taxes. In accordance with FASB ASC Topic 740, “Income Taxes,” we provide for the recognition of deferred tax assets if realization of such assets is more likely than not.

Estimates

The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.  Actual results may differ from those estimates and such differences may be material to the financial statements.  The more significant estimates and assumptions by management include among others, the fair value of shares of common stock issued for services. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

Fair Value Measurements

Fair value measurements are determined using authoritative guidance issued by the FASB, with the exception of the application of the guidance to non-recurring, non-financial assets and liabilities as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company's assumptions.

The Company is required to use observable market data if available without undue cost and effort.

The Company’s financial instruments include cash and cash equivalents, accounts payable, and accrued expenses. Management has estimated that the carrying amounts approximate their fair value due to the short-term nature.

8

CROWN MARKETING

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2013

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Loss Per Share

Basic loss per share has been computed using the weighted average number of common shares outstanding and issuable during the period. Diluted loss per share is computed based on the weighted average number of common shares and all common equivalent shares outstanding during the period in which they are dilutive. Common equivalent shares consist of shares issuable upon the exercise of stock options, warrants or other convertible securities such as convertible notes. As of September 30, 2013 and June 30, 2013, the weighted average common shares outstanding totaled 190,067,600 and 190,067,600, respectively.  As of June 30, 2012, common stock equivalents were comprised of warrants exercisable into 2,400,000 shares of the Company’s common stock.   There were no potentially dilutive shares as of September 30, 2013 and June 30, 2013 as there were no warrants outstanding as of September 30, 2013 or June 30, 2013.

Stock-Based Compensation

The Company periodically issues stock instruments, including shares of its common stock, stock options, and warrants to purchase shares of its common stock to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option awards issued and vesting to employees in accordance with authorization guidance of the FASB whereas the value of stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service period. Options to purchase shares of the Company’s common stock vest and expire according to the terms established at the grant date.

The Company accounts for stock options and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete.

Advertising costs

Advertising costs of $28,783 and $0 were incurred during the three months ended September 30, 2013 and 2012, respectively, and are included in direct operating costs.

Recent Accounting Pronouncements

In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies which instruments and transactions are subject to the offsetting disclosure requirements established by ASU 2011-11. This guidance is effective for annual and interim reporting periods beginning January 1, 2013. We do not believe the adoption of this update will have a material effect on our financial position and results of operations.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Loss, or a Tax Credit Carryforward Exists. Topic 740, Income Taxes, does not include explicit guidance on the financial statement presented of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances and the amendments in this update are intended to eliminate that diversity in practice. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Early adoption is permitted.  We do not believe the adoption of this update will have a material effect on our financial position and results of operations.

9

CROWN MARKETING

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2013

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Other accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern.  However, the Company is still in development stage and has not yet been successful in establishing profitable operations. The Company incurred a net loss of $22,054 for the three months ended September 30, 2013, and the Company's liabilities exceed its assets by $165,516 as of September 30, 2013.  The Company has received limited revenues to date.  These factors create substantial doubt about the Company's ability to continue as a going concern.  As a result, the Company’s independent registered public accounting firm, in their report on the Company’s June 30, 2013 financial statements, raised substantial doubt about the Company’s ability to continue as a going concern.  The  financial statements do not include any adjustments that might be necessary if  the  Company  is  unable  to  continue  as  a  going  concern.

The Company's management plans to continue as a going concern revolves around its ability to achieve, as well as raise necessary capital to pay ongoing general and administrative expenses of the Company.  The ability of the Company to continue as a going concern is dependent on securing additional sources of capital and the success of the Company's plan.  There is no assurance that the Company will be successful in raising the additional capital or in achieving profitable operations.

 

NOTE 3 - ACCOUNTS PAYABLE TO RELATED PARTIES

As of September 30, 2013 and June 30, 2013, the Company had outstanding accounts payable due to Mr. Learned Hand, which represented expenses paid by him on behalf of the Company.  Mr. Learned Hand did not have any relationship with the Company as of June 30, 2012; however in September 2012, he was elected as the Company’s director, and Chief Executive and Financial Officer following the resignation of predecessor director and Chief Executive Officer, Mr. Igor Produn.  As of June 30, 2013, amount due to Mr. Hand for reimbursement of Company expenses amounted to $62,004. During the quarter ended September 30, 2013, Mr. Hand advanced an additional $5,250.  In addition, amount due to Mr. Hand as of September 30, 2013 included the balance of accrued interest of $6,750 on the long term notes beneficially held by him (see Note 4), resulting in a balance due him of $74,004 as of the period then ended. The advances are unsecured, due on demand, and non-interest bearing.

In view of the Company’s limited operations and resources, Mr. Hand did not receive any compensation from the Company for the periods ended  September 30, 2013.

10

CROWN MARKETING

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2013

NOTE 4 - NOTES PAYABLE TO RELATED PARTIES

The Company’s notes payable to related parties consist of the following as of September 30, 2013 and June 30, 2013:

	September 30,  2013			June 30,  2013
Notes payable to entity owned by shareholder (a)	$	10,366		$	10,366
Notes payable to entity owned by officer (b)		140,000			140,000
Notes payable to officer (c)		25,000			25,000
Total notes payable to related parties		175,366			175,366
Less: current portion		(35,366)			(35,366)
Notes payable to related parties, net current portion, due 2017	$	140,000		$	140,000

(a)

During the year ended June 30, 2012, the Company issued an unsecured promissory note to an entity owned by a shareholder and former director of the Company for the aggregate principal sum of $9,666.  The unpaid principal sum, together with all other amounts advanced to the Company by the lender from time to time, shall bear interest at 4% per annum until paid, and shall be due and payable on demand.  In September 2012, the lender advanced an additional $700 to the Company under the same terms.  As of September 30, 2013, notes payable to this related party had a balance of $10,366, which was presented as current liability in the accompanying consolidated balance sheets..

(b)

In September 2012, the Company issued an unsecured promissory note to an entity controlled by the Mr. Learned Hand, the Company’s Chief Executive and Financial Officer and director, for the principal sum of $140,000. The promissory note was issued in connection with the assignment of two patents and the related intellectual property (see Note 6).  The unpaid principal sum of the promissory note bears interest at 4% per annum until paid.  The unpaid principal sum and all accrued but unpaid interest thereon shall be due and payable five years from the date of the promissory note (September 2017).  As of September 30, 2013, the promissory note of $140,000 remained outstanding and was classified as non-current liability on the accompanying consolidated balance sheets.

(c)

In March 2013, Mr. Learned Hand, the Company’s Chief Executive and Financial Officer and director, loaned the Company $25,000. This loan is unsecured, and is represented by a demand note bearing interest at a rate of 4% per annum.  As of September 30, 2013, the loan of $25,000 remained outstanding and was classified as current liability on the accompanying consolidated balance sheets.

NOTE  5– INCOME TAXES

As of September 30, 2013 and June 30, 2013, the Company had net operating loss carryforwards of approximately $211,114 and $189,060, which expire in varying amounts between 2018 and 2028.   Realization of this potential future tax benefit is dependent on generating   sufficient taxable income prior to expiration of the loss carryforward.  The deferred tax asset related to this (and other) potential future tax benefits has been offset by a valuation allowance in the same amount. The amount of the deferred tax asset ultimately realizable could be increased in the near term if estimates of future taxable income during the carryforward period are revised.

Deferred income tax assets of $73,890 and $66,530 at September 30, 2013 and June 30, 2013, respectively were offset in full by a valuation allowance.

11

 CROWN MARKETING

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2013

NOTE  5– INCOME TAXES CONTINUED

The components of the Company's net deferred tax assets, including a valuation allowance, are as follows:

			As of			As of
			September 30, 2013			June 30, 2013
Net deferred tax assets before
valuation allowance		$	73,840		$	66,530
Less: Valuation Allowance			(73,890)			(66,530)
Net deferred tax assets			--			--

A reconciliation between the amounts of income tax benefit determined by applying the applicable

U.S. and State statutory income tax rate to pre-tax loss is as follows:

Tax expense at the U.S.
statutory income tax			35%			35%
Statutory state income tax			--			--
Increase in valuation allowance			(35)%			(35)%
Effective tax rate			--			--

Due to the inherent uncertainty in forecasts and future events and operating results, the Company has provided for a valuation allowance in an amount equal to gross deferred tax assets resulting in the above figures for the periods audited.

NOTE 6 – STOCKHOLDERS’ DEFICIENCY

The Company has authorized an unlimited number of shares of preferred stock, no par value, with such rights, preferences and designation and to be issued in such series as determined by the Board of Directors. No shares of preferred stock are issued and outstanding at September 30, 2013 or June 30, 2013.

In July 2010, the Company sold 240,000 units of its common stock for an aggregate consideration of $12,000.  Each unit consisted of 10 shares of common stock and 100 Class A warrants to acquire a share of the Company’s common stock at an exercise price of $0.007 per share with expiration date on December 31, 2014 (24,000,000 warrants in the aggregate).  

In March 2011, the Company sold 110,000 shares of its common stock for cash for net proceeds of $1,100.

The officer and director contributed $7,200 in cash to the Company in March, 2011, and $60 in the quarter ended December 31, 2011.

12

CROWN MARKETING

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  FOR THE UNAUDITED THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

AND THE UNAUDITED PERIOD JULY 8, 2009 (INCEPTION) TO SEPTEMBER 30, 2013

NOTE 6 – STOCKHOLDERS’ DEFICIENCY CONTINUED

Class A Warrants to purchase 8,000,000 shares were exercised for cash of $56,000 on August 14, 2012, and the remaining Class A Warrants to purchase 16,000,000 shares were exercised on August 28, 2012 in exchange for promissory notes in the amount of $112,000.  As of June 30, 2013, all outstanding Class A warrants had been exercised.  The promissory notes were unsecured, bear interest at 4% per annum until paid, and all unpaid principal sum and all accrued but unpaid interest thereon was due and payable on December 31, 2012.  The Company has agreed to extend these notes until December 31, 2013.  One note for $28,000 was paid during fiscal 2013 leaving a balance due of $87,473 (including accrued interest) at June 30, 2013. During the three months ended September 30, 2013, the Company collected $84,000 of the subscription receivable, and accrued interest receivable of $190 in connection with these notes.  As of September 30, 2013, the balance of the notes receivable including the accrued interest of $3,662 was reflected as subscription receivable on the accompanying balance sheet.

By resolution dated September 20, 2012, the Board of Directors authorized the issuance of 122,600,000 restricted shares and a promissory note in the amount of $140,000 for the assignment of two patents and the related intellectual property from a  party which was non-affiliated at the time; in connection with this assignment, the party nominated a new President, Chief Financial Officer and director who is an affiliate of the assignor. The assignment took effect on September 22, 2012. The Company has valued the patent at the predecessor basis in the property exchanged because the assignor gained control of the Company after the acquisition.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statement Notice

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations.  Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Crown Marketing,(“we”, “us”, “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company.  Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate.  In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

13

Results of Operations

 We had losses of $22,504 and $11,943 for the  three months ended September 30, 2013 and 2012. The increase in loss is due to the increase in operating expenses, primarily related to the costs of the new nutraceuticals division, which commenced in the third fiscal quarter of fiscal 2013, as well as increased operating costs related to developing and marketing the controlled release technology acquired in September 2012.  In contrast, our business in fiscal 2012 was primarily focused on wholesaling generic pharmaceuticals.. We expect that our level of operating expenses will continue at the current level for fiscal 2014, and may possibly increase if we are able to exploit the controlled release technology, which is being evaluated at this time by our industry consultants. Management is examining the trends for the quarter ended December 31, 2013. If the nutraceuticals division does not become profitable during this quarter, management will consider terminating the marketing program.

Revenue

Sales in the quarter ended September 30, 2013 increased dramatically, to $44,727, compared to $0  for the three months ended September 30, 2012. The current sales represent sales in a new division, financing the marketing of nutraceuticals, and we cannot predict whether results will continue in future quarters.

Direct Operating Costs

Direct operating costs were $28,783 during the three months ended September 30, 2013, compared to $0 in the three months ended September 30, 2012. These direct operating costs, which consist wholly of advertising costs,  are pursuant to the marketing contract, under which  Crown Nutraceuticals pays all the advertisting costs for the products (green tea extract and raspberry ketone diet products) while the other party developed the product, packaging and marketing materials, and is responsible for all the costs of inventory and fulfillment.  The advertising costs paid by this division were $28,783 for the three months ended September 30,  2013. The Company believes that the new nutraceutical enterprise will recoup all of the advertising costs by December 31, 2013.  We cannot predict whether this new business segment will be profitable nor whether the controlled release technology will be successfully exploited. Should we be able to obtain additional funding to market the controlled release technology, our marketing expenses will increase substantially as well in fiscal 2014.

General and Administrative expenses.

  

 General and Administrative expenses were $36,434 for the three months ended September 30, 2013 as compared to $12,097 for the three months ended September 30, 2012.  General and administrative costs were primarily composed of costs for rent, legal and professional services, transfer agent and other costs primarily related to  our status as a public company. Notable in the September 2003 quarter were legal and accounting expenses of $15,250, bank cahrges of $9,980 and travel related to marketing of the controlled release technology of $7,917.

Liquidity

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern.  However, the Company is still in development stage and has not yet been successful in establishing profitable operations. The Company incurred a net loss of $22,054 for the three months ended September 30, 2013, and the Company's liabilities exceed its assets by $165,546 as of September 30, 2013.  The Company has received limited revenues to date.  These factors create substantial doubt about the Company's ability to continue as a going concern.  As such, the  accompanying financial statements do not include any adjustments that might be necessary if  the  Company  is  unable  to  continue  as  a  going  concern.

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The  Company's  management  plans to continue as a going concern revolves around its abilitiy to achieve, as well as raise necessary  capital  to pay ongoing general and administrative expenses  of  the  Company.   The ability of the Company to continue as a going concern is dependent on securing  additional  sources  of capital and the success of the Company's plan.  There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. 

Our cash needs in the quarter ended September 30, 2013 were met by the payment on subscriptions receivable related to the exercise of warrants.  As of June 30, 2013 we had cash on hand of $19,746., During the quarter ended September 30, 2012, 24,000,000 warrants were exercised that entitled us to receive proceeds of $168,000.   During the year ended June 30, 2013 we received $80,000 from the proceeds of the exercise of warrants. Subsequently  we received $84,000 in the September 30, 2013 quarter  that were due us from on the warrant subscription receivable. We believe that the $93,503 cash on hand as of September 30, 2013 will cover our operating expenses through March 31, 2014. After March 31, 2014, we will need approximately $750,000 for marketing and development to fully fund our marketing plans. Due to our limited operating history, we believe that we will need to sell common equity to raise the required funds. We have no arrangement or understanding pursuant to which we might obtain such funding.

Our officer/shareholder is providing all of our working capital other than those from warrant exercises and will continue to do so until at least June 30, 2014. During the year ended June 30, 2012, the Company issued an unsecured promissory note to an entity owned by a shareholder and former director of the Company for the aggregate principal sum of $9,666.  The unpaid principal sum, together with all other amounts advanced to the Company by the lender from time to time, shall bear interest at 4% per annum until paid, and shall be due and payable on demand.  In September 2012, the lender advanced an additional $700 to the Company under the same terms.  As of September 30 and June 30, 2013, notes payable to this related party had a balance of $10,366.

In September 2012, the Company issued an unsecured promissory note to an entity controlled by Mr. Learned Hand, the Company’s Chief Executive and Financial Officer and director, for the principal sum of $140,000. The promissory note was issued in connection with the assignment of two patents and the related intellectual property (see Note 6).  The unpaid principal sum of the promissory note bears interest at 4% per annum until paid.  The unpaid principal sum and all accrued but unpaid interest thereon shall be due and payable five years from the date of the promissory note (September 2017).  As of September 30 and June 30, 2013, the promissory note of $140,000 remained outstanding.

In March 2013, Mr. Hand loaned the Company $25,000 to capitalize the Crown Nutraceuticals subsidiary. This loan is represented by a demand note bearing interest at a rate of 4% per annum.  As of September 30 and June 30, 2013, the loan of $25,000 remained outstanding.

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Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. 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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our condensed consolidated financial statements.

Development Stage Company

The Company is a development stage enterprise pursuant to applicable guidance of the Financial Accounting Standards Board (“FASB”), and is devoting substantially all of its present efforts to establishing a new business and has produced limited revenues from its operations .

Use of Estimates

The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.  Actual results may differ from those estimates and such differences may be material to the financial statements.  The more significant estimates and assumptions by management include among others, the fair value of shares of common stock issued for services. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

Revenue Recognition

The Company recognizes sales in accordance with the United States Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”. The Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. Revenue is not recognized until title and risk of loss is transferred to the customer, which generally occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have been met.

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Recent Accounting Pronouncements

In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies which instruments and transactions are subject to the offsetting disclosure requirements established by ASU 2011-11. This guidance is effective for annual and interim reporting periods beginning January 1, 2013. We do not believe the adoption of this update will have a material effect on our financial position and results of operations.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Loss, or a Tax Credit Carryforward Exists. Topic 740, Income Taxes, does not include explicit guidance on the financial statement presented of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances and the amendments in this update are intended to eliminate that diversity in practice. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Early adoption is permitted.  We do not believe the adoption of this update will have a material effect on our financial position and results of operations.

Other accounting pronouncements did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

Forward Looking Statements

Information included in this report includes forward looking statements, which can be identified by the use of forward-looking terminology such as may, expect, anticipate, believe, estimate, or continue, or the negative thereof or other variations thereon or comparable terminology. The statements in "Risk Factors" and other statements and disclaimers in this report constitute cautionary statements identifying important factors, including risks and uncertainties, relating to the forward-looking statements that could cause actual results to differ materially from those reflected in the forward-looking statements.

Since we have not yet generated any significant revenues, we are a development stage company as that term is defined in Section 915 - Development Stage Entities, of the FASB Accounting Standards Codification.   Our activities have mostly been devoted to seeking capital; seeking supply contracts and development of a business plan.  Our auditors have included an explanatory paragraph in their report on our financial statements, relating to the uncertainty of our business as a going concern, due to our lack of operating history or current revenues, its nature as a start up business, management's limited experience and limited funds.  We do not believe that conventional financing, such as bank loans, is available to us due to these factors.  We have no bank line of credit available to us.  Management believes that it will be able to raise the required funds for operations from one or more future offerings, in order to effect our business plan.

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Our future operating results are subject to our attaining certain milestones, including:

o     our success in entering into favorable arrangements  to license or exploit our technolog;

o     the success of our marketing efforts;

o     our ability to obtain additional financing; and

o     other risks which we identify in future filings with the SEC.

Any or all of our forward looking statements in this prospectus and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward looking statement can be guaranteed. In addition, we undertake no responsibility to update any forward-looking statement to reflect events or circumstances which occur after the date of this report.

Contractual Obligations and Off-Balance Sheet Arrangements

We do not have any contractual obligations or off balance sheet arrangements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company’s principal executive officer and its principal financial officer, based on his evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d -14 (c) as of September 30, 2013. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective to enable us to accurately record, process, summarize and report certain information required to be included in the Company’s periodic SEC filings within the required time periods, and to accumulate and communicate to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2013 that have materially affected or are reasonably likely to materially affect our internal controls.

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PART II — OTHER INFORMATION

Item 1.  Legal Proceedings.

We are not a party to or otherwise involved in any legal proceedings.

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions.  The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations.  However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

Item 1A.  Risk Factors.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.  Defaults Upon Senior Securities.

There have been no events which are required to be reported under this Item.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

None.

Item 6.  Exhibits.

31. Certification of CEO and CFO.

32. Certification pursuant to 18 U.S.C. Section 1350 of CEO and CFO

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	CROWN MARKETING
Dated:  November 18, 2013	By:	/s/ Learned Hand
		Learned Hand
		CEO and Chief Financial Officer (chief financial and accounting officer and duly authorized officer)

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