Idaho Copper Corp - Quarter Report: 2010 September (Form 10-Q)
Table of Contents
UNITED STATES
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 September 30, 2010
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from to
Commission File No. 333-108715
G2 VENTURES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Texas | 98-0221494 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
16th Floor, Tianjin Global Zhiye Square, 309 Nanjing Road, Nankai District, Tianjin, PRC 300100 |
86-22-58896888 | |
(Address of Principal Executive Offices) | (Issuers Telephone Number) |
1810 Three Galleria Tower, 13155 Noel Road, Dallas, Texas 75240
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark 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). Yes ¨ 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.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | 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 x No ¨
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
The number of shares outstanding of the Issuers Common Stock as of November 15, 2010 was 20,000,000.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
In the opinion of management, the accompanying unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
Unaudited Balance Sheet as of September 30, 2010 and Audited Balance Sheet as of December 31, 2009 |
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(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, 2010 |
December 31, 2009 |
|||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current Assets: |
||||||||
Cash |
$ | | $ | 6,471 | ||||
Prepaid expense |
| 3,000 | ||||||
Total current assets |
| 9,471 | ||||||
Total assets |
$ | | $ | 9,471 | ||||
LIABILITIES AND STOCKHOLDERS DEFICIT | ||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | | $ | 15,836 | ||||
Stockholder advances |
| 114,922 | ||||||
Total current liabilities |
| 130,758 | ||||||
Commitments and Contingencies |
||||||||
Stockholders Deficit: |
||||||||
Preferred stock - par value $0.001; 1,000,000 shares authorized; no shares issued and outstanding |
| | ||||||
Common stock - par value $0.001; 200,000,000 shares authorized; 4,784,574 shares issued and outstanding |
4,785 | 4,785 | ||||||
Additional paid-in capital |
299,773 | 167,811 | ||||||
Deficit accumulated during development stage |
(304,558 | ) | (293,883 | ) | ||||
Total stockholders deficit |
| (121,287 | ) | |||||
Total liabilities and stockholders deficit |
$ | | $ | 9,471 | ||||
See accompanying notes to the unaudited financial statements
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(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
From Inception through September 30, 2010 |
||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Revenues, net |
$ | | $ | | $ | | $ | | $ | 129,807 | ||||||||||
Cost of revenues |
| | | | 116,631 | |||||||||||||||
Gross profit |
| | | | 13,176 | |||||||||||||||
Operating expenses: |
||||||||||||||||||||
General and administrative |
4,760 | 16,799 | 23,434 | 64,231 | 330,493 | |||||||||||||||
Total operating expense |
4,760 | 16,799 | 23,434 | 64,231 | 330,493 | |||||||||||||||
Operating (loss) |
(4,760 | ) | (16,799 | ) | (23,434 | ) | (64,231 | ) | (317,317 | ) | ||||||||||
Other income |
12,759 | | 12,759 | | 12,759 | |||||||||||||||
Income (loss) before taxes |
7,999 | (16,799 | ) | (10,675 | ) | (64,231 | ) | (304,558 | ) | |||||||||||
Provision for income taxes |
| | | | | |||||||||||||||
Net income (loss) |
$ | 7,999 | $ | (16,799 | ) | $ | (10,675 | ) | $ | (64,231 | ) | $ | (304,558 | ) | ||||||
Income (loss) per share, basic and diluted |
$ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | |||||||||
Weighted average number of shares outstanding |
4,784,574 | 4,784,574 | 4,784,574 | 4,784,574 | ||||||||||||||||
See accompanying notes to the unaudited financial statements
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(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, |
From Inception through September 30, 2010 |
|||||||||||
2010 | 2009 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||
Net loss |
$ | (10,675 | ) | $ | (64,231 | ) | $ | (304,558 | ) | |||
Forgiveness of debt by shareholder |
| | ||||||||||
Adjustments to reconcile net loss to net cash flows from operating activities: |
||||||||||||
Prepaid expense |
3,000 | 10,000 | | |||||||||
Accounts payable |
(15,836 | ) | 3,744 | | ||||||||
Net cash flows used in operating activities |
(23,511 | ) | (50,487 | ) | (304,558 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
| | | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||||
Proceeds from issuance of common stock |
| | 154,800 | |||||||||
Stockholder advances |
18,300 | | 159,518 | |||||||||
Repayment of stockholder advances |
(1,260 | ) | | (9,760 | ) | |||||||
Net cash flows provided by financing activities |
17,040 | | 304,558 | |||||||||
Increase (decrease) in cash |
(6,471 | ) | (50,487 | ) | | |||||||
Cash, beginning of period |
6,471 | 85,039 | | |||||||||
Cash, end of period |
$ | | $ | 34,552 | $ | | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||||
Stockholder advances forgiven as additional paid in capital |
$ | 131,962 | $ | | $ | 149,758 | ||||||
See accompanying notes to the unaudited financial statements
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G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business
G2 Ventures, Inc. (the Company) was formed as a Texas corporation on March 21, 2003. We were formed to acquire most of the assets and certain liabilities of and succeed the business of G2 Companies, Inc., (formerly Hartland Investment, Inc.), as an independent recording company and artist management company.
On April 1, 2003, we acquired the business, most of the assets and assumed liabilities of G2 Companies, Inc., a music recording and production company. At the time of such acquisition, Gust Kepler, who serves as our principal shareholder, sole officer, employee and sole director, also served as an officer, director and the sole shareholder of G2 Companies, Inc., the seller. The acquisition of assets and the assumption of liabilities from G2 Companies, Inc. were not conducted at arms length due to Mr. Keplers interest in both companies.
On May 13, 2008, through a registered offering, we offered up to 1,500,000 shares of our common stock on a self-underwritten basis at a price of $0.10 per share with a minimum offering of 1,200,000 shares and a maximum offering of 1,500,000 shares (the Offering). The shares were offered and sold by the Company through our previous Chief Executive Officer, Mr. Gust C. Kepler through December 3, 2008, when we terminated the Offering after subscribing 1,284,574 shares and raising an aggregate of $128,457, before costs of the Offering.
Our common stock began trading on the Over-the-Counter Bulletin Board (OTCBB) under the symbol GTVI on September 11, 2009.
Until September 28, 2010, the Company operated as a music recording, production and artist management company with limited operations. A change of control occurred on September 28, 2010 upon the closing of a Stock Purchase Agreement in which Gust Kepler, the Companys prior sole officer and director, sold 3,300,000 shares of the Companys Common Stock to Crystal Globe Limited, a British Virgin Islands company. Coincident with the change of control, the Companys board of directors and executive officers were reconstituted wherein all prior officers and directors resigned and new officers and directors were elected. See Note C, Subsequent Events.
We were a shell company (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately before the Closing of the Reverse Merger. As a result of the Reverse Merger, Dynamic Elite International Limited (Dynamic Elite) is now our wholly-owned subsidiary. Dynamic Elite is the holding company of all the equity of Tianjin Junhe Management Consulting Co., Ltd. (Junhe Consulting). On September 16, 2010, prior to the Reverse Merger, Junhe Consulting and Tianjin Joway Shengshi Group Co., Ltd. (Joway Group) entered into a series of agreements known as variable interest agreements (the VIE Agreements) pursuant to which Joway Group became Junhe Consultings contractually controlled affiliate. Through Junhe Consulting, we effectively and substantially control Joway Group and its three wholly owned subsidiaries. Consequently, we are now, through our PRC Operating Entities, namely Joway Group, Liaoning Joway Technology Engineering Co., Ltd. (Joway Technology), Tianjin Joway Decoration Engineering Co., Ltd. (Joway Decoration) and Tianjin Oriental Shengtang Import & Export Trading Co., Ltd. (Shengtang Trading), in the business of research and development, manufacture and sales of tourmaline-related healthcare products and as a result of the Reverse Merger on October 1, 2010, have ceased to be a shell company.
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G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of presentation and going concern uncertainty
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q. Accordingly, they do not include all the information and disclosures required for annual financial statements and related footnotes for the year ended December 31, 2009, included in the Annual Report filed on Form 10-K for the year then ended.
In the opinion of the management of the Company, all adjustments (consisting of normal recurring accruals) necessary to present fairly the companys financial position as of September 30, 2010, and the results of operations and cash flows for the three and nine month periods ending September 30, 2010 have been included. The results of operations for the three and nine month periods ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year.
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (GAAP), which contemplate continuation of the Company as a going concern, which is dependent upon the Companys ability to establish itself as a profitable business. The Company is a development stage company and as such has incurred net operating losses of $304,558 since inception (September 26, 2002), and for the nine months ended September 30, 2010 incurred losses of $10,675. Due to the start-up nature of the Companys business, the Company expects to incur losses as it expands. To date, the Companys cash flow requirements have been primarily met with funds raised through shareholder loans and a private placement of its equity. There is no assurance that such additional funds will be available for the Company to finance its operations should the Company be unable to realize profitable operations. These conditions, among others, give rise to substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
Recent Accounting Pronouncements
During 2009, the Company adopted the Financial Accounting Standards Board (FASB) ASC Topic 105 (previously FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles). ASC Topic 105 establishes the ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America.
During the nine months ended September 30, 2010, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Companys financial statements.
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G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE B RELATED PARTIES
During the nine months ended September 30, 2010 and 2009, and the period September 26, 2002 (inception) through September 30, 2010, Gust Kepler, the Companys President and Chief Executive Officer, director, employee, and major stockholder, made advances to the Company of $18,300, $0 and $159,518 respectively, while we made repayments to Mr. Kepler of $1,260, $0 and $9,760, respectively. During the same periods Mr. Kepler forgave amounts due to him by the Company totaling $131,962, $0 and $149,758, respectively.
NOTE C SUBSEQUENT EVENTS
On October 1, 2010, the Company completed a reverse acquisition transaction through a share exchange with Crystal Globe Limited, a British Virgin Islands company (Crystal Globe) and the sole shareholder of Dynamic Elite, a British Virgin Islands company, whereby the Company acquired 100% of the issued and outstanding capital stock of Dynamic Elite in exchange for 15,215,426 shares of our Common Stock which constituted 76.1% of the Companys issued and outstanding capital stock as of and immediately after the consummation of the reverse acquisition. As a result of the reverse acquisition, Dynamic Elite became the Companys wholly-owned subsidiary and the former shareholder of Dynamic Elite became the Companys controlling shareholder. The share exchange transaction with Dynamic Elite and Crystal Globe, was treated as a reverse acquisition for accounting and financial reporting purposes, with Dynamic Elite as the acquirer and the Company as the acquired party. As a result of the reverse acquisition transaction, the Company now owns all of the issued and outstanding capital stock of Dynamic Elite.
Dynamic Elite holds 100% of the equity interest of Tianjin Junhe Consulting, a PRC company. On September 16, 2010, prior to the reverse acquisition, Junhe Consulting and Joway Group, a PRC company, entered into VIE Agreements pursuant to which Joway Group became Junhe Consultings contractually controlled affiliate.
The use of VIE Agreements is a common structure used to control PRC corporations, particularly in certain industries in which foreign investment is restricted or forbidden by the PRC government. The VIE Agreements included:
| a Consulting Services Agreement through which Junhe Consulting has the right to advise, consult, and assist Joway Group and collect and own all of the net profits of Joway Group; |
| an Operating Agreement through which Junhe Consulting has the right to recommend director candidates and appoint the senior executives of Joway Group, approve any transactions that may materially affect the assets, liabilities, rights or operations of Joway Group, and guarantee the contractual performance by Joway Group of any agreements with third parties, in exchange for a pledge by Joway Group of its accounts receivable and assets; |
| a Proxy Agreement under which the two owners of Joway Group have vested their collective voting control over Joway Group to Junhe Consulting and will only transfer their respective equity interests in Joway Group to Junhe Consulting or its designee(s); |
| an Option Agreement under which the owners of Joway Group have granted to Junhe Consulting the irrevocable right and option to acquire all of their equity interests in Joway Group; and |
| an Equity Pledge Agreement under which the owners of Joway Group have pledged all of their rights, titles and interests in Joway Group to Junhe Consulting to guarantee Joway Groups performance of its obligations under the Consulting Services Agreement. |
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G2 VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE C SUBSEQUENT EVENTS (Continued)
Through Junhe Consulting, the Company effectively and substantially controls Joway Group and its three wholly owned subsidiaries: Joway Technology, Shengtang Trading and Joway Decoration.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
General
The following discussion and analysis provides information which management of the Company believes to be relevant to an assessment and understanding of the Companys results of operations and financial condition. This discussion should be read together with the Companys financial statements and the notes to the financial statements, which are included in this report. This information should also be read in conjunction with the information contained in our Form 10-K filed with the Securities and Exchange Commission (SEC) on March 1, 2010, including the audited financial statements and notes included therein. The reported results will not necessarily reflect future results of operations or financial condition.
Caution Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. Some discussions in this report may contain forward-looking statements that involve risk and uncertainty. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this report. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar words or expressions that, by their nature, refer to future events.
In some cases, you can also identify forward-looking statements by terminology such as may, will, should, plans, predicts, potential, or continue, or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements in an effort to conform these statements to actual results.
Overview
G2 Ventures, Inc. (the Company) was formed as a Texas corporation on March 21, 2003. We were formed to acquire most of the assets and certain liabilities of and succeed the business of G2 Companies, Inc., (formerly Hartland Investment, Inc.), as an independent recording company and artist management company.
On April 1, 2003, we acquired the business, most of the assets and assumed liabilities of G2 Companies, Inc., a music recording and production company. At the time of such acquisition, Gust Kepler, who serves as our principal shareholder, sole officer, employee and sole director, also served as an officer, director and the sole shareholder of G2 Companies, Inc., the seller. The acquisition of assets and the assumption of liabilities from G2 Companies, Inc. were not conducted at arms length due to Mr. Keplers interest in both companies.
On May 13, 2008, through a registered offering, we offered up to 1,500,000 shares of our common stock on a self-underwritten basis at a price of $0.10 per share with a minimum offering of 1,200,000 shares and a
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maximum offering of 1,500,000 shares (the Offering). The shares were offered and sold by the Company through our previous Chief Executive Officer, Mr. Gust C. Kepler through December 3, 2008, when we terminated the Offering after subscribing 1,284,574 shares and raising an aggregate of $128,457, before costs of the Offering.
Our common stock began trading on the Over-the-Counter Bulletin Board (OTCBB) under the symbol GTVI on September 11, 2009.
Until September 28, 2010, the Company operated as a music recording, production and artist management company with limited operations. A change of control occurred on September 28, 2010 upon the closing of a Stock Purchase Agreement in which Gust Kepler, the Companys prior sole officer and director, sold 3,300,000 shares of the Companys Common Stock to Crystal Globe Limited, a British Virgin Islands company. Coincident with the change of control, the Companys board of directors and executive officers were reconstituted wherein all prior officers and directors resigned and new officers and directors were elected. See Recent Events.
On October 1, 2010, we entered into and consummated a Share Exchange Agreement with Crystal Globe, the sole shareholder of Dynamic Elite and Dynamic Elite to acquire all the issued and outstanding capital stock of Dynamic Elite, a British Virgin Islands company, in exchange for the issuance to Crystal Globe of 15,215,426 restricted shares of our common stock. As of result of this Reverse Merger, Crystal Globe owns a total of 18,515,426 shares of our common stock or approximately 92.58% of our total and issued shares of common stock and is our single largest shareholder. See Recent Events.
As described above, because of our acquisition of Dynamic Elite, we now control, through Junhe Consulting, the PRC Operating Entities under the VIE Agreements and are now involved in the manufacture and sale of tourmaline-related healthcare products.
We were a shell company (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately before the Closing of the Reverse Merger. As a result of the Reverse Merger, Dynamic Elite is now our wholly-owned subsidiary. Dynamic Elite is the holding company of all the equity of Junhe Consulting. On September 16, 2010, prior to the Reverse Merger, Junhe Consulting and Joway Group entered into a series of VIE Agreements pursuant to which Joway Group became Junhe Consultings contractually controlled affiliate. Through Junhe Consulting, we effectively and substantially control Joway Group and its three wholly owned subsidiaries. Consequently, we are now, through our PRC Operating Entities, namely Joway Group, Joway Technology, Joway Decoration and Shengtang Trading, in the business of research and development, manufacture and sales of tourmaline-related healthcare products and as a result of the Reverse Merger on October 1, 2010, have ceased to be a shell company.
Recent Events
On October 1, 2010, the Company completed a reverse acquisition transaction through a share exchange with Crystal Globe, a British Virgin Islands company and the sole shareholder of Dynamic Elite, whereby the Company acquired 100% of the issued and outstanding capital stock of Dynamic Elite in exchange for 15,215,426 shares of our Common Stock which constituted 76.1% of the Companys issued and outstanding capital stock as of and immediately after the consummation of the reverse acquisition. As a result of the reverse acquisition, Dynamic Elite became the Companys wholly-owned subsidiary and the former shareholder of Dynamic Elite became our controlling shareholder. The share exchange transaction with Dynamic Elite and Crystal Globe, was treated as a reverse acquisition for accounting and financial reporting purposes, with Dynamic Elite as the acquirer and the Company as the acquired party. As a result of the reverse acquisition transaction, the Company now owns all of the issued and outstanding capital stock of Dynamic Elite.
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Dynamic Elite holds 100% of the equity interest of Tianjin Junhe Consulting, a PRC company. On September 16, 2010, prior to the reverse acquisition, Junhe Consulting and Joway Group, a PRC company, entered into VIE Agreements pursuant to which Joway Group became Junhe Consultings contractually controlled affiliate.
The use of VIE Agreements is a common structure used to control PRC corporations, particularly in certain industries in which foreign investment is restricted or forbidden by the PRC government. The VIE Agreements included:
| a Consulting Services Agreement through which Junhe Consulting has the right to advise, consult, and assist Joway Group and collect and own all of the net profits of Joway Group; |
| an Operating Agreement through which Junhe Consulting has the right to recommend director candidates and appoint the senior executives of Joway Group, approve any transactions that may materially affect the assets, liabilities, rights or operations of Joway Group, and guarantee the contractual performance by Joway Group of any agreements with third parties, in exchange for a pledge by Joway Group of its accounts receivable and assets; |
| a Proxy Agreement under which the two owners of Joway Group have vested their collective voting control over Joway Group to Junhe Consulting and will only transfer their respective equity interests in Joway Group to Junhe Consulting or its designee(s); |
| an Option Agreement under which the owners of Joway Group have granted to Junhe Consulting the irrevocable right and option to acquire all of their equity interests in Joway Group; and |
| an Equity Pledge Agreement under which the owners of Joway Group have pledged all of their rights, titles and interests in Joway Group to Junhe Consulting to guarantee Joway Groups performance of its obligations under the Consulting Services Agreement. |
Through Junhe Consulting, the Company effectively and substantially controls Joway Group and its three wholly owned subsidiaries: Joway Technology, Shengtang Trading and Joway Decoration.
Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Financial Statements and the related notes. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements.
Comparison of Three Month Periods Ended September 30, 2010 and September 30, 2009
No revenues were recorded during the three months ended September 30, 2010 and 2009. Operating expenses during the three month periods ended September 30, 2010 and 2009 were comprised entirely of general and administrative expenses. During the three month period ended September 30, 2010, general and administrative expenses totaled $4,760. Expenses totaling $16,799 were incurred during the same period in 2009. This $12,039 decrease reflects a reduction associated with advertising expense of approximately $4,500 and outside services of approximately $7,500. Also during the three months ended September 30, 2010, certain vendors forgave approximately $13,000 in outstanding accounts payables attributable to 2008.
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Comparison of Nine Month Periods Ended September 30, 2010 and September 30, 2009
No revenues were recorded during the nine months ended September 30, 2010 and 2009. Operating expenses during the nine month periods ended September 30, 2010 and 2009 were comprised entirely of general and administrative expenses. During the nine month period ended September 30, 2010, general and administrative expenses totaled $23,434. Expenses totaling $64,231 were incurred during the same period in 2009. This $40,797 decrease reflects a reduction associated with recording costs of approximately $19,000, advertising costs of approximately $4,500 and outside services of approximately $17,300. Also during the nine months ended September 30, 2010, certain vendors forgave approximately $12,800 in outstanding accounts payables attributable to 2008.
Liquidity and Capital Resources
At September 30, 2010, the Company was a shell company as that term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. At September 30, 2010, the Company had no cash or debt and no operations. As a result, as of September 30, 2010 there was substantial doubt about the Companys ability to continue as a going concern and the accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.
On October 1, 2010, as a result of the reverse acquisition transaction with Crystal Globe, the Company ceased being a shell company. As disclosed in our Current Report on Form 8-K filed with the SEC on October 7, 2010, the Companys PRC operating subsidiaries, Joway Group, and its VIE entities Joway Technology, Joway Decoration Co., and Shengtang Trading were in the development stage until 2009 when planned operations commenced. Beginning in May 2007 during its development stage, the Companys Chief Executive Officer, Jinghe Zhang, made cash advances to Joway Group to fund its operations. The advances were made on an interest-free basis and are unsecured. Through June 30, 2010, Jinghe Zhang made advances to the Joway Group in the aggregate amount of $4,637,397. In addition, beginning in March 2007, Jinghe Zhang made advances to Joway Technology to fund its operations. The advances were made on an interest-free basis and were unsecured. Through June 30, 2010, Jinghe Zhang made advances to Joway Technology in the aggregate principal amount of $22,031 all of which were repaid.
Beginning in 2009 when the PRC operating subsidiaries began generating revenue, Joway Group has been reducing the outstanding balance owed to Jinghe Zhang and as of June 30, 2010, Joway Group owed Jinghe Zhang $453,124. Mr. Zhang does not have an obligation to provide further advances to any of the PRC operating subsidiaries. In addition, under the terms of the agreement with Mr. Zhang, he has the right to demand repayment of the remaining $453,124 owed to him at any time, although we do not expect that he will do so.
Towards the latter half of 2009, the PRC operating subsidiaries have developed their principal operations to the level where cash generated by their operations is the primary source of liquidity. At June 30, 2010, cash on a combined basis was $0.6 million and net working capital was $2.3 million.
We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter, accounts receivable collections, inventory and supply chain management, and the timing and amount of tax and other payments. However, based on our current expectations, we believe that internally generated cash flows are generally sufficient to support business operations, capital expenditures, contractual obligations, and other liquidity requirements associated with our operations for at least the next twelve months, even in the event Mr. Zhang demands immediate repayment of all remaining amounts owed to him. There are no other transactions, arrangements, or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity and the availability of and our requirements for capital resources.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our Company is a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and, as such, is not required to provide the information required under this item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported, within the time period specified in the SECs rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions in connection with required disclosure.
Evaluation of Disclosure Controls and Procedures
At September 30, 2010, Mr. Kepler, the Companys President and Chief Executive Officer, and Nicole Kirkwood, the Companys Treasurer, evaluated the effectiveness of the design and operation of our Companys disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) as of the end of the period covered by this quarterly report. Based on such evaluation, they have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that is files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. During the most recently completed three month period ending September 30, 2010, there has been no significant change in the Companys internal control over financial reporting that has affected, or is reasonably likely to affect, the Companys internal control over financial reporting.
Changes in Internal Control of Financial Reporting
During the three months ended September 30, 2010, there were no significant changes in internal controls of the Company, or other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
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Item 4. Reserved and Removed.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibit No. |
Date |
Description | ||
31.1 |
November 15, 2010 | Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a).* | ||
31.2 |
November 15, 2010 | Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 15d-14(a).* | ||
32.1 |
November 15, 2010 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.* | ||
32.2 |
November 15, 2010 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.* |
* | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: November 15, 2010
G2 VENTURES, INC. | ||
By: |
/s/ Jinghe Zhang | |
Jinghe Zhang | ||
President and Chief Executive Officer | ||
By: | /s/ Yuan Huang | |
Yuan Huang | ||
Chief Financial Officer |
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