Crown Equity Holdings, Inc. - Quarter Report: 2010 March (Form 10-Q)
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended March 31, 2010
OR
o TRANSITION REPORT UNDER SECTION 13 OF
15(d) OF THE EXCHANGE ACT OF 1934
From the
transition period from ___________ to ____________.
Commission
File Number 000-29935
CROWN EQUITY HOLDINGS
INC.
(Exact
name of registrant as specified in its charter)
Nevada
33-0677140
(State or
other jurisdiction of incorporation or organization)(IRS Employer Identification
No.)
544West Sahara Avenue, Suite
205, Las Vegas, NV 89146
(Address
of principal executive offices)
(702)
448-1543
(Issuer's
telephone number)
N/A
(Former name, former address and former
fiscal year, if changed since last report)
Indicate
by check mark whether the Company (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Company was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days:
Yes x No
o
Indicate
by check mark whether the Company is a large accelerated filer, an accelerated
file, non-accelerated filer, or a smaller reporting company.
|
Large
accelerated filer o
Non-accelerated
filer o
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Accelerated
filed o
Smaller
reporting company x
|
Indicate
by check mark whether the Company is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Yes o No
x
As of May 4, 2010, there were
73,267,616 shares of Common Stock of the issuer outstanding.
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TABLE
OF CONTENTS
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Page
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PART
I: FINANCIAL INFORMATION
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PART
II: OTHER INFORMATION
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2
(Unaudited)
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ASSETS
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||||||||
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March
31,
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December
31,
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|||||||
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2010
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2009
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||||||
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Current
assets
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||||||||
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Cash
and cash equivalents
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$ | 260,024 | $ | 249,612 | ||||
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Accounts
receivable
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2,500 | -- | ||||||
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Marketable
securities
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72,600 | -- | ||||||
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Prepaid
expense
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2,400 | 8,102 | ||||||
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Total
current assets
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337,524 | 257,714 | ||||||
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Fixed
assets
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||||||||
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Equipment
and vehicles(net)
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11,648 | 17,993 | ||||||
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Restricted
securities
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56,125 | 204,500 | ||||||
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Total
Assets
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$ | 405,297 | $ | 480,207 | ||||
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LIABILITIES AND STOCKHOLDERS’
EQUITY
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Current
liabilities
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Accounts
payable and accrued expense
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$ | 16,060 | $ | 14,332 | ||||
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Taxes
payable
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-- | 16,990 | ||||||
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Deferred
revenue
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26,000 | 62,000 | ||||||
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Accrued
salaries
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57,700 | -- | ||||||
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Total
current liabilities
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99,760 | 93,322 | ||||||
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Long
term liabilities
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Notes
payable- related parties
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97,209 | 87,209 | ||||||
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Total
liabilities
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196,969 | 180,531 | ||||||
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Stockholder's
Equity
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Stockholders’
equity:
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Preferred
shares $0.001 par value, 10,000,000 shares authorized
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- | - | ||||||
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None
issued or outstanding
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Common
stock, $.001 par value, 490,000,0000 shares authorized
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73,237,616 and
72,880,632 shares issued and outstanding as of March 31, 2010
and December 31, 2009 respectively.
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73,238 | 72,881 | ||||||
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Additional-paid-in-capital
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6,510,978 | 6,475,637 | ||||||
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Accumulated
deficit
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(6,375,888 | ) | (6,248,842 | ) | ||||
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Total
stockholder's equity
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208,328 | 299,676 | ||||||
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Total
Liabilities & Stockholders’ Equity
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$ | 405,297 | $ | 480,207 | ||||
The accompanying notes are an integral
part of the unaudited financial statements
3
Crown
Equity Holdings Inc.
Three
month periods ended March 31, 2010 and 2009
(Unaudited)
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2010
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2009
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Revenue
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$ | 324,776 | $ | 6,144 | ||||
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Cost
of revenues
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(85,000 | ) | (1,364 | ) | ||||
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Gross
margin
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239,776 | 4,780 | ||||||
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Expenses:
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General
and administrative
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241,994 | 253,985 | ||||||
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Depreciation
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6,345 | 6,345 | ||||||
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Operating
loss
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(8,563 | ) | (255,550 | ) | ||||
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Other
Income (expense):
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Other
income
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17,039 | -- | ||||||
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Interest
income
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31 | -- | ||||||
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Realized
gain/(loss) on securities
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1,700 | -- | ||||||
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Unrealized
gain/(loss) on securities
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(134,025 | ) | ||||||
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Gain
on debt forgiveness
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-- | 1,319 | ||||||
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Other
expense
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(2,916 | ) | -- | |||||
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Interest
expense
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(312 | ) | (766 | ) | ||||
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Total
other income (expense)
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(118,483 | ) | 553 | |||||
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Net
loss
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$ | (127,046 | ) | $ | (254,997 | ) | ||
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Net
loss per common share (basic and diluted):
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$ | (0.00 | ) | $ | (0.00 | ) | ||
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Weighted
average common shares outstanding (basic and diluted):
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73,106,722 | 70,808,676 | ||||||
The
accompanying notes are an integral part of the unaudited financial
statements
4
Crown
Equity Holdings Inc.
Three
month periods ended March 31, 2010 and 2009
(Unaudited)
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2010
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2009
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CASH
FLOWS FROM OPERATING ACTIVITIES
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Net
loss
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$ | (127,046 | ) | $ | (254,997 | ) | ||
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Adjustments
to reconcile net income (loss) to cash used
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in operating activities:
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Depreciation
expense
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6,345 | 6,345 | ||||||
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Stock
for services
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35,698 | 225,100 | ||||||
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Unrealized
(gain)/loss on securities
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134,025 | -- | ||||||
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Realized
(gain)/loss on securities
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(1,700 | ) | -- | |||||
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Restricted
securities received for revenue
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(14,550 | ) | -- | |||||
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Marketable
securities received for revenue
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(21,000 | -- | ||||||
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Debt
forgiveness income
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-- | (1,319 | ) | |||||
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Net
Change in:
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||||||||
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Accounts
receivable
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(2,500 | ) | -- | |||||
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Accounts
payable and accrued expenses
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1,728 | (3,089 | ) | |||||
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Income
tax payable
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(16,990 | ) | 270 | |||||
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Prepaid
expenses
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5,702 | -- | ||||||
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Accrued
salaries
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57,700 | 5,325 | ||||||
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Deferred
revenue
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(57,000 | ) | -- | |||||
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TOTAL
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
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412 | (22,365 | ) | |||||
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CASH
FLOWS USED IN INVESTING ACTIVITIES
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-- | -- | ||||||
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Advances
from related party, net
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-- | (5,613 | ) | |||||
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Proceeds
from sale of stock
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-- | 25,000 | ||||||
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Proceeds
from notes payable, net
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-- | 2,000 | ||||||
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Notes
payable-related party
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10,000 | 2,650 | ||||||
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TOTAL
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
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10,000 | 24,037 | ||||||
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Net
Increase in Cash
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10,412 | 1,672 | ||||||
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Cash,
beginning of period
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249,612 | 2,898 | ||||||
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Cash,
end of period
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$ | 260,024 | $ | 4,570 | ||||
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SUPPLEMENTAL
CASH FLOW INFORMATION
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Interest
paid
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$ | - | $ | - | ||||
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Income
taxes paid
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$ | - | $ | - | ||||
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Non
Cash Investing and Financing
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Common
stock for accounts payable and accrued liabilities
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$ | -- | $ | 29,000 | ||||
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Securities
reclassed from restricted
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$ | 47,000 | $ | - | ||||
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Securities
received for deferred revenues
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$ | 21,000 | $ | - | ||||
The
accompanying notes are an integral part of the unaudited financial
statements
5
Crown
Equity Holdings Inc.
(Unaudited)
NOTE
1 - BASIS OF PRESENTATION
The
accompanying unaudited interim consolidated financial statements of Crown Equity
Holdings Inc. (“Crown Equity”) have been prepared in accordance with accounting
principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission, and should be read in conjunction with
the audited consolidated financial statements and notes thereto contained in
Crown Equity’s December 31, 2009 Annual Report filed with the SEC on Form 10-K.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
end December 31, 2009 as reported on Form 10-K, have been omitted.
NOTE
2 - GOING CONCERN
As shown
in the accompanying financial statements, Crown Equity has an accumulated
deficit of March 31, 2010. Unless profitability and increase in shareholders
equity continues, these conditions raises substantial doubt as to Crown Equity's
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if Crown Equity is unable to continue as
a going concern.
NOTE
3 – MARKETABLE SECURITIES
Marketable
securities are classified as available-for-sale and are presented in the balance
sheet at fair market value. Crown Equity classified certain
securities as long-term due to restrictions on transfers.
Per
Accounting Standards Codification (“ASC”) 820 “Fair Value Measurement”, fair
value is defined, establishes a framework for measuring fair value under
generally accepted accounting principles, and expands disclosures about fair
value measurements. ASC 820 does not require any new fair value
measurements.
ASC 820
establishes a valuation hierarchy for disclosure of the inputs to valuation used
to measure fair value. This hierarchy prioritizes the inputs into three broad
levels as follows:
Level 1:
Quoted market prices in active markets for identical assets or
liabilities
Level 2:
Observable market based inputs or unobservable inputs that are corroborated by
market data
Level 3:
Unobservable inputs that are not corroborated by market data
6
Crown
Equity has classified these marketable securities as level 1 with a fair value
of $72,600 as of March 31, 2010.
Per
Accounting Standards Codification 825 “The Fair Value Option for Financial
Assets and Financial Liabilities—Including an Amendment of FASB Statement No.
115”, an entity is permitted to irrevocably elect fair value on a
contract-by-contract basis for new assets or liabilities within the scope of ASC
825 as the initial and subsequent measurement attribute for those financial
assets and liabilities and certain other items including property and casualty
insurance contracts. Entities electing the fair value option are required to (i)
recognize changes in fair value in earnings and (ii) expense any up-front costs
and fees associated with the item for which the fair value option is elected.
Entities electing the fair value option are required to distinguish, on the face
of the statement of financial position, the fair value of assets and liabilities
for which it has elected the fair value option, and similar assets and
liabilities measured using another measurement attribute. An entity can
accomplish this either by reporting the fair value and non-fair-value carrying
amounts as separate line items or by aggregating those amounts and disclosing
parenthetically the amount of fair value included in the aggregate
amount.
Crown
Equity adopted ASC 825 this quarter and elected the fair value option for their
marketable securities. The related gain/loss based on valuation on the mark to
market each balance sheet date is reflected in the income
statement.
NOTE
4 – REVENUE RECOGNITION
The
Company provides various consulting services to companies and individuals
dealing with corporate structure and operations globally. Crown Equity’s revenue
is recognized pursuant to ASC 605 “Revenue Recognition.” The
Company recognizes its revenue from services as those services are performed.
Revenue recognition is limited to the amount that is not contingent upon
delivery of any future product or service or meeting other specified performance
conditions. Product sales, accounted for within fulfillment services, are
recognized upon shipment to the customer and satisfaction of all
obligations.
Contract
revenues include royalties under license and collaboration agreements. Contract
revenue related to technology licenses is fully recognized only after the
license period has commenced, the technology has been delivered and no further
involvement of Crown Equity is required.
Crown
Equity receives payment for its services in both cash and equity instruments
issued by the customer. The equity instruments are accounted for in
accordance with the provisions of ASC 718 “Compensation – Stock
Compensation” and is based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more
reliably measurable. The measurement date of the fair value of the equity
instrument issued is the date on which the equity instruments are received or
the date on which the contract is issued for the services to be preformed
related to the payments received by Crown Equity.
Amounts
received for revenue not earned as of period end are accounted for as deferred
revenues.
7
NOTE
5 - RELATED PARTY TRANSACTIONS
On
December 2, 2009, the Company signed a one year lease for 2,400 square feet of
office space. The rent for the space is $2,400 per month. The
landlord is related to one of the officers of the Company.
On
November 20, 2009, the Company converted accounts payable and advances from
Montse Zaman, a related party, of $71,185 to a three year unsecured note
maturing on November 19, 2012. As of March 31, 2010 the balance increased by
$10,000 to $81,185. Interest is incurred at 12% per annum unless the principal
and interest are not paid by maturity at which time the interest rate
accelerates to 18% per annum.
During
the quarter ended March 31, 2007, the Company borrowed $12,700 from Phoenix
Consulting Services Inc. controlled by a related party. The loan is unsecured
and matured on April 1, 2008 and accrued interest at 12% per annum. The note may
be converted into common shares of the company at the holder’s option at a to be
determined in the future conversion price. Amounts outstanding under
this agreement subsequent to April 1, 2008 accrued interest at 18% per annum. On
November 20, 2009, the note including principal and interest totaling $16,024
was converted to a long term note due November 19, 2012 with principal and
interest due at maturity. If the principal and interest are not paid
by maturity, the interest rate accelerates to 18% per annum.
NOTE
6 – EQUITY
On March
25, 2010, the Company filed Amended and Restated Articles of Incorporation
authorizing 10,000,000 shares of preferred shares with par value of $0.001 and
reducing the authorized shares of common stock from 500,000,000 shares to
490,000,000 shares.
During
the three months ended March 31, 2010, Crown Equity issued 356,984 shares of
common stock at $0.10 per share for a value of $35,698 for accrued
compensation.
NOTE
7 - CONTINGENCIES
There is
pending litigation in Arizona small claims court - Strojnik v. Crown Equity
Holdings, Inc. Crown Equity has assessed the outcome of a loss as
remote and furthermore the maximum liability in small claims court is
$2,500. Crown Equity has not accrued any amounts related to this
contingency.
NOTE
8- RESTRICTED SECURITIES
Crown
Equity has classified the marketable securities they hold as of yearend as
long-term in accordance with rule 144 due to restrictions on sale &
transfers of unregistered shares. As of March 31, 2010 $56,125 of the marketable
securities which are non controlling shares received from customers as
consulting income has been classified as restricted securities in accordance
with Accounting Standards Codification 825 and 718. The related gain/loss based
on valuation on the mark to market each balance sheet date is reflected in the
income statement.
8
NOTE
9 – SUBSEQUENT EVENTS
On April
1, 2010 the Company issued 30,000 shares of common stock at $0.10 per share
valued at $3,000 for services.
Crown
Equity evaluated events up through May 5, 2010. During this period, the Company
did not have any other material recognizable subsequent events.
9
This
report contains forward looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. Crown Equity’s actual results could
differ materially from those set forth on the forward looking statements as a
result of the risks set forth in Crown Equity’s filings with the
Securities and Exchange Commission, general economic conditions, and changes in
the assumptions used in making such forward looking statements.
OVERVIEW
Crown
Equity Holdings Inc. (”Crown Equity”) was incorporated in August 1995 in Nevada.
The
Company is offering its services to companies seeking to become public entities
in the United States. It has launched a website, www.crownequityholdings.com,
which offers its services in a wide range of fields. The Company provides
various consulting services to companies and individuals dealing with corporate
structure and operations globally.
In 2007,
the Company, through a wholly-owned subsidiary, Crown Trading Systems, Inc.
(“CTS”), a Nevada corporation, began to develop, sell and produce computer
systems which are capable of running multiple monitors from one
computer. CTS is able to run 16 monitors off one CPU. In late 2007,
CTS began to attend trade shows and starting selling these systems. In 2009,
Crown Trading Systems was dissolved as a corporation and its business was
absorbed into the Company.
On
September, 30, 2009 Crown Marketing, Inc acquired controlling interest of the
Company from Crown Partners, Inc.
Crown
Equity is offering its services to companies and their management seeking to
become public entities in the United States. It has launched a
website, www.crownequityholdings.com, which offers its services in a wide range
of fields.
Crown
Equity’s office is located at 5440 West Sahara, Suite 205, Las Vegas, Nevada
89146.
As of
March 31, 2010, Crown Equity had no employees but was utilizing the services of
independent contractors and consultants.
RESULTS
OF OPERATIONS
For the
three months period ending September 2010 and 2009 revenues were $ 324,776 and $
6,144 with net loss of $127,046 and a net loss of $254,997 respectively. During
the period ending March 31, 2010 Crown Equity incurred deferred revenues of $
26,000. General and administrative expense increased to $241,994 for the three
months ended March 31, 2009 as compared to $253,985 for the three months ended
March 31, 2010. Interest expense incurred during the three month
period ending March 31, 2010 was $312 compared $766 for the same period in 2009.
Depreciation for the three months period ending March 31, 2010 was $6,345 and
$6,345 for the same periods in 2009. The revenue increases in 2010 were from
consulting services of approximately $258,550 and net deferred revenue pickup of
$36,000. The net loss for the three month period ending March 31, 2010 consisted
of an operating loss of $8,563 and other expenses of $118,483 of which $ 134,025
was an unrealized loss on securities.
10
Crown
Equity will attempt to carry out its business plan as discussed above; however,
it cannot predict to what extent its capital resources could hinder its business
plan.
LIQUIDITY
AND CAPITAL RESOURCES
At March
31, 2010, Crown Equity had current assets of $337,524 and current liabilities of
$99,760, resulting in working capital of $ 237,764. Shareholders'
equity as of March 31, 2010 was $208,328. Further, there exist no agreements or
understandings with regard to loan agreements by or with the Officers,
Directors, principals, affiliates or shareholders of Crown Equity.
Cash flow
from operations for the period ending March 31, 2010 was $412 compared to
($22,365) for the same period in 2009 a positive increase of $21,953. Cash flow
from financing activities during the period ended March 31, 2010 was $10,000
compared to $24,037 in 2009, a decrease of $14,037. The increase in sales was
the significant factor in positive cash flow during the period ending March 31,
2010 compared to 2009 when the sale of stock contributed $25,000 to the
financing activity.
Our
existing capital may not be sufficient to meet Crown Equity's cash needs,
including the costs of compliance with the continuing reporting requirements of
the Securities Exchange Act of 1934, as amended. This condition
raises substantial doubt as to Crown Equity's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary if Crown Equity is unable to continue as a going concern.
EMPLOYEES
As of
March 31, 2010, Crown Equity had no employees.
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, Crown
Equity is not required to provide information required under this
Item.
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(a)
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Evaluation
of Disclosure Controls and
Procedures
|
Based on
their evaluation of our disclosure controls and procedures(as defined in Rule
13a-15e under the Securities Exchange Act of 1934 the "Exchange Act"), our
principal executive officer and principal financial officer have concluded that
as of the end of the period covered by this quarterly report on Form 10-Q such
disclosure controls and procedures were not effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms because
of the identification of a material weakness in our internal control over
financial reporting which we view as an integral part of our disclosure controls
and procedures. The material weakness relates to the lack of segregation of
duties in financial reporting, as our financial reporting and all accounting
functions are performed by an external consultant with no oversight by a
professional with accounting expertise. Our CEO and CFO do not possess
accounting expertise and our company does not have an audit committee.
This weakness is due to the company’s lack of working capital to hire additional
staff. To remedy this material weakness, we intend to engage another
accountant to assist with financial reporting as soon as our finances will
allow.
11
Changes
in Internal Control over Financial Reporting
Except as
noted above, there have been no changes in our internal control over financial
reporting identified in connection with the evaluation required by paragraph (d)
of Exchange Act Rules 13a-15 or 15d-15 that occurred during our first quarter
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
There is
pending litigation in Arizona small claims court - Strojnik v. Crown Equity
Holdings, Inc. Crown Equity has assessed the outcome of a loss as remote and
furthermore the maximum liability in small claims court is
$2,500. Crown has not accrued any amounts related to this
contingency.
There
have been no material changes to Crown Equity’s risk factors as previously
disclosed in our most recent 10-K filing for the year ending December 31,
2009.
During
the three months ended March 31, 2010 Crown Equity issued 356,984 shares of
common stock at $0.10 per share for a value of $35,698 for accrued
compensation.
None
None
None
12
EXHIBIT
31.1 Certification of Principal Executive Officer and Principal Financial
Officer
EXHIBIT
32 Certification of Compliance to Sarbanes-Oxley
In
accordance with 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
EQUITY HOLDINGS INC.
By /s/ Kenneth Bosket
Kenneth
Bosket, CEO
By /s/ Lowell Holden
Lowell Holden, CFO
Date: May
4, 2010
13