Data Storage Corp - Quarter Report: 2008 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_______________
FORM
10-Q
_______________
|
x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended September 30, 2008
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition period from
______to______.
EURO
TREND INC.
(Exact
name of registrant as specified in Charter)
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NEVADA
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98-0530147
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|||
|
(State
or other jurisdiction of
incorporation
or organization)
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(Commission
File No.)
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(IRS
Employee Identification No.)
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875
Merrick Avenue
Westbury,
NY 11590
(Address
of Principal Executive Offices)
_______________
(212)
564-4922
(Issuer
Telephone number)
______________
(Former
Name or Former Address if Changed Since Last Report)
Check
whether the issuer (1) has 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 issuer 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 registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company filer.
See definition of “accelerated filer” and “large accelerated filer”
in Rule 12b-2 of the Exchange Act (Check one):
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.
Yes o No x
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of November 19, 2008: 87,312,501 shares of Common Stock.
EURO
TREND INC.
FORM
10-Q
September
30, 2008
INDEX
PART
I-- FINANCIAL INFORMATION
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Item
1.
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Consolidated
Financial Statements
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|
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Consolidated
Balance Sheets as of September 30, 2008 (unaudited) and December 31,
2007
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||
| Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2008 and September 30, 2007 | ||
| Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2008 and September 30, 2007 | ||
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Notes
to Consolidated Financial Statements
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||
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition
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Item
3
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Quantitative
and Qualitative Disclosures About Market Risk
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Item
4T.
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Control
and Procedures
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PART
II-- OTHER INFORMATION
|
Item
1
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Legal
Proceedings
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Item
1A
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Risk
Factors
|
|
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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|
Item
3.
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Defaults
Upon Senior Securities
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|
Item
4.
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Submission
of Matters to a Vote of Security Holders
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|
Item
5.
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Other
Information
|
|
Item
6.
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Exhibits
and Reports on Form 8-K
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PART
I – Financial Information
Item 1. Consolidated
Financial Statements
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EURO
TREND, INC AND SUBSIDIARY
|
||||||||
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CONSOLIDATED
BALANCE SHEETS
|
||||||||
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September
30, 2008
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December
31, 2007
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|||||||
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(Unaudited)
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||||||||
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ASSETS
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||||||||
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Current
Assets:
|
||||||||
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Cash
and cash equivalents
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$ | 893,343 | $ | 37,803 | ||||
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Accounts
receivable (less allowance for doubtful
|
||||||||
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accounts of
$1,000 in 2008 and 2007)
|
75,325 | 34,885 | ||||||
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Stock
subscription receivable
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200,000 | - | ||||||
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Total
Current Assets
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1,168,668 | 72,688 | ||||||
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Property
and Equipment:
|
||||||||
|
Property and
equipment
|
1,115,984 | 1,052,116 | ||||||
|
Less—Accumulated
depreciation
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(759,461 | ) | (673,764 | ) | ||||
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Net
Property and Equipment
|
356,523 | 378,352 | ||||||
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Other
Assets:
|
||||||||
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Other assets
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443 | 443 | ||||||
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Employee
loan
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23,000 | 18,000 | ||||||
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Deposit
on investment
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50,000 | - | ||||||
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Total
Other Assets
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73,443 | 18,443 | ||||||
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Total
Assets
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1,598,634 | 469,483 | ||||||
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LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
||||||||
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Current
Liabilities:
|
||||||||
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Accounts
payable
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26,021 | 47,809 | ||||||
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Accrued
expenses
|
4,123 | 1,785 | ||||||
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Credit
line payable
|
99,970 | - | ||||||
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Due to
related party
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13,500 | - | ||||||
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Total
Current Liabilities
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143,614 | 49,594 | ||||||
|
Due
to officer
|
- | 1,836,097 | ||||||
|
Commitments
and contingencies
|
- | - | ||||||
| Stockholders’ Deficiency: | ||||||||
|
Preferred
Stock, $.001 par value; 10,000,000 shares
authorized; 9,812,499,
and
0 shares issued and outstanding
|
9,812 | - | ||||||
|
Common
stock, par value $0.001; 250,000,000 shares authorized;
87,312,501
and 9,032,096 shares issued and outstanding
|
87,313 | 9,032 | ||||||
|
Additional
paid in capital
|
4,852,966 | 1,804,962 | ||||||
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Accumulated
deficit
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(3,495,071 | ) | (3,230,202 | ) | ||||
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Total
Stockholders' Equity (Deficit)
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1,455,020 | (1,416,208 | ) | |||||
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Total
Liabilities and Stockholders' Equity (Deficit)
|
$ | 1,598,634 | $ | 469,483 | ||||
|
The
accompanying notes are an integral part of these consolidated financial
statements
|
||||||||
-1-
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EURO
TREND, INC AND SUBSIDIARY
|
||||||||||||||||
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CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
||||||||||||||||
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Three
Months Ended
September
30,
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Nine
Months Ended
September
30
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Sales
|
$ | 149,330 | $ | 162,821 | $ | 477,917 | $ | 500,738 | ||||||||
|
Cost
of sales
|
82,905 | 84,350 | 246,508 | 254,018 | ||||||||||||
|
Gross
Profit
|
66,425 | 78,471 | 231,409 | 246,720 | ||||||||||||
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Selling,
general and administrative
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215,628 | 136,080 | 498,272 | 416,271 | ||||||||||||
|
Loss
from Operations
|
(149,203 | ) | (57,609 | ) | (266,863 | ) | (169,551 | ) | ||||||||
|
Other
Income (Expense)
|
||||||||||||||||
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Interest
income
|
4,222 | 19 | 4,259 | 649 | ||||||||||||
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Interest
expense
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(1,389 | ) | - | (2,265 | ) | - | ||||||||||
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Total
Other (Expense)
|
2,833 | 19 | 1,994 | 649 | ||||||||||||
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Loss
before provision for income taxes
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(146,370 | ) | (57,590 | ) | (264,869 | ) | (168,902 | ) | ||||||||
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Provision
for income taxes
|
- | - | - | - | ||||||||||||
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Net
Loss
|
$ | (146,370 | ) | $ | (57,590 | ) | $ | (264,869 | ) | $ | (168,902 | ) | ||||
|
Loss
per Share – Basic
and Diluted
|
$ | (.002 | ) | $ | (.006 | ) | $ | (.008 | ) | $ | (.019 | ) | ||||
|
Weighted
Average Number of Shares - Basic
and Diluted
|
78,657,403 | 9,032,096 | 31,985,494 | 9,032,096 | ||||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements
-2-
EURO
TREND, INC AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
Nine
Months Ended
September
30,
|
||||||||
|
2008
|
2007
|
|||||||
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Cash
Flows from Operating Activities:
|
||||||||
|
Net
loss
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$ | (264,869 | ) | $ | (168,902 | ) | ||
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
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Depreciation
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85,698 | 89,801 | ||||||
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Changes
in Assets and Liabilities:
|
||||||||
|
Accounts
receivable
|
(40,440 | ) | (23,432 | ) | ||||
|
Employee
Loan
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(5,000 | ) | - | |||||
|
Other
Assets
|
- | 459 | ||||||
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Security
Deposit
|
- | (5,975 | ) | |||||
|
Accounts
payable
|
(21,788 | ) | 3,043 | |||||
|
Accrued
expenses
|
2,337 | (1,841 | ) | |||||
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Due
to Related Party
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13,500 | - | ||||||
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Net
Cash Used in Operating Activities
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(230,562 | ) | (106,847 | ) | ||||
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Cash
Flows from Investing Activities:
|
||||||||
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Cash
paid for equipment
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(63,868 | ) | (154,261 | ) | ||||
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Deposit
on investment
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(50,000 | ) | - | |||||
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Net
Cash Used in Investing Activities
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(113,868 | ) | (154,261 | ) | ||||
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Cash
Flows from Financing Activities:
|
||||||||
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Advances
from credit line
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99,970 | - | ||||||
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Advances
from shareholder
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- | 255,215 | ||||||
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Capital
Stock Issuance
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1,100,000 | - | ||||||
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Net
Cash Provided by Financing Activities
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1,199,970 | 255,215 | ||||||
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Increase
(Decrease) in Cash and Cash Equivalents
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855,540 | (5,893 | ) | |||||
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Cash
and Cash Equivalents, Beginning of Period
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37,803 | 23,624 | ||||||
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Cash
and Cash Equivalents, End of Period
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$ | 893,343 | $ | 17,731 | ||||
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Cash
paid for interest
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$ | - | $ | - | ||||
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Cash
paid for income taxes
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$ | - | $ | - | ||||
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Noncash
Investing and Financing Activities:
|
||||||||
|
Common
stock issued for stock subscription receivable
|
$ | 200,000 | $ | - | ||||
|
Conversion
of debt for common stock
|
$ | 1,836,097 | $ | - | ||||
The
accompanying notes are an integral part of these consolidated financial
statements
-3-
EURO
TREND, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND SEPTEMBER 30, 2007
Note
1 Basis of presentation, organization and other matters
On
October 20, 2008, Euro Trend Inc. ("Euro Trend"), acquired all of the
outstanding capital stock of Data Storage Corporation (“Data Storage”). Data
Storage became a wholly owned subsidiary of Euro Trend. The business of Data
Storage was the only business of Euro Trend after the acquisition.
Data
Storage Corporation was incorporated in Delaware on August 29, 2001. Data
Storage Corporation is a provider of data backup services. The Company
specializes in secure disk-to-disk data backup and restoration solutions for
disaster recovery, business continuity, and regulatory compliance.
Data
Storage Corporation derives its revenues from the sale of solutions that provide
businesses protection of critical electronic data. Primarily, these services
consist of email storage and compliance solutions; off site data back up;
continuous data protection; data duplication; high availability replication and
virtual tape libraries for disaster recovery and business continuity. The
Company has Data Centers in Westbury, New York and maintains equipment under a
strategic alliance with Broadsmart a Voip company in Fort
Lauderdale, Florida to provide redundant data protection.
The
Company accounted for the acquisition of Data Storage on October 20, 2008 as a
recapitalization. The recapitalization was the merger of a private operating
company (Data Storage) into a public corporation (Euro Trend) with nominal
net assets and as such is treated as a capital transaction, rather than a
business combination. As a result no Goodwill is recorded. The transaction is
the equivalent to the issuance of stock by the private company for the net
monetary assets of the shell corporation. The pre acquisition financial
statements of Data Storage are treated as the historical financial statements of
the consolidated companies.
The
consolidated balance sheets, statement of changes in operations and footnotes
have been revised to show the effect on the outstanding shares resulting from
the reverse merger which occurred on October 20, 2007. The effect on the
outstanding shares is based on the 27.236 common shares of Euro Trend for every
one share of Data Storage’s common stock. In addition, where required all share
amounts have been revised to reflect the 27.236 common shares of Euro Trend for
every one share of Data Storage’s common stock.
Condensed
Consolidated Financial Statements
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all normal recurring adjustments considered necessary for a fair
statement of the results of operations have been included. The results of
operations for the nine months ended September 30, 2008 are not necessarily
indicative of the results of operations for the full year. When reading the
financial information contained in this Quarterly Report, reference should be
made to the financial statements, schedule and notes contained in the Company's
Amended Annual Report on Form 10-KSB/A for the year ended December 31,
2007.
Note
2 Summary of Significant Accounting Policies
Cash,
cash equivalents and short-term investments
The
Company considers all highly liquid investments with an original maturity or
remaining maturity at the time of purchase, of three months or less to be cash
equivalents.
Concentration of
credit risk and other risks and uncertainties
Financial
instruments and assets subjecting the Company to concentration of credit risk
consist primarily of cash and cash equivalents, short-term investments and trade
accounts receivable. The Company's cash and cash equivalents are maintained at
major U.S. financial institutions. Deposits in these institutions may exceed the
amount of insurance provided on such deposits.
The
Company's customers are primarily concentrated in the United States. The Company
performs ongoing credit evaluations and establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of customers, historical
trends and other information.
-4-
Allowance
for Doubtful Accounts
The
allowance for doubtful accounts reflects the estimated accounts receivable that
will not be collected due to credit losses and customer returns and allowances.
Provisions for estimated uncollectible accounts receivable are made for
individual accounts based upon specific facts and circumstances including
criteria such as their age, amount, and customer standing. Provisions are also
made for other accounts receivable not specifically reviewed based upon
historical experience.
Income
Taxes
Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. At
September 30, 2008, the Company had a full valuation allowance against its
deferred tax assets.
Estimated
Fair Value of Financial Instruments
The
Company's financial instruments include cash, accounts payable, line of credit
and due to related parties. Management believes the estimated fair value of
cash, accounts payable and debt instruments at September 30, 2008 approximate
their carrying value as reflected in the balance sheets due to the short-term
nature of these instruments or the use of market interest rates for debt
instruments. Fair value of due to related parties cannot be determined due to
lack of similar instruments available to the Company.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.
Revenue
Recognition
The
Company’s revenues consist principally of storage revenues. Storage revenues
consist of monthly charges related to the storage of materials or data
(generally on a per unit basis). Sales are generally recorded in the
month the service is provided.
Advertising
Costs
The
Company expenses the costs associated with advertising as they are incurred.
The Company incurred $21,503 and $13,107 for advertising costs for the
nine months ended September 30, 2008 and 2007, respectively.
Net
Income (Loss) per Common Share
In
accordance with SFAS No. 128, "Earnings Per Share," Basic income (loss) per
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted earnings per
share is computed by dividing net income (loss) adjusted for income or loss that
would result from the assumed conversion of potential common shares from
contracts that may be settled in stock or cash by the weighted average number of
shares of common stock, common stock equivalents and potentially dilutive
securities outstanding during each period. The inclusion of the potential common
shares to be issued have an anti-dilutive effect on diluted loss per share
because under the treasury stock method the average market price of the
Company's common stock was less than the exercise prices of the warrants, and
therefore they are not included in the calculation.
Note 3 Property and
Equipment
Property
and equipment is recorded at cost and depreciated over their estimated useful
lives or the term of the lease using the straight-line method for financial
statement purposes. Estimated useful lives in years for depreciation are 5 to 7
years for property and equipment. Additions, betterments and replacements are
capitalized, while expenditures for repairs and maintenance are charged to
operations when incurred. As units of property are sold or retired, the related
cost and accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized in income.
-5-
Note
4 Commitments and Contingencies
Revolving
Credit Facility
On
January 31, 2008 the Company entered into a revolving credit line with a bank.
The credit facility provides for $100,000 at prime plus .5%, 5.5% at September
30, 2008, and is secured by all assets of the Company and personally guaranteed
by the Company’s principal shareholder. As of September 30, 2008, the Company
owed $99,970 under this agreement.
Capital
Stock
The
Company has 260,000,000 shares of capital stock authorized, consisting of
250,000,000 shares of Common Stock, par value $0.001, 10,000,000 shares of
Series A Preferred Stock, par value $0.001 per share.
During
the nine months ended September 30, 2008, the Company issued 60,571,901 shares
of the Common Stock in exchange for $1,836,097 of debt due to the Chief
Executive Officer of the company.
During
the nine months ended September 30, 2008, 9,812,499 shares of Preferred Stock
and 17,708,503 shares of Common Stock were issued in a private placement for
$1,300,000.
Stock
Appreciation Plan
Data
Storage established a stock appreciation plan to enable the Data Storage to
attract and retain employees to assist in increasing the value of the
company. Management may grant stock appreciation rights at its’ sole
discretion up to 10,000,000 Units, which represents 100% or the value of Data
Storage. Shares granted under the plan may, at the board’s discretion, be
subject to a vesting schedule. The Participant shall be entitled to compensation
for the vested portion of the Units, as calculated in accordance with the
agreement upon the first to occur of any of the following events (the “Trigger
Events”):
(i)
the
Participant’s employment with Data Storage has terminated because he has become
Disabled;
(ii)
the
Participant has died;
(iii)
the
Participant’s employment with Data Storage has been terminated by Data Storage
without “cause”
(iv)
the sale,
transfer or assignment of all or substantially all of Data Storage’s assets
(whether tangible or intangible), not in the ordinary course of business,
whether in a single transaction or a series of transactions;
(v)
the sale,
transfer or assignment of more than fifty (50%) percent of the outstanding
capital stock of Data Storage, whether in a single transaction or a series of
transactions.
On the
date of grants the board of directors assigned a value of $200,000 to the
company for use as a base in calculating future stock appreciation under the
plan. As of September 30, 2008, Data Storage granted 2,200,000 units of stock
appreciation rights all of which were granted prior to 2006. Data Storage
has not recorded any compensation expense as of September 30, 2008. As of
September 30, 2008 and 2007 2,183,333 and 2,116,666 units of stock appreciation
rights were vested.
On
October 20, 2008, the date of the merger, Euro Trend adopted the 2008 Equity
Incentive Plan (the “plan”) and exchanged the outstanding vested units for
options under the plan. Under the exchange agreement, 2,200,000 units of stock
appreciation rights were exchanged for options to purchase 17,541,046 shares of
common stock exercisable at $0.02.
Note
6 Related Party Transactions
Due to
related party represents 2008 rent accrued to the Chief Executive Officer of the
company for the New York Data Center. The rent expense for the data
center is $1,500 per month.
On July
7, the Chief Executive Officer converted debt of $1,836,097 in exchange for
60,571,901 shares of common stock.
-6-
Note
7 Subsequent Events
On
October 20, 2008, the date of the merger, Euro Trend adopted the 2008 Equity
Incentive Plan. The aggregate number of shares of Common Stock that may be
issued pursuant to all Grants under this Plan is 20,000,000. The Board shall
prescribe the time or times at which, or the conditions upon which, an Option
shall become vested and exercisable. The period during which a vested
Option may be exercised shall be ten (10) years from the Grant Date, unless a
shorter exercise period is specified by the Board in an Option Agreement,
subject to such limitations as may apply under an Option Agreement relating to
the termination of an Optionee’s employment or other service with the Company
and all Subsidiaries.
On
October 20, 2008, the Company issued warrants to purchase 1,456,875 shares of
its common stock to a consultant at an exercise price of $1.00.
Data
Storage purchased all existing end user customers and associated licenses of
Novastor’s online backup service licenses as of October 31, 2008 and an
additional 500 client licenses in exchange for a maximum purchase price of
$292,546. In conjunction with the Agreement, Novastor will provide Data Storage
technical and marketing support related to the online backup service
licenses.
On
November 10, 2008, our wholly owned subsidiary Data Storage Corporation (“Data
Storage”) entered into an Asset Purchase Agreement (the “Agreement”) with
Novastor Corporation (“Novastor”).
-7-
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
information contained in Item 2 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. Actual results may
materially differ from those projected in the forward-looking statements as a
result of certain risks and uncertainties set forth in this report. Although
management believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual results
will not be different from expectations expressed in this report.
Company
Overview
Euro
Trend Inc. was incorporated on March 27, 2007 under the laws of the State of
Nevada intending to commence business operations by distributing high-end
European made designer clothing in mass wholesale and retail markets throughout
Western Europe, Canada and the United States of America. On October 20, 2008 we
completed a Share Exchange Agreement whereby we acquired all of the outstanding
capital stock and ownership interests of Data Storage Corporation. In exchange
we issued 93,500,000 shares of our common stock to the Data Storage
Shareholders.
Data
Storage Corporation derives its revenues from the sale of solutions that provide
businesses protection of critical electronic data. Primarily, these services
consist of email storage and compliance solutions; off site data back up;
continuous data protection; data duplication; high availability replication and
virtual tape libraries for disaster recovery and business continuity. The
Company has Data Centers in Westbury, New York and maintains equipment under a
strategic alliance with Broadsmart a Voip company in Fort Lauderdale, Florida to
provide redundant data protection.
We
service customers from our New York premises which consist of modern offices and
a technology suite adapted to meet the needs of a technology based business. Our
primary role is to provide, maintain and develop the network hub hardware and
software to meet the needs of our customers.
Data
Storage varies its use of resource, technology and work processes to meet the
changing opportunities and challenges presented by the market and the internal
customer requirements.
Results of
Operation
Three
and nine months ended September 30, 2008 as compared to September 30,
2007
Net sales. Net
sales for the three months ended September 30, 2008 were $149,330, a decrease of
$13,491, or 8.29%, compared to $162,821 for the three months ended September 30,
2007, and for the nine months ended September 30, 2008 were $477,917, a decrease
of $22,821, or 4.56%, compared to $500,738 for the nine
months ended September 30, 2007. The decrease in sales for is primarily
attributable due to the loss of a channel partner.
Cost of sales. For
the three months ended September 30, 2008, cost of sales decreased $1,445 to
$82,905 from $84,350 for the three months ended September 30, 2007 and decreased
$7,510 to $246,508 from $254,018 for the nine months ended September 30, 2007.
The decrease for the three and nine month periods ended September 30, 2008 is
the result of lower software costs, partially offset by increased utility costs
. The Company's gross margin decreased to 44.5% for the three months ended
September 30, 2008 as compared to 48.2% for the three months ended September 30,
2007, and decreased to 48.4% for the nine months ended September 30, 2008 from
49.2% for the nine months ended September 30, 2007. The
majority of the company’s cost of sales are fixed costs and accordingly the
gross profit decrease is directly attributable to the decline in
sales.
Operating
Expenses. For the three months ended September 30, 2008
operating expenses were $215,628, an increase of $79,548, or 58.3% as compared
to $136,080 for the three months ended September 30, 2007, and for the nine
months ended September 30, 2008, operating expenses were $498,272, an increase
of $82,001, or 19.7%, as compared to $416,271 for the nine months ended
September 30, 2007. The increase in operating expenses for the three and nine
months ended September 30, 2008 is additional professional fess related to the
merger of Euro Trend, Inc. and Data Storage Corporation. Professional
fees for the three months ended September 30, 2008 were $123,877 an increase of
$99,572 from $24,305 for the three months ended September 30,
2007, and for the nine months ended September 30, 2007 professional
fees were $207,023 and increase of $142,800 from $64,223 for the nine months
ended September 30, 2007. The increase in professional fees were
costs related to our merger transaction.
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Interest
Expense. Interest expense for the three months ended September
30, 2008 increased to $1,389 from $0 for the three months ended September 30,
2007 and for the nine months ended September 30, 2007, increased to $2,265 from
$0 for the nine months ended September 30, 2007. For the three months and nine
months ended September 30, 2008, interest expense was related to a $100,000 line
of credit which was opened January 31, 2008.
Net Income
(Loss). Net loss for the three months ended September 30, 2008
was $146,370 an increase of $88,780 as compared to net loss of $57,590 for the
three months ended September 30, 2007 and for the nine months ended September
30, 2008 was $264,869, an increase of $95,967 as compared to net income of
$168,902 for the nine months ended September 30, 2007. The decrease in both
periods is primarily from an increase in professional fees related to the merger
of Euro Trend, Inc. and Data Storage Corporation
Liquidity and Capital
Resources
The
Company currently generates its cash flow through operations which it believes
will be sufficient to sustain current level operations for at least the next
twelve months. In 2008 we intend to continue to work to increase our
presence in the marketplace through both organic growth and acquisition of data
storage service provider’s assets.
To the
extent we are successful in growing our business, identifying potential
acquisition targets and negotiating the terms of such acquisition, and the
purchase price includes a cash component, we plan to use our working capital and
the proceeds of any financing to finance such acquisition costs. Our opinion
concerning our liquidity is based on current information. If this information
proves to be inaccurate, or if circumstances change, we may not be able to meet
our liquidity needs.
During
the nine months ended September 30, 2008 the company’s cash increased $855,540
to $893,343. The Company issued 10,237,537 shares of Series A Preferred Stock
for a price of $.05 for an aggregate purchase price of $500,000 and 18,475,563
shares of Class B Common Stock for a price of $.04 per share and an aggregate
purchase price of $500,000.
The
Company's working capital was $1,025,054 at September 30, 2008, increasing
$1,001,961, from $23,094 at December 31, 2007.
Critical Accounting
Policies
Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
(“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on
the assets, liabilities, revenue and expense amounts reported. These estimates
can also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition.
We believe our use if estimates and underlying accounting assumptions
adhere to GAAP and are consistently and conservatively applied. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results may differ
materially from these estimates under different assumptions or conditions. We
continue to monitor significant estimates made during the preparation of our
financial statements.
Our
significant accounting policies are summarized in Note 1 of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ
from those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements.
SFAS No. 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities-an amendment of FASB Statement No. 133” (SFAS 161). SFAS
161 requires enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. SFAS
161 is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application encouraged.
The adoption of SFAS 161 is not expected to have a material impact on our
financial position, results of operations or cash flows.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
The
Company is subject to certain market risks, including changes in interest rates
and currency exchange rates. The Company does not undertake any specific
actions to limit those exposures.
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Item
4. Controls and Procedures
Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Accounting Officer (“CAO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CAO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CAO, as appropriate, to allow timely decisions regarding required
disclosure.
There
have been no significant changes in the Company’s internal controls or in other
factors that could significantly affect internal controls subsequent to the date
the Chief Executive Officer and the Chief Financial Officer carried out this
evaluation.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings.
Currently
we are not aware of any litigation pending or threatened by or against the
Company.
Item
1A. Risk Factors.
None.
Item
2. Unregistered Sales of Equity Securities and Use
of Proceeds
None.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Submission of Matters to a Vote of Security
Holders.
None.
Item
5. Other Information.
None
Item
6. Exhibits and Reports of Form 8-K.
(a) Exhibits
31.1
Certifications pursuant to Section 302 of Sarbanes Oxley Act of
2002
32.1
Certifications pursuant to Section 906 of Sarbanes Oxley Act of
2002
(b) Reports
of Form 8-K
On
October 17, 2008 the Company filed a Form 8-K with the SEC based on an amendment
to the articles of incorporation.
On
October 24, 2008 the Company filed a Form 8-K with the SEC based on
an entry into a material definitive agreement; completion of acquisition or
disposition of assets; unregistered sales of equity securities; change in
registrant’s certifying accountant and departure of directors or principal
officers; election of directors; appointment of principal officers.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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EURO
TREND INC.
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||
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Date:
November 19, 2008
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By:
|
/s/ Charles M.
Piluso
|
|
Charles
M. Piluso
President,
Chief Executive Officer
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||
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