IMPERALIS HOLDING CORP. - Annual Report: 2008 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended: September
30, 2008
o TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _____ to ______
Commission
File Number: 000-52140
COLOURED (US)
INC.
(Name of
small business issuer in its charter)
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NEVADA
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N/A
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(State
or other jurisdiction of incorporation or
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(I.R.S.
Employer Identification No.)
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Organization)
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Suite
3.19, 130 Shaftesbury Avenue, London, England
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WID 5EU
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(Address
of principal executive offices)
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(Zip
Code)
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Issuer’s
telephone number: +44 (0)
20 7031 1189
Securities
registered under Section 12(b) of the Exchange Act:
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Title of each class
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Name of each exchange on which
registered
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Not
Applicable
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Not
Applicable
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Securities
registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par
value
(Title of
class)
Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act o
Yes xNo
Indicate
by checkmark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. o
Indicate
by checkmark whether the issuer: (1) has 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 registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes x Noo
Indicate
by checkmark if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of issuer’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K x
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer.
Large
accelerated filer o Accelerated filer
o Non-accelerated filer
x
Indicate by checkmark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Act). x
Yes o No
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliate computes by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity: $90,725.00 as at January 5,
2009.
Applicable Only to Issuer Involved in
Bankruptcy Proceedings During the Preceding Five Years.
N/A
Indicate
by checkmark whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934
after the distribution of securities under a plan confirmed by a
court. Yes o No o
Applicable
Only to Corporate Registrants
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Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the most practicable date:
Class
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Outstanding
as of January 5, 2009
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Common
Stock, $0.001 par value
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73,494,610
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Documents
Incorporated By Reference
List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the Securities Act of 1933 “Securities Act”). The listed documents should
be clearly described for identification purposes (e.g. annual report to security
holders for fiscal year ended December 24, 1980).
None.
COLOURED
(US) INC.
Annual
Report on Form 10-K
For
The Year Ended
September
30, 2008
| INDEX | Page | |
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Business
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5 | |
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Risk
Factors
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22 | |
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Unresolved
Staff Comments
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30 | |
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Properties
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30 | |
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Legal
Proceedings
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30 | |
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Submission
of Matters to a Vote of Security Holders
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30 | |
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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30 | |
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Selected
Financial Data
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33 | |
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
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34 | |
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Quantity
and Qualitative Disclosure About Market Risks
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40 | |
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Financial
Statements and Supplemental Data
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41 | |
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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52 | |
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Controls
and Procedures
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54 | |
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Controls
and Procedures
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54 | |
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Other
Information
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54 | |
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Directors,
Executive Officers and Corporate Governance
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54 | |
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Executive
Compensation
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56 | |
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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60 | |
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Certain
Relationships and Related Transactions and Director
Compensation
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61 | |
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Principal
Accountant Fees and Services
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63 | |
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Exhibits
and Financial Statement Schedules
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64 |
FORWARD-LOOKING
STATEMENTS
This
annual report on Form 10-K 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. These forward-looking
statements involve risks and uncertainties, including statements regarding our
capital needs, business plans and expectations. Such forward-looking statements
involve risk and uncertainty regarding our ability to achieve commercial levels
of sales of our Coloured Mobile Games, our ability to successfully market our
Coloured Mobile Games, our ability to continue development and upgrades to the
Coloured Mobile Games and our mobile games technology, availability of funds,
government regulations, common share prices, operating costs, capital costs and
other factors. Forward-looking statements are made, without limitation, in
relation to our operating plans, our liquidity and financial condition,
availability of funds, operating costs and the market in which we compete. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"expect", "plan", "intend", "anticipate", "believe", "estimate", "predict",
"potential" or "continue", the negative of such terms or other comparable
terminology. Actual events or results may differ materially. In evaluating these
statements, you should consider various factors, including the risks outlined in
our registration statement on Form SB-2, filed with the Securities and Exchange
Commission (the “SEC”) on April 24, 2006, as amended, this annual report on Form
10-KSB, and, from time to time, in other reports we file with the SEC. These
factors may cause our actual results to differ materially from any
forward-looking statement. Given these uncertainties, readers are cautioned not
to place undue reliance on such forward-looking statements.
Available
Information
Coloured
(US) Inc. files annual, quarterly, current reports, proxy statements, and other
information with the Securities and Exchange Commission (the “Commission”). You
may read and copy documents referred to in this Annual Report on Form 10-K that
have been filed with the Commission at the Commission’s Public Reference Room,
450 Fifth Street, N.W., Washington, D.C. You may obtain information
on the operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. You can also obtain copies of our Commission filings
by going to the Commission’s website at http://www.sec.gov.
PART
I
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ITEM
1. BUSINESS
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BUSINESS
DEVELOPMENT
We were
incorporated on April 5, 2005 as Emcor Holdings Inc. under the laws of the state
of Nevada. During September 2005, Emcor Holdings Inc entered into a share
exchange agreement (the “Share Exchange Agreement”) with Coloured Industry
Limited (“Coloured UK”), a privately held corporation. Coloured UK was
incorporated in the United Kingdom on May 2, 2003. In accordance with the terms
and provisions of the Share Exchange Agreement, we acquired Coloured UK by way
of acquisition of 100% of the total issued and outstanding shares of Coloured UK
(which was 2,087,000 shares) in exchange for 12,000,000 shares of our restricted
common stock issued and outstanding. The founding shareholders of Coloured UK
were Coloured Industry, Inc. (“CII”), Outlander Management Ltd. (“Outlander
Management”) and four businessmen including Lars Brannvall, the managing
director of Coloured UK and our sole director and officer. CII is a private
Antiguan corporation that is one of our principal shareholders. Outlander
Management is a private corporation that is now one of our shareholders. On
December 8, 2005, we changed our name to Coloured (US) Inc. See “Item 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.”
Subsidiary
We
carried out our business operations through our wholly owned subsidiary,
Coloured UK located in the United Kingdom. On July 1, 2008, we wound up Coloured
UK and the financial results of Coloured UK have been reclassified as
discontinued operations in our financial statements. See “Item 7. Management’s
Discussion and Analysis of Financial Condition or Plan of
Operation”.
Principal
Executive Office
Our
principal executive office is located at Suite 3.19, 130 Shaftesbury Avenue,
London, England, W1D 5EU. Our telephone number is +44(0)20 7031 1189 and our fax
number is +44(0)20 7031 1199.
CURRENT
BUSINESS OPERATIONS
General
We are
the owner of six mobile games designed to be played on GSM-network mobile phones
using the Short Message Service (“SMS”) features of these phones. The SMS short
message service refers to an industry adopted standard for sending and receiving
text messages to and from mobile telephones and other mobile devices. Our games
are played entirely via regular text messages sent back and forth between
players via the servers on which our games are stored. Text messages are
relatively short and easily translated into virtually any language.
All of
our games are multi-player games which allow players to interact with and play
against others located in the player’s vicinity. And all of our games support
optional value-added features such as location-based services (LBS) where the
actual location of each player has an effect of the outcome, and Multimedia
Messaging Services (MMS) which facilitates the inclusion of graphics in each
text message. Players send their commands to our server by way of text message.
Our server receives the messages, integrates the commands within the context of
the game being played, and automatically sends responses by text message to each
player. Three of our games will utilize support from our website, where players
may check their individual playing statistics, view high scores and get tips and
strategies on improving their skills. Our mobile games may also be played
without the LBS feature for networks which do not support it.
The
primary target market for our games are teenage and young adult mobile phone
users. Our games have been designed with the objective that they are quick to
learn, enjoyable to play and may be played in a relatively short period of time
over many sessions. Text messages are relatively short and easily translated
into a variety of languages for distribution into major foreign language
markets. Each of our games has been fully developed and is ready for commercial
deployment. We plan further developments to these games as our future resources
permit. Specifically, we plan to develop software, which players may choose to
download onto mobile phones which support the technology, that will enable our
games to integrate more advanced graphics and video into our games in a way that
will further increase their playability.
We intend
to market and distribute our games through a number of different “gateway
owners”, or companies that sell mobile phone products and services to the
general public. Gateway owners include wireless network providers (such as
Vodafone, Orange, T-Mobile, Sprint), Internet portals (MSN and Lycos) and media
companies that publish or distribute products in which mobile services are
generally advertised (Bertelsmann and Bonnier). To assist us in marketing our
games to these gateway owners, we have established and intend to build
relationships with various agents and resellers located in Europe, America and
Asia whom we intend to partner with to distribute our games worldwide. We intend
to expand our dealings to include gateway owners in North America and eventually
South America and Australasia. Each of these regions has shown growth in the use
of text-messaging among mobile phone users in recent years.
We have
not earned revenues to date. Our plan of operations is, as described below, to
partner with gateway owners, either directly or indirectly through third party
resellers, in the marketing and distribution of our mobile games.
INDUSTRY
BACKGROUND
Text
messaging (SMS) was created during the late 1980s to work with GSM (Global
System for Mobile Communications), the digital technology which is the basis for
most modern cell phones. This technology was defined as the standard in 1989 by
the European Telecommunications Standards Institute (ETSI). It is widely
believed that the first SMS was sent in December of 1992 from a personal
computer to a mobile phone on the Vodafone GSM network in the United Kingdom. In
1994, SMS became a commercially available product to mobile subscribers. Today
there are GSM networks in approximately 220 countries worldwide.
In
Europe, SMS was quickly adopted as an effective means of communicating between
parties, and as a less expensive alternative to voice calls. The youth market
was the fastest adopter of SMS. Mass-market acceptance grew quickly as the user
base expanded beyond the youth segment. The European success with SMS-services
spread to the rest of the wireless world in the nineties, and was soon adopted
in most markets. The last large region to adopt the concept of messaging has
been North America, but the growth in numbers of messages sent in the US and
Canada has been similar to the European experience. The tremendous growth of SMS
around the world is the result of high growth in mobile penetration in most
markets, general adoption of the concept among a broad range of user groups and
the launch of value-added services. Consumers worldwide have accepted SMS as an
alternative to direct voice communication, and the greatest usage of traffic is
generated by consumer applications.
SMS has
also offered opportunities to strengthen customer loyalty and generate
significant additional revenue streams through the development of other SMS
services, including personalized ring tones, games and simple information
requests such as weather reports.
The
mobile gaming market is evolving as many mobile operators are offering third
party service providers such as ourselves access to the location of their users
in a similar manner that they provided third parties access to their networks
for sending SMS text messages or supplying mobile phone ringtones.
OVERVIEW
OF THE COLOURED SMS-BASED MOBILE GAMES
Our goal
is to provide SMS-based mobile entertainment to owners of mobile phones on the
GSM networks. Our software consists of multi-player, location based mobile
action and role-playing games. We currently own six such mobile games as
described below, each of which is fully developed and ready for market. Our
mobile games are hosted on two different servers. Mobile Warrior is hosted by
agreement on a server owned by TrackWell, the Icelandic company that developed
this game. The other five mobile games we own are hosted on our own server which
is located in space rented from Internet Border Technologies AB, a Swedish
computing services company. These games feature location-based service (LBS)
technology which allows users the ability to play the games against other
registered players located in the user’s vicinity. The physical location of the
user therefore has a direct impact on the ongoing play of the game. The result
is a new dimension of interactivity in game play through a web-based community
of similar users. A graphical representation of the connections between the
servers and a player’s mobile phone is as follows:
LDT
(Location Determination Technology) in the diagram refers to software which
permits the player to utilize the LBS features of our games. This service is
provided to companies providing mobile phone services such as ours. The SMS-C
gateway is the connection point between our server and a particular player’s
wireless network provider (represented by the GSM Network in the above diagram).
The SMS-C gateway provides a number of services, in particular the regulation of
the transfer of text messages to mobile phones via the wireless network
provider. There are a number of companies that aggregate gateway connections to
the SMS-C’s, ensuring a single point of access to a global network of SMS
gateways and wireless network providers.
All our
games are played entirely by text messages sent between players via our servers,
and do not require any software to be downloaded onto a player’s mobile phone.
Players do not have any direct communication with each other, protecting each
player’s identity and privacy, while still having a completely interactive
experience through the game. To illustrate, each player will go through the
following series of steps:
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1.
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Once
a player has registered by text message or on the Internet to play a game,
they are sent a text message containing the telephone number to the server
on which that particular game is stored and a key code for the game. When
the player wishes to play, they send a text message through their
operator’s network to our server via a phone number provided to the
player. The key code indicates what game the player wants to
play.
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2.
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This text message, including LBS
information about the player’s location, is received by our server.
Depending on what message the player has sent, that player’s location, and
the presence and number of other potential players in the vicinity, the
server responds accordingly and sends a response to the player’s mobile
phone.
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3.
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This
message triggers another message to be sent by the mobile phone
user.
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The games
drive revenue-generation through the use of text messages by the players who are
charged by their wireless network provider for the text messages they send, a
portion of which we intend to receive by agreement with the gateway owner
through which the player registered to play.
Our games
have been designed with the objective that they are quick to learn, each
requiring only the memorization of a few simple commands which they communicate
by text message to our servers, and enjoyable to play. The user can access
registration and support information either through their mobile phone or, for
most of our games, on the Internet. Several of the games are designed to enable
each user to enjoy the added benefit of joining and interacting with a community
of users with similar game-playing interests. Our games can also support
Multimedia Messaging Service (MMS) technology, which will eventually allow the
addition of sound, graphics and even video to our existing games.
Mobile
Warrior Game
One of
our six mobile games titled Mobile Warrior was developed by TrackWell Software,
a mobile software development company located in Iceland (“TrackWell”). In an
arm’s length negotiation, ABS Global Capital Inc. (“ABS Global Capital”)
acquired from TrackWell the rights to the Mobile Warrior game in March 2003. In
March 2003, ABS Global Capital subsequently sold to The Mobile Warrior
Technology Partnership LLP (“MW Technology Partnership”), the intellectual
property rights to the Mobile Warrior game.
Agency
Exploitation Agreement. On March 31, 2003, MW Technology Partnership
entered into an agency exploitation agreement (the “Mobile Warrior Agency
Exploitation Agreement”) with LDC Network (“LDC Network”). In accordance with
the terms and provisions of the Mobile Warrior Agency Exploitation Agreement,
LDC Network was appointed as the agent of the licensee for the purpose of
undertaking the commercial exploitation of the license rights. LDC Network was
obligated to carry out the commercial exploitation of the mobile warrior
technology platform and to use its best efforts to achieve an exploitation
result in accordance with an agreed upon exploitation forecast. MW Technology
Partnership agreed to pay to LDC Network an amount equal to 25% of the net
profit of the partnership derived from the exploitation of these license rights.
LDC Network did not realize any gross income from the exploitation of the mobile
warrior technology platform during the term of the Mobile Warrior Agency
Exploitation Agreement.
On April
2, 2004, LDC Network subsequently assigned its rights under the Mobile Warrior
Agency Exploitation Agreement to Coloured UK. We did not realize any
gross income from the exploitation of the mobile warrior technology platform
during the balance of the term of the Mobile Warrior Agency Exploitation
Agreement. The Mobile Warrior Agency Exploitation Agreement was terminated on
February 28, 2006 concurrently with our acquisition of the Mobile Warrior
game.
Intellectual
Property Asset Purchase Agreement. On January 31, 2006, we entered into
an intellectual property asset purchase agreement effective February 28, 2006
(the “Mobile Warrior Intellectual Asset Purchase Agreement”) with ABS Capital
pursuant to which we purchased the intellectual property rights to the Mobile
Warrior game. This acquisition was subsequent to the re-acquisition by ABS
Capital of the Mobile Warrior game from MW Technology Partnership. We issued
6,000,000 shares of our restricted common stock to ABS Capital in consideration
of the acquisition and transfer to us of the Mobile Warrior game. ABS Capital
subsequently transferred the 6,000,000 shares of our common stock to MW
Technology Partnership in connection with its concurrent acquisition of the
Mobile Warrior game from MW Technology Partnership. See “ – Material
Contracts”.
The Mobile
Warrior Game. Mobile Warrior is a battle game set in the Viking era.
Players initially register and create a character for the game on our website,
choosing their weapons and armour from a list provided. The player then sends a
simple text message to our server when they want to play the game. The LBS
feature of the game determines what other potential players are located in the
sender’s vicinity, and our server communicates this information to the sender by
a text message. Players can then choose whom they wish to challenge to a duel by
sending a text message back to the server, which then informs the player chosen.
That player may then choose whether or not they wish to play at that time. If
they decline, they will lose points and drop in the overall ranking of players
playing the game. If they accept, the game begins and both players attempt to
defeat the other with attack commands sent by text message to the server.
Battles generally consist of between five and eight text messages per player.
Outcomes depend on a number of factors including each player’s weapons, armour,
experience, choice of commands and other such factors. Players collect points by
winning battles, which they may redeem on our website for better weapons and
armour. The game is supported by our website on which players can check their
ranking against other players, see the results of other battles and change their
weapons, armour and other features of their characters.
Five
Remaining Games
The five
remaining mobile games to which we currently hold the rights were originally
developed by BF Studios AB of Sweden (“Blue Factory”). During March 2003, CII
acquired the five mobile games and during March 2003 subsequently sold the five
mobile games to The Coloured Industry Technology Partnership LLP. (“Coloured
Industry Technology Partnership”). On August 6, 2003, Coloured Industry
Technology Partnership granted a license to Coloured UK to exploit those
intellectual property rights. Each of the licenses held by Coloured UK was
subsequently terminated on February 28, 2006 upon our acquisition of the
games.
Agency
Exploitation Agreement. On August 6, 2003, Coloured UK entered into an
agency exploitation agreement (the “Agency Exploitation Agreement”) with
Coloured Industry Technology Partnership. In accordance with the terms and
provisions of the Agency Exploitation Agreement, Coloured UK was appointed as
the agent of the licensee for the purpose of undertaking the commercial
exploitation of the license rights. Coloured UK was obligated to carry out the
commercial exploitation of the five mobile software games and to use its best
efforts to achieve an exploitation result in accordance with an agreed upon
exploitation forecast. Coloured Industry Technology Partnership agreed to pay to
Coloured UK an amount equal to 25% of the net profit of the partnership derived
from the exploitation of these license rights. Coloured UK did not realize any
gross income from the exploitation of the mobile warrior technology platform
during the term of the Agency Exploitation Agreement. The Agency Exploitation
Agreement was terminated on February 28, 2006 concurrently with our acquisition
of the intellectual property rights to the five mobile software
games.
Intellectual
Property Asset Purchase Agreement. On January 31, 2006, we entered into
intellectual property rights purchase agreements effective February 28, 2006
(collectively, the “Intellectual Asset Purchase Agreement”) with CII pursuant to
which we purchased the intellectual property rights to the remaining five mobile
games. The acquisition was subsequent to the re-acquisition by CII of these five
mobile games from Coloured Industry Technology Partnership. We issued 6,000,000
shares of our restricted common stock to CII in consideration of the acquisition
and transfer to us of these five mobile games. CII in turn transferred these
6,000,000 shares of our common stock to Coloured Industry Technology Partnership
in connection with its acquisition of these five mobile games from Coloured
Industry Technology Partnership. See “ – Material Contracts”.
The Flirtylizer
Game. The Flirtylizer mobile game allows a user to send pre-set text
messages to another user’s mobile phone to allow chat with another user they
know without that other user knowing the identity of the person sending the
message. The receiver gets a text message informing him or her that someone they
know is flirting with them, and they must correctly guess the sender’s identity
in order to have it revealed. Both parties then receive a message confirming
that the receiver has correctly guessed the identity of the sender.
The Voodolizer
Game. The Voodolizer game provides a casual spin on the idea behind
Flirtylizer. The receiver will get text message “spell” saying that something
will happen to their mobile phone (for example, all the phone numbers stored in
the receiver’s mobile phone will be deleted) unless the receiver can “throw the
spell” by guessing the sender’s identity with a text message. If the guess is
correct, both parties are informed that the spell has been lifted.
The Banana Battle
Game. The Banana Battle game is a simple dueling game where players must
hit their opponents with a banana by guessing the distance between themselves
and their opponents by text message. Players send their guess as to their
distance to the other player by text message, with the computer automatically
sending back responses after each throw (hit or miss), until one player
correctly guesses the distance and hits their opponent, ending the
game.
The Get Nessie!
Game. Players of Get Nessie! try to become the top ranked scientist by
catching the Loch Ness Monster. Doing so requires a player to send text messages
containing coordinates for the placement of sonar buoys in the lake in which
Nessie lives and analyzing the data that comes back from the server via text
message. The lake is full of things other than Nessie, and a player has a choice
of several actions they may take with the information received, such as
attempting to take pictures of whatever they find or try catching it. Players
can check our website at any time to see the latest news on their progress in
the hunt.
The Hunters &
Collectors Game. The Hunters & Collectors is a “soft” battle game
where players duel each other with weapons such as sticks and water balloons. It
is similar to Mobile Warrior in the manner in which players register and play,
but with a less battle-like tone. Players initially register and create a
character for the game on our website, and then challenge and battle players in
the same manner as with Mobile Warrior. This game is also supported by a website
on which players can check their ranking against other players and see the
results of other battles.
MATERIAL
CONTRACTS
Intellectual
Asset Purchase Agreements
On
February 28, 2006, we acquired the intellectual property rights to our six
mobile games concurrently from CII and ABS Capital in accordance with the terms
and provisions of the Mobile Warrior Intellectual Asset Purchase Agreement and
the respective Intellectual Asset Purchase Agreements for total consideration of
the issuance of 12,000,000 shares of our restricted common stock, of which
6,000,000 shares were issued to CII and 6,000,000 shares were issued to ABS
Capital. Concurrent with the completion of this acquisition, CII transferred
6,000,000 shares of our common stock to Coloured Industry Technology Partnership
as part of its arrangement to re-acquire five of the six mobile games from
Coloured Technology Partnership. Coloured Industry Technology Partnership is a
limited liability partnership that was at arm’s length to CII. Coloured Industry
Technology Partnership became one of our principal shareholders as a result of
the completion of these transactions.
At the
same time, ABS Capital transferred its 6,000,000 shares of our common stock to
Mobile Warrior Technology Partnership as part of its own arrangement to
re-acquire the Mobile Warrior game from Mobile Warrior Technology Partnership.
Mobile Warrior Technology Partnership LLP is a limited liability partnership
that is at arm’s length to ABS Capital Inc. The Mobile Warrior Technology
Partnership LLP became one of our principal shareholders as a result of the
completion of these transactions. See “Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters”.
DEVELOPMENT
OF OUR MOBILE GAMES
Our
mobile games were all developed during the period from 2000-2002. Mobile Warrior
was developed by TrackWell Software and continues to be hosted on their server
by agreement with us, while the others were developed by the Swedish company
Blue Factory. Each development company sought distribution for the games they
developed. Blue Factory’s games were available in 2001 and 2002 to mobile phone
users in Europe through a number of operators including Vodafone, T-Mobile (UK
and Germany), Telia (Sweden), i100 (Hong Kong), TIM (Italian), and Sonera Zed
(Finland). None of the games achieved widespread commercial success; we believe
this was due to a variety of factors, including the lack of an existing LBS
infrastructure among mobile operators, the market’s relative unfamiliarity with
MMS technology and under-funded marketing efforts.
On April
2, 2004, LDC Network assigned its rights under the Mobile Warrior Agency
Exploitation Agreement to Coloured UK for the intellectual property rights
relating to the Mobile Warrior Mobile Game. On August 6, 2003, Coloured UK
entered into the Agency Exploitation Agreement with Coloured Industry Technology
Partnership whereby it undertook to commercially exploit the five remaining
Coloured Mobile Games on behalf of Coloured Technology Partnership. Effective
August 15, 2003, Lars Brannvall was hired as managing director of Coloured UK
with a view to establishing a commercially viable sales and marketing plan for
the distribution and sales of our mobile games. At the time Coloured UK acquired
the rights to exploit our mobile games, the games were fully developed and ready
for commercial roll-out.
Current
Status of Development and Future Plans
Each of
our games is currently fully developed and ready for commercial
roll-out.
In 2004,
we commissioned SIA Limited, a UK-based software developer, to develop a test
version of a software program that could be downloaded onto the mobile phone of
anyone playing our Mobile Warrior game. This program utilizes the advanced MMS
graphics capabilities that most mobile phones currently support to add graphics
to Mobile Warrior. Rather than typing their text messages into their phones,
players will be able to choose their commands from a list. Players will also see
graphical representations of their characters, and other such features that will
enhance their playing experience. The test program was successful, and we intend
to add this feature to Mobile Warrior as we secure additional
funding.
We also
intend to have the most popular of our games translated into languages suitable
for other foreign markets once we have secured the necessary funding. Our
initial plans call for translations of one or more of the Coloured Mobile Games
into Spanish, German and French.
We do not
have the internal ability to carry out any software development work on our
mobile games should we decide in the future that such work is necessary. We
anticipate engaging SIA Limited for any future software development work we
might decide to undertake. We presently do not have any agreements with SIA
Limited in place for any current or future software development
work.
OUR
BUSINESS MODEL
Text
messaging and game-playing are two of the most popular uses of today’s mobile
phones. Recently, mobile phone users have seen the introduction of games that
utilize the SMS features of their phones. We believe that the market for
location-based SMS mobile gaming is poised for substantial growth. Our
multi-player, location-based SMS games are intended to represent the next level
in the development of this market. Our games offer users a more interactive
experience and the opportunity to become part of an online
community.
Our
success will depend on our ability to establish a distribution network for our
games. Due to the high cost and relatively low efficiency of marketing directly
to our target market, we intend to approach gateway owners serving mobile
markets, either directly or through third party resellers and agents who will
leverage their industry contacts to sell our games in exchange for a portion of
the revenues generated from text messages sent in connection with our games.
This approach is illustrated below:
While we
plan to pursue gateway owners as part of our plan of operations, we are in the
early stages of the commercialization of our games. Accordingly, there is no
assurance that our business model will be successful. Further, we may elect to
change our business model in response to our success or lack of success in
pursuing commercialization of our games. At present, we are not able to pursue
our business model due to a lack of financing. We may determine not to pursue
commercialization of our products in accordance with our business model if we
determine to complete the acquisition of another business or
assets.
Gateway
Owners
Gateway
owners include wireless network providers (such as Vodafone, Orange, T-Mobile,
Sprint), Internet portals (MSN and Lycos) or other specialized websites which
provide content for mobile phone users for which they have revenue-sharing
agreements with various wireless network providers (MonsterMob), and a variety
of media companies that may produce television programs or publish or distribute
newspapers, websites or other forms of media in which mobile products and
services are generally advertised (Bertelsmann and Bonnier). In addition to
mobile phone service, these gateway owners provide or advertise a wide range of
products and services to our target market, including ringtones and games, and
in doing so have established themselves as destinations for members of our
target market looking for entertainment to use with their mobile
phones.
Under our
business model, gateway owners would agree to distribute our games through their
particular media and would be responsible for the marketing of our games to
their customers. If the gateway owner in question is not a wireless network
provider, they would also be responsible for setting up the billing arrangements
with the wireless network providers they deal with. Gateway owners promote their
products and services in a variety of ways. We expect that the primary methods
through which our games would be marketed would be print and Internet
advertisements. Although we expect that the precise terms of the agreements will
vary, our objective is to secure fees that would be not less than 25% of the
revenue derived from text messages generated through the playing of our
games.
Resellers
Given the
early stage of development we are at and because of the time and expense
required in marketing directly to gateway owners, we intend to use agents and
third party resellers to market our games at their own cost to gateway owners
while we build an internal sales force. Under this business model, the goal of
our resellers would be to enter into sub-license agreements with gateway owners
located in their particular territory. Those sub-license agreements would
specify the division of the fees received from each text message sent in
connection with our games between the gateway owner and the
reseller.
We have
entered into a number of reseller agreements with agents and resellers located
around the world. Each of these agreements grants the reseller in question
non-exclusive rights (unless otherwise specified) to a particular market
territory. The agreements also contain standardized terms setting out the rights
and obligations of each reseller, and specify any applicable set-up costs and
the fees to be paid to us by the reseller in connection with the use of our
games. All the agreements are for a term of one year from the date they were
signed, and are automatically renewed for additional one year periods unless
otherwise terminated by either party. Details of the unique terms of the
individual agreements are as follows:
|
·
|
Reseller:
Tele-Publishing UK Ltd. (also known as G8wave) - Territory: United
Kingdom; Fees: reseller will pay ₤0,05 (USD$0.1 based on a foreign
exchange rate on December 27, 2006 of $1.96:£1.00) per text message
sent.
|
|
·
|
Reseller:
iTech Solutions India PVT Ltd. – Territory: India and the Indian
Subcontinent; Fees: reseller will pay a fee to be agreed upon per text
message sent.
|
|
·
|
Reseller:
Mobiletones Asia Pte Ltd. - Territory: Asia, excluding Singapore; Fees:
reseller will pay 50% of the revenue generated from our mobile games. We
have has the right to reject any sub-license agreement which the
reseller.
|
|
·
|
Reseller:
Nostromo ICT - Territory: Czech Republic; Fees: reseller will pay 25% of
the charge to the customer per text message sent (a minimum of 0,625 CZK
(USD$0.03 based on a foreign exchange rate on December 27, 2006) per text
message).
|
|
·
|
Reseller:
Mtertainment Korea - Territory: Asia, with exclusivity in Singapore; Fees:
reseller will pay 30% of the revenue generated from our mobile
games.
|
|
·
|
Reseller:
Mobile Minds - Territory: Hungary, Slovakia, Czech Republic and Pakistan;
Fees: reseller will pay a fee to be agreed upon per text message
sent.
|
|
·
|
Reseller:
Net People International Inc. - Territory: Latin America (South &
Central America), Mexico and the Caribbean; Fees: reseller will pay 50% of
the revenue generated from our mobile
games.
|
|
·
|
Reseller:
Mobilkraft - Territory: Sweden; Fees: reseller will pay a fee to be
negotiated per text message sent.
|
|
·
|
Reseller:
Mocondi Ltd. - Territory: No specific territory; Fees: reseller will pay a
fee to be agreed upon per text message sent. Coloured UK has the right to
reject any sub-license agreement which the reseller proposes to enter
into.
|
|
·
|
Reseller:
Voicelock Ltd. (also known as Trust5) - Territory: United Kingdom &
Ireland; Fees: reseller will pay fees generated from our games, to be
based upon a model to be agreed
upon.
|
|
·
|
Reseller:
Tracebit Ltd. - Territory: Worldwide; Fees: reseller will pay 50% of the
revenue generated from our games.
|
To date,
we have not been successful in generating any revenues from these reseller
agreements.
We also
have a marketing co-operation agreement with Ericsson AB under which Ericsson
has agreed to provide us with access to their Ericsson Mobility World members
network, as well as introductions to potential customers and invitations to
participate with them in various marketing events. We have agreed to pay
Ericsson 15% of the gross revenues generated from the use of our games by their
customers. The agreement was signed on May 14, 2004 and runs for a period of two
years with automatic renewals until terminated by either party. We intend to
continue seeking such strategic partnerships for the distribution of our games
worldwide.
MARKETING
STRATEGY
We plan
to implement a sales and marketing strategy with the objective of signing our
first distribution agreements with gateway owners for our games. In addition to
licensing our games directly to such gateway owners for distribution, we intend
to continue our current relationships with various agents and third party
resellers to distribute our games to gateway owners with whom they have already
established relationships. Once we are able to secure the necessary financing,
we plan to begin the process of hiring additional personnel and building an
internal sales network for the support of our distribution strategy. There is no
guarantee we will secure sufficient funding to build such a
network.
Marketing
Our first
challenge will be to use our third party resellers to build a base of gamers who
play our mobile games. Once this has been achieved, we plan to promote viral
marketing efforts with that base of gamers. We recognize that in the gaming
community, current players are often the most effective and cost-efficient
promoters of the games they enjoy to new players. Because our games are all
designed to support multiple players and utilize the concept of gamer
communities, we believe they lend themselves very well to this kind of
marketing. Our strategy is to encourage gateway owners to use other products and
services they promote and sell as prizes for players who successfully encourage
others to try our games.
Another
cost-effective method of marketing our games is by partnering with resellers to
market our games at industry trade shows. These trade shows provide a convenient
forum to demonstrate our games to numerous gateway owners as well as explaining
to them how our games can be integrated into their current product offering. We
expect to have strong support for this idea, as resellers generally seek to
offer multi-dimensional product lines appealing to a wide variety of customers
at such shows. We have identified trade shows located in a number of European
cities in which we would attempt to participate including London, Barcelona, Los
Angeles and Singapore.
Pricing
and Revenue Generation
Set Up,
Adaptation and Installation Costs. We may charge gateway owners fees in
connection with the costs of set-up, hosting and maintenance adaptation and
installation of our games, as well as for any upgrades of the games or their
operations which we may develop in the future. These fees will be dependent on
each gateway owner’s environment and requirements. To encourage gateway
operators and resellers to offer our games, we do not intend to charge fees
which exceed our costs to any large degree.
Revenue-Sharing. We do not anticipate that
users of our mobile games will pay us directly to play them, nor is our
infrastructure set up to support this. Rather, we will generate revenue through
revenue-sharing agreements with gateway operators and resellers based on revenue
received by those parties from the text messages generated by players playing
our games. There are a number of ways that mobile phone users may be charged for
sending text messages while playing our games, but the most common ones will
likely be:
|
1.
|
Premium
SMS (P-SMS): where a gateway owner charges a flat fee per text message
sent while playing our games, which fee is generally higher than the cost
of text message levied by the wireless network operator;
and
|
|
|
2.
|
Subscription:
where a player may send up to an agreed number of text messages during a
certain time period, perhaps a week or month, for a set
fee.
|
Our
revenue-sharing model is based on SMS messages sent by a player while playing
our games, under which we anticipate that we would typically earn a fixed
percentage of either the price paid per message or the revenues earned from the
number of messages the player is estimated to send during an upcoming time
period. These fees are all exclusive of local taxes.
Our
Web Site
Our
website, www.cimobilegaming.com
is intended to provide information on our mobile gaming software for gateway
owners and resellers/agents, and not for the mobile phone users.
INTELLECTUAL
PROPERTY
We own
intellectual property rights including trade secrets and copyright relating to
our mobile games. We seek to protect our intellectual property by generally
limiting access to it, treating portions of it as trade secrets and obtaining
confidentiality or non-disclosure agreements from persons who are given access
to it, including our developers. In general, a "trademark" is a distinctive
word, phrase, logo, graphic symbol or other device that is used to identify the
source of a product and to distinguish a product from anyone else's. As a
general rule, trademark law confers legal protection to names, logos and other
marketing devices that are distinctive. We may seek trademark protection of our
logos in order to identify our services on the Internet and in the marketplace
to prevent consumer confusion and to protect the means we chose to identify our
services and products against use by competitors.
In
general, a copyright gives the owner of a creative work the right to keep others
from using the work without the owner's permission. In general, a creative work
must meet three criteria to be protected by copyright: (i) it must be original;
(ii) it must be fixed in a tangible medium of expression; and (iii) it must have
at least some creativity, i.e. produced by an exercise of human intellect. We
have not sought copyright protection of our website designs.
Our
management believes that copyright and trademark protection may provide us with
certain protections. As of the date of this Annual Report, we have obtained
patent, copyright or trademark registrations for certain of our products.
Therefore, since a copyright or trademarks have been issued for our products, we
have the right to bring a copyright or trademark infringement action against a
third party. Also, there is no assurance that such copyright and trademarks will
not be attacked by third parties or that, if any such attack were made, it would
not be successful. The costs in defending such copyright or trademark or
prosecuting a copyright or trademark infringement action could be
substantial.
Trademark
Applications
We hold
the following trademarks registered in the United Kingdom for each of our mobile
games:
|
Game
|
TM Registration
Number
|
Classes
|
Filing
Date
|
|
Banana
Battle
|
2375332
|
9,
28, 38, 41 and 42
|
October
7, 2004
|
|
Flirtylizer
|
2375333
|
9,
28, 38, 41 and 42
|
October
7, 2004
|
|
Get
Nessie!
|
2375334
|
9,
28, 38, 41 and 42
|
October
7, 2004
|
|
Hunters
& Collectors
|
2375335
|
9,
28, 38, 41 and 42
|
October
7, 2004
|
|
Voodoolizer
|
2375336
|
9,
28, 38, 41 and 42
|
October
7, 2004
|
|
Mobile
Warrior
|
2317126
|
9,
28, 38, 41 and 42
|
November
28, 2002
|
Patents
CII filed
for patent protection in the United Kingdom for all of mobile games except for
Mobile Warrior as of October 7, 2004. CII was later advised by the UK Patent
Office that evidence had been found that the technologies associated with these
mobile games appeared to have been in the public domain before the patent
applications were filed and that as a result, the patent applications would
likely be denied. As a result, a request to withdraw the patent applications was
filed effective February 20, 2006. Accordingly, we believe that we will not be
able to obtain any patent protection for our mobile games.
COMPLIANCE
WITH GOVERNMENT REGULATION
We must
abide by regulations imposed by government regulatory authorities in deploying
our mobile games. Because our mobile games result only in the creation of SMS
messages, we believe we will only be subject to rules and regulations pertaining
to mobile messaging. The majority of regulations within the telecommunications
industry that apply to mobile messaging are created by industry bodies producing
codes of conduct that outline the rules that network operators, content
providers, carriers, technology providers and advertisers must adhere to when
providing telecommunication services to the public. These codes of conduct
generally focus on protecting consumers against unwanted SMS messages being
delivered to their mobile devices.
We intend
to thoroughly investigate the regulations imposed in each jurisdiction in which
we intend to expand our business prior to commencing any marketing efforts in
such jurisdiction. In some cases, the cost of compliance with a jurisdiction’s
regulations may preclude us from providing our services to customers in such
jurisdiction.
COMPETITION
The
mobile gaming market is a highly competitive but very fragmented marketplace in
which no single company holds a dominant share. We believe technology plays the
key role in differentiating the types of games available in this marketplace to
be played on a mobile phone. As opposed to graphics-based (non-SMS) games which
use software that must be downloaded onto a user’s mobile phone, our focus is on
the SMS-based gaming sector. The feature of the Coloured mobile games which we
believe differentiates them from the majority of the other SMS-based mobile
games available on the market is the location-based (LBS) feature that
integrates a player’s actual physical location relative to other players into
play of the game. Of the SMS-based games currently on the market, we believe
that there are at present few competitors that can offer multi-player games with
the LBS and MMS features present in the Coloured mobile games. The following
tables list the companies that we believe to be our key competitors in various
parts of the world in which we plan to eventually make the Coloured mobile games
available.
SMS
–Based Games with LBS Capabilities
|
Company
|
Game
|
Description
|
|
Mikoishi Studios Pte Ltd.
|
“Gunslinger”
|
A
multi-player western showdown game. Can be seen as in direct competition
with our game “Mobile Warrior”. Currently available only in
Singapore.
|
|
Mopius
|
“The
Journey”
|
An
adventure game where the player takes the role of a detective finding
clues in a virtual world, similar to our “Get Nessie!” game. Available in
several languages including English, German and
Russian.
|
|
Daydream Software
AB
|
“BotFighter”
|
Another
multi-player game. BotFighter was the first LBS mobile game and has been
launched in several markets including Sweden and
Russia.
|
|
Blisterent Entertainment Inc.
|
“Swordfish”
“Torpedo
Bay”
|
A
virtual fishing game, similar to our “Get Nessie!” game.
A
submarine fighting game.
Each
of these games is available in North
America
|
Unlike
our mobile games, each of the games listed in the table above requires the user
to first download software to their mobile phone before the game may be played.
As a result, each game may not work on all brands and models of mobile phones or
all networks.
SMS
–Based Games without LBS Capabilities
|
Company
|
Game
|
Description
|
|
Cellular Magic S.A
|
Several
games
|
This
company’s primary focus is on offering its own mobile services platform to
mobile operators to help them host, sell and deliver services to mobile
phone users. Their games are offered as an added
service.
|
|
Cascata Games Limited
|
“Reversi”
|
SMS
version of this popular game, it requires the user to first download
software to their mobile phone before the game may be
played
|
|
SMS Prank (website)
|
Several
games
|
Gives
the user the opportunity to send prank SMS messages for which the sender
pays by buying credits.
|
COMPETITIVE
STRATEGY
We
believe our mobile games and our sales and marketing strategy provide us with
several competitive advantages over our competitors which we plan to use to gain
market share in this industry.
|
·
|
As
we host our mobile games on our own servers rather than just licensing the
software to gateway owners, we anticipate that we will normally able to
provide for gateway owners to begin distributing our mobile games within
two to three weeks of reaching a distribution agreement with
them.
|
|
·
|
Our
mobile games can be delivered in versions without MMS or LBS functions
such that we can expand into markets whose networks do not yet have the
technology to support these features, such as China, India and Nigeria.
Expansion into these markets is dependent only upon having the text
messages used to play the games translated into the appropriate language,
which can be done relatively easily given the small number of words
actually used in each text message.
|
|
·
|
The
fact that our mobile games can be played on any GSM phone without the
requirement to download unique software (as is the case with most of our
competitors) means that we do not require a large technical support
division to adapt our mobile games to different types of mobile
phones.
|
|
·
|
The
reseller agreements currently in place between us and our third party
resellers are highly flexible and adaptable to the unique mobile
telecommunications “culture” of each market. This gives us the ability to
provide the appropriate incentives to each reseller to market our games in
the most effective manner in that
market.
|
Since the
mobile gaming market is highly fragmented, we believe the primary competitive
advantage of our mobile games is the ease with which they can be launched in the
majority of existing markets. While our mobile games lack the graphic features
of many of our competitors, that factor also gives them the advantage of being
compatible with many more types of mobile phones and on more networks of
differing technological advancement.
While our
current size makes it difficult for us to compete with the service and technical
support offered by several of our existing competitors, our mobile games and
systems are designed to minimize the amount of technical support necessary. We
plan to seek strategic partnerships with companies to whom we can outsource
these functions. By securing such partnerships, we believe we will be able to
offer a competitive level of service and improve our competitive position within
the market.
Our
primary strategy upon receiving the additional financing we require is to
greatly expand our sales and marketing activities by entering agreements with
more third party agents and resellers. We believe our profit-sharing model to be
very competitive, offering potential agents and resellers an attractive portion
of the revenues from SMS fees and any applicable license fees generated by our
mobile games.
EMPLOYEES
As of the
date of this Annual Report, we have one employee, namely Mr. Lars Brannvall, who
is our sole director and executive officer.
RESEARCH
AND DEVELOPMENT EXPENDITURES
Since
inception in May 2003, we have not incurred any development costs to date, as
all development work carried out by SIA to develop the test software to
integrate MMS graphic features into our Mobile Warrior game was done on a
revenue-sharing arrangement. The purpose of the software was to demonstrate the
feasibility of adding MMS features to our games.
|
ITEM 1A. RISK FACTORS
|
RISK
FACTORS
An
investment in our common stock involves a number of very significant risks. You
should carefully consider the following risks and uncertainties in addition to
other information in evaluating our company and its business before purchasing
shares of our common stock. Our business, operating results and financial
condition could be seriously harmed due to any of the following risks. The risks
described below are all of the material risks that we are currently aware of
that are facing our company. Additional risks not presently known to us may also
impair our business operations. You could lose all or part of your investment
due to any of these risks.
Risks
Related to Our Business
As we have a
limited operating history, and our ability to commerciallyexploit our mobile
gaming software is untested, we may never earn revenuesor achieve
profitability.
We were
incorporated on April 5, 2005 and acquired Coloured UK on September 30, 2005.
Coloured UK was incorporated in the United Kingdom on May 2, 2003.
We acquired the intellectual property underlying our mobile games in
February 2006, and we have no experience as the owner of the software. Our
operating history is limited, and to date we have been involved primarily in
organizational and development activities. We have not earned any revenues to
date, and our ability to commercially exploit our mobile games is untested. We
had an accumulated deficit of $4,037,449 as at September 30, 2008. Accordingly,
there is no assurance that we will ever achieve revenues or
profitability.
As we have
yet to establish commercial sales of our mobile games, there is noassurance that
we will ever achieve revenues.
Our plan of operation is focused on the
commercialization of our mobile gaming software. We have not obtained any sales
or distribution for our mobile games to date. Further, our business model to
earn revenues from a percentage of fees generated by SMS messages generated by
users playing our mobile games is unproven in the marketplace. As we have no
current revenues or fee generating arrangements, our ability to achieve revenues
and future profitability will depend on our ability to successfully market and
sell our games. There is no assurance that we will be able to successfully enter
into arrangements with gateway owners for the distribution of our mobile games
to users that will result in us earning revenues. We are not able to provide
investors with any assurance that we will be able to operate our business
successfully or that we will be able to achieve profitable operations. Potential
investors should consider the difficulties normally encountered in developing
and commercializing new technologies, and the high rate of failure of such
enterprises. The likelihood of success must be considered in light of the
problems, expenses, difficulties, complications and delays encountered in
connection with the commercialization process that we plan to undertake. These
potential problems include, but are not limited to, the reluctance of mobile
gateway operators to accept our business model, the inability of our resellers
to sell our games to mobile phone operators, the inability of mobile phone
operators to successfully market our games to their customers, and our games not
being accepted by mobile phone customers. If we are unsuccessful in addressing
these risks, then we will not achieve revenues and our business will most likely
fail.
If we are
unable to obtain additional financing to execute our plan ofoperations, then we
will not have sufficient funds with which to carry out ourplan of operations and
our business will most likely fail.
Our plan
of operations is to market and sell our mobile games and to generate revenues
from sales of SMS text messages created while playing these games. Our planned
expenditures over the next year to implement this plan of operations is in
excess of our current financial resources. We had cash of $28,111 from continued
and discontinued operations and a working capital deficit of $291,729 as of
September 30, 2008. We may not be able to fund our operations beyond the end of
September 2009 without additional financing. Accordingly, we will require
additional financing in order to carry out our plan of operations. We anticipate
that we will pursue equity financings, either through sales of our common stock
or sales of convertible promissory notes that are convertible into shares of our
common stock, in order to further finance our operations. We presently do not
have any arrangements for additional financing in place and there is no
assurance that we will be able to arrange for additional financing. If we are
not able to arrange for additional financing to cover these additional
anticipated expenses, we will not be able to execute our plan of operations with
the result that our business may fail and investors may lose a substantial
portion or all of their investment.
If we are not
able to enter into arrangements with gateway owners for thedistribution of our
mobile games, then our plans to achieve revenues fromfees based on SMS text
messaging traffic generated by users playing our games will fail.
A
significant aspect of our business plan involves entering into arrangements,
either directly or indirectly through third party resellers, with mobile
operators and other “gateway owners” such as mobile operators and other content
providers for mobile phones to whom we would license our mobile games for fees
based on SMS text messages generated by users playing the games. There is no
assurance that gateway owners will enter into these arrangements with us for the
distribution of our mobile games. To date, we have approached over thirty
gateway owners directly and over an additional twenty gateway owners indirectly
through resellers with the objective of securing distribution arrangements,
without any success of securing a revenue generating arrangement. We believe
that the primary reasons for our lack of success are the facts that we do not
have a track record in the industry or any prior sales experience, we do not
have personal relationships with the management and employees of the gateway
owners and our company does not offer any name brand recognition. We believe
that these factors result in a reluctance of gateway owners to enter into
arrangements with us, either directly or through our resellers. If we are not
able to enter into these arrangements, then our mobile games will not be
distributed in order to generate the SMS text messaging traffic from which we
plan to earn revenues. Further, even if we are successful in entering into
license arrangements with gateway owners, there is no assurance that SMS text
messages and corresponding revenues will be generated as our mobile games may
not be accepted by users. In this event, we would have to devise a new marketing
strategy, with the result that there will be a significantly higher risk that
our business will fail.
We have a
history of losses and negative cash flows, which are likely tocontinue unless
our products gain sufficient market acceptance to generate acommercially viable
level of revenues through SMS text messages sent by players.
Since our
inception through March 31, 2006, we have incurred an accumulated deficit of
($4,037,449). For fiscal year ended September 30, 2008, we had a loss of
($165,031). There is no assurance that we will be able to successfully
commercialize the Coloured mobile games to generate revenues, operate
profitability or generate positive cash flow in the future. Further, we also
expect an increase in development and operating costs as we undertake our plan
of operations prior to achieving revenues, of which there is no certainty.
Consequently, we expect to incur continued operating losses and net cash
outflows until such time as our mobile games gain market acceptance sufficient
to generate a commercially viable and sustainable level of revenues. In
addition, our operating results in the future may be subject to significant
fluctuations due to many factors not within our control, such as market
acceptance of our products, the unpredictability of when customers will order
products, the size of customers’ orders, the demand for our products, and the
level of competition and general economic conditions.
If our
operating expenses are greater than anticipated, then we will have lessfunds
with which to pursue our plan of operations and our additionalfinancing
requirements will be greater than anticipated.
Our
operating expenses over the past fiscal year have been approximately $15,000 per
month, which includes legal and auditing and accounting expenses that we have
incurred in connection with being a reporting company under the Securities
Exchange Act of 1934, as amended. We anticipate that our operating expenses will
increase as we undertake our marketing and sales activities in accordance with
our plan of operations. And, we may find that the costs of carrying out our plan
of operations prior to achieving revenues are greater than we anticipate. There
is also a risk that legal and auditing and accounting expenses will be greater
than anticipated. Increased operating costs will cause the amount of additional
financing that we require to increase. Investors may be more reluctant to
provide additional financing if we cannot demonstrate that we can control our
operating costs. There is no assurance that additional financing required as a
result of our operating costs being greater than anticipated will be available
to us. If we do not control our operating expenses, then we will have less funds
with which to carry out our plan of operations with the result that our business
may fail.
As there is a
substantial doubt as to our ability to continue as a goingconcern, there is a
significant risk that our business will fail.
As noted
in our audited financial statements, we intend to continue funding operations
through sales and equity financing arrangements, which may be insufficient to
fund our capital expenditures, working capital and other cash requirements for
the next fiscal year. Thereafter, we will be required to seek additional funds,
either through sales and/or equity financing, to finance our long-term
operations. The successful outcome of future activities cannot be determined at
this time, and there is no assurance that, if achieved, we will have sufficient
funds to execute our intended business plan or generate positive operating
results. In response to these conditions, our management intends to raise
additional funds through future private placement offerings. These factors,
among others, raise substantial doubt about our ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
In their
report on our annual financial statements for fiscal years ended September 30,
2008 and 2007, our independent auditors included explanatory paragraphs
expressing doubt about our ability to continue as a going concern. Our auditors
noted that we are dependent upon financing to continue operations, have suffered
recurring losses from operations and our total liabilities that exceed total
assets. As a result, our auditors stated these matters raise substantial doubt
about our ability to continue as a going concern. As a result of these factors,
we caution investors that there is a substantial risk that our business may
fail.
As Lars
Brannvall is our sole executive officer and director, we do not haveany
independent directors on our board of directors who are able toindependently and
objectively review decisions made by Mr. Branval in hiscapacity as our sole
executive officer and director.
Mr. Lars
Brannvall is our sole executive officer and director. Mr. Brannvall is not an
independent director and we have no independent directors who may be able to
independently and objectively review decisions made Mr. Brannvall, either in his
capacity as sole director or in his capacity as the sole member of our senior
management. Mr. Brannvall may, as our sole director, approve transactions on
behalf of our corporation in which he has a personal interest. We do not have in
place any independent directors who would be able to review these conflicts of
interest and provide an objective assessment prior to any transaction in which
Mr. Brannvall has an interest being approved by our board of directors.
Accordingly, there is a risk that Mr. Brannvall may, in his capacity as sole
director, approve transactions in which Mr. Brannvall has a personal interest,
but that may not be in our best interests or the best interests of our
shareholders.
We operate in
a highly competitive industry and our failure to competeeffectively may
adversely affect our ability to generate revenue.
Our industry is highly competitive and
subject to rapid change. Our mobile gaming software allows users to play a
variety of SMS-based text messages and location-based games on their mobile
phones. We expect to experience competition from companies involved in gaming
software technology. We have identified the following companies as competitors
as they offer SMS mobile games that may be played by our target market: Mikoishi
Studios Pte. Ltd., Mopius, Daydream Software AB, Blisterent Entertainment Inc.,
Cellular Magic S.S., Cascata Games Limited and SMS Prank (a web site). We
believe that many, if not all, of these competitors have greater technical,
financial, marketing, sales and other resources than we do. As a result, we
believe that our competitors will have more resources with which to market and
sell their mobile gaming products to mobile gateway owners. We are currently
constrained by our lack of financial and marketing resources which reduces our
ability to make contact with and secure arrangements with mobile gateway
operators. These constraints mean that our competitors may be able to sell their
mobile gaming products and secure arrangements with mobile gateway operators who
might otherwise be potential customers to us. Further, we cannot guarantee that
our technical and knowledge resources will be able to modify our products fast
enough to meet customer and market requirements in the face of new and enhanced
mobile games that may be offered by competitors. Such competition may reduce our
chances of achieving revenues and profitability, and ultimately adversely affect
our ability to continue as a going concern.
Our mobile
games may become obsolete and unmarketable if we are unableto respond adequately
to rapidly changing technology and customerdemands.
Our
industry is characterized by rapid changes in technology and customer demands.
As a result, our products may quickly become obsolete and unmarketable. Our
future success will depend on our ability to adapt to technological advances,
anticipate customer demands, develop new products and enhance our current
products on a timely and cost-effective basis. Further, our products must remain
competitive with those of other companies with substantially greater resources.
We may experience technical or other difficulties that could delay or prevent
the development, introduction or marketing of new products or enhanced versions
of existing products. Also, we may not be able to adapt new or enhanced products
to emerging industry standards, and our new products may not be favourably
received.
Our
mobile gaming software is designed to be distributed seamlessly by mobile
operators, and are therefore subject to technology changes and developments that
are outside our control. If we are unsuccessful in responding to such changes
and developments, the competitiveness of our products will be hurt.
As we
anticipate that we will contract out any future software developmentactivities
to an independent third party contractor, there can be no assurancethat we will
be able to continue development work on our mobile games, or that this work will
be completed on a timely and cost-effective basis.
We do not
have the internal ability to carry out software development work on our
products. Accordingly, we anticipate outsourcing future software upgrades and
developments on our mobile games to SIA Limited, a private arm’s-length software
development company. We do not have any agreements in place with SIA Limited for
any current development work. There can be no assurance that SIA will be able to
carry out the development work we require when we require it or complete the
work on a cost-effective basis. If SIA is unable to carry out our work when we
require it or on a cost-effective basis, we will either be forced to find
another contractor to provide development services, which may be very difficult
to do, or run the risk of not responding to market demands for improvements.
This could harm our customer relationships and negatively affect our operating
results.
Substantially
all our assets and our sole director and officer are locatedoutside the United
States, with the result that it may be difficult for investorsto enforce within
the United States any judgments obtained against us or our sole director and
officer.
Substantially
all of our assets are located outside the United States and we do not currently
maintain a permanent place of business within the United States. In addition,
our sole director and officer is a resident of the United Kingdom, and all or a
substantial portion of his assets are located outside the United States. As a
result, it may be difficult for investors to enforce within the United States
any judgments obtained against us or our sole officer and director, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof. Consequently, you may be effectively
prevented from pursuing remedies under U.S. federal securities laws against our
director and officer.
We could lose
our competitive advantages if we are not able to protect anyproprietary
technology and intellectual property rights against infringement.
Our
success and ability to compete depends to a significant degree on our mobile
games. We hold trademarks for all of the Coloured mobile games, however, there
is a risk that a competitor or other party may allege that our use of these
names is a breach of the trademark or other intellectual property rights of the
party. We do not have any patent protection that covers the Coloured mobile
games. Accordingly, the only measures that we believe will be available to us to
protect our mobile games will be based upon a combination of trademark, trade
secret and copyright law and our ability to ensure confidentiality of the
software source codes through non-disclosure agreements. If any of our
competitors copies or otherwise gains access to such proprietary technology or
software or develops similar technologies independently, our competitive
position will be damaged.
While we
believe that we have the rights to exploit our mobile games, there is a risk
that other persons may bring actions against us claiming that we have infringed
on their intellectual property rights, including claims based upon the breach of
patent, or claims that our intellectual property rights are not valid. Any
claims against us, with or without merit, may be time-consuming and costly to
defend or litigate, may divert our attention and resources, may result in the
loss of goodwill associated with our trademarks or may require us to make
changes to our technologies. We presently do not have sufficient financial
resources to defend any litigation that alleges a breach by us of another
party’s intellectual property rights.
As a
result of these factors, investors should be aware that we may be unable to
protect any intellectual property rights that we have or that we will be able to
exploit the intellectual property rights that we do have in order to secure a
competitive position in the market-place.
If we fail to
effectively manage our growth our future business results couldbe harmed and our
managerial and operational resources may be strained.
As we
proceed with the commercialization of our mobile gaming software, we expect to
experience growth in the scope and complexity of our business. We will need to
add staff to market our services, manage operations, handle sales and marketing
efforts, and perform financial and accounting functions. We will be required to
hire a broad range of additional personnel in order to successfully manage our
operations, if we are successful in commercializing our mobile games. This
growth is likely to place a strain on our management and operational resources.
The failure to develop and implement effective systems, or to hire and retain
sufficient personnel for the performance of all of the functions necessary to
effectively service and manage our potential business, or the failure to manage
growth effectively, could have a materially adverse effect on our business and
financial condition.
If we lose
the services of Mr. Lars Brannvall, our sole director and officer,then we may
not be able to carry out our plan of operations.
We will
be dependent upon the services of Mr. Lars Brannvall, our sole director and
officer, to carry out our plan of operations. The loss of the services of Mr.
Brannvall could have a serious effect on our ability to execute our business
plan and succeed in commercializing our mobile games. If we should lose the
services of Mr. Brannvall, we would be forced to hire another person to manage
our business and undertake the implementation of our plan of operations. We do
not maintain any ‘key man’ insurance on Mr. Brannvall.
If government
regulations are adopted that impose additional costs orrequirements on our
ability to provide our SMS messaging solutions, thenour cost of operations may
be increased and we may not be able to carry out our plan of
operations.
Our
industry is highly regulated, and both we and our future customers and clients
may be affected by changes in regulation of electrical wireless
telecommunication devices and SMS messaging. The indirect impact of changes in
regulation could affect our business adversely even though the specific
regulations do not apply directly to us or our products. Changing governmental
regulations may impose new and different requirements with which our mobile
games must comply. We have no control over regulations and regulatory change and
cannot guarantee that our mobile games will meet the minimum standards as set
out by applicable future regulation. Establishing compliance may be costly and
time-consuming and our failure to do so could result in our inability to
commercialize our mobile games and carry out our plan of operations. Further,
the existence of government regulation in markets into which we may wish to
enter may impose prohibitive costs of operation which could result in our
determination not to offer our mobile games.
Errors or
Defects in Our Mobile Game Products Could Diminish Demand For
Our Products and Reduce Our Operating Results.
Our
mobile game products are complex and may contain errors that could be detected
at any point. We cannot assure you that errors will not be found in new products
or releases after shipment. This could result in diminished demand for our
mobile game products, delays in market acceptance and sales, diversion of
development resources, injury to our reputation or increased service and
warranty costs. If any of these were to occur, our operating results could be
adversely affected.
Mobile Gaming
is a New Platform and May Not Gain Popularity.
The
market for our mobile game products and platforms on which they operate may not
grow. Consumer behavior may change and consumers may lean towards technologies
and/or leisure activities which are not within our sphere of
activity.
A
significant portion of our business is conducted outside the United States.
Although a majority of our revenues are transacted in U.S. Dollars, we are
exposed to currency exchange fluctuations in other currencies such as the
British pound. Moreover, a portion of our expenses in the United Kingdom are
paid in pounds, which subjects us to the risks of foreign currency
fluctuations.
Because We
Intend to Operate in Multiple International Markets, We Will Be Subject to Additional Risks.
.
We intend
to sell our mobile game products in a number of countries and we intend to enter
additional geographic markets. Our business is subject to risks, which often
characterize international markets, including: (i) potentially weak protection
of intellectual property rights; (ii) economic and political instability; (iii)
import or export licensing requirements; (iv) trade restrictions; (v)
difficulties in collecting accounts receivable; (vi) longer payment cycles;
(vii) unexpected changes in regulatory requirements and tariffs; (viii) seasonal
reductions in business activities in some parts of the world, such as during the
summer months in Europe; (ix) fluctuations in exchange rates; and (x)
potentially adverse tax consequences.
Risks
Relating to Our Common Stock
Sales of a
substantial number of shares of our common stock into the public market by
certain stockholders may result in significant downward pressure on the price of
our common stock and could affect your ability to realize the current trading
price of our common stock.
Sales of
a substantial number of shares of our common stock in the public market by
certain stockholders could cause a reduction in the market price of our common
stock. As of the date of this Annual Report, we have 73,494,610 shares of common
stock issued and outstanding. Of the total number of issued and outstanding
shares of common stock, certain stockholders are able to resell up to 9,898,660
shares of our common stock pursuant to the SB-2 Registration Statement declared
effective on July 26, 2006 and are available for immediate resale which could
have an adverse effect on the price of our common stock.
As of the
date of this Annual Report, there are 64,422,110 outstanding shares of our
common stock that are restricted securities as that term is defined in Rule 144
under the Securities Act of 1933, as amended (the “Securities Act”). Although
the Securities Act and Rule 144 place certain prohibitions on the sale of
restricted securities, restricted securities may be sold into the public market
under certain conditions. See “Item 5. Market for Common Equity and Related
Stockholder Matters.”
Any
significant downward pressure on the price of our common stock as the selling
stockholders sell their shares of our common stock could encourage short sales
by the selling stockholders or others. Any such short sales could place further
downward pressure on the price of our common stock.
28
As of the
date of this Annual Report, our common stock trades on the Over-the-Counter
Bulletin Board. There is a volatility associated with Bulletin Board securities
in general and the value of your investment could decline due to the impact of
any of the following factors upon the market price of our common stock: (i)
disappointing results from our discovery or development efforts; (ii) failure to
meet our revenue or profit goals or operating budget; (iii) decline in demand
for our common stock; (iv) downward revisions in securities analysts' estimates
or changes in general market conditions; (v) technological innovations by
competitors or in competing technologies; (vi) lack of funding generated for
operations; (vii) investor perception of our industry or our prospects; and
(viii) general economic trends.
In
addition, stock markets have experienced price and volume fluctuations and the
market prices of securities have been highly volatile. These fluctuations are
often unrelated to operating performance and may adversely affect the market
price of our common stock. As a result, investors may be unable to sell their
shares at a fair price and you may lose all or part of your
investment.
Additional
issuance of equity securities may result in dilution to our existing
stockholders.
Our
Articles of Incorporation authorize the issuance of 100,000,000 shares of common
stock and 5,000,000 shares of preferred stock. The board of directors has the
authority to issue additional shares of our capital stock to provide additional
financing in the future and the issuance of any such shares may result in a
reduction of the book value or market price of the outstanding shares of our
common stock. If we do issue any such additional shares, such issuance also will
cause a reduction in the proportionate ownership and voting power of all other
stockholders. As a result of such dilution, your proportionate ownership
interest and voting power will be decreased accordingly. Further, any such
issuance could result in a change of control.
Our common
stock is classified as a “penny stock” under SEC rules which limits the market
for our common stock.
The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in "penny stocks." Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also
provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for stock that becomes
subject to those penny stock rules. If a trading market for our common stock
develops, our common stock will probably become subject to the penny stock
rules, and shareholders may have difficulty in selling their
shares.
|
ITEM
1B. UNRESOLVED STAFF COMMENTS
|
No report
required.
|
ITEM
2.
|
PROPERTY
|
Our
executive office is located at Suite 3.19, 130 Shaftesbury Avenue, London,
England W1D 5EU. This space is provided to us rent free by a shareholder of the
Company.
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
We
currently are not a party to any material legal proceedings and to our
knowledge, no such proceedings are threatened or contemplated.
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
No matters were submitted to our
security holders for a vote during the year ended September 30,
2008.
PART
II
|
ITEM 5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES
OF EQUITY SECURITIES
|
MARKET
FOR COMMON EQUITY
Shares of
our common stock commenced trading on the OTC Bulletin Board under the symbol
“COUS:OB” on approximately September 2007. The market for our common stock is
limited, and can be volatile. The following table sets forth the high and low
bid prices relating to our common stock on a quarterly basis for the periods
indicated as quoted by the NASDAQ stock market. These quotations reflect
inter-dealer prices without retail mark-up, mark-down, or commissions, and may
not reflect actual transactions.
|
Quarter
Ended
|
High
Bid
|
Low
Bid
|
||
|
December
31, 2008
|
$0.001
|
$0.001
|
||
|
September
30, 2008
|
$0.003
|
$0.003
|
||
|
June
30, 2008
|
$0.23
|
$0.17
|
||
|
March
31, 2008
|
$0.40
|
$0.35
|
||
|
December
31, 2007
|
$0.73
|
$0.32
|
||
|
September
30, 2007
|
$0.53
|
$0.30
|
||
As of
September 30, 2008, we had 194 shareholders of record, which does not include
shareholders whose shares are held in street or nominee names.
DIVIDEND
POLICY
No
dividends have ever been declared by the Board of Directors on our common stock.
Our losses do not currently indicate the ability to pay any cash dividends, and
we do not indicate the intention of paying cash dividends either on our common
stock in the foreseeable future. Moreover, the Nevada Revised Statutes prohibit
us from declaring dividends where, after giving effect to the distribution of
the dividend:
|
1.
|
We
would not be able to pay our debts as they become due in the usual course
of business; or
|
|
2.
|
Our
total assets would be less than the sum of our total liabilities plus the
amount that would be needed to satisfy the rights of shareholders who have
preferential rights superior to those receiving the
distribution.
|
We have
not declared any dividends and we do not plan to declare any dividends in the
foreseeable future.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS
We do not
have any stock option plans. The table set forth below presents information
relating to our equity compensation plans as of the date of this Annual
Report:
|
Plan
Category
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options, Warrants
and Rights
(a)
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights
(b)
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans (excluding column (a))
|
|
Equity
Compensation Plans Approved by Security Holders
|
-0-
|
-0-
|
-0-
|
|
Equity
Compensation Plans Not Approved by Security Holders
|
-0-
|
-0-
|
-0-
|
|
Warrants
|
8,000,000
|
$0.05
|
n/a
|
RECENT
SALES OF UNREGISTERED SECURITIES
As of the
date of this Annual Report and during fiscal year ended September 30, 2008, to
provide capital, we sold stock in private placement offerings pursuant to
contractual agreements as set forth below.
December
2007 Private Placement Offering
Effective
December 2007, we completed a private placement offering (the “Private
Placement”) with certain non-United States residents (collectively, the
“Investors”). In accordance with the terms and provisions of the Private
Placement, we issued to the Investors an aggregate of 8,000,000 units at a per
unit price of $0.025 (the “Unit”) in our capital for aggregate proceeds of
$200,000. Each Unit was comprised of one share of restricted common stock and
one-share purchase warrant (the “Warrant”) entitling the Investor to purchase
one share of common stock at $0.025. Each Warrant is exercisable for a period of
two years from the date of issuance.
The Units
under the Private Placement were sold to non-United States Investors in reliance
on Regulation S promulgated under the United States Securities Act of 1933, as
amended (the “Securities Act”). The Private Placement has not been registered
under the Securities Act or under any state securities laws and may not be
offered or sold without registration with the United States Securities and
Exchange Commission or an applicable exemption from the registration
requirements. The per share price of the Units was arbitrarily determined by our
Board of Directors based upon analysis of certain factors including, but not
limited to, stage of development and exploration of properties, industry status,
investment climate, perceived investment risks, our assets and net estimated
worth. The Investors executed subscription agreements and acknowledged that the
securities to be issued have not been registered under the Securities Act, that
they understood the economic risk of an investment in the securities, and that
they had the opportunity to ask questions of and receive answers from our
management concerning any and all matters related to acquisition of the
securities.
Settlement
Agreement
On
December 12, 2008, we entered into a settlement agreement and general mutual
release (the “Settlement Agreement”) with Karada Ltd., a company incorporated in
the Republic of the Marshall Islands (“Karada”). In accordance with the terms
and provisions of the Settlement Agreement: (i) we issued to Karada an aggregate
of 34,845,950 shares of our restricted common stock; and (ii) Karada agreed to
accept the issuance of the 34,845,950 shares of our restricted common stock in
consideration of settling and releasing the debt due and owing by us to Karada
of $34,846. We had previously entered into a loan agreement with Karada for debt
financing. The loan was a draw down facility, which was unsecured and available
in minimum traunches of $5,000 up to a maximum of $250,000 bearing interest at a
rate of 5% per annum calculated monthly for a period of five years ending July
1, 2002. At September 30, 2008, the loan balance was $32,425 and interest in the
amount of $2,421 was accrued. See “Item 11. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters”.
|
ITEM 6.
|
SELECTED FINANCIAL DISCLOSURE
|
|
Cumulative
|
||||||||||||
|
From
|
||||||||||||
|
Incorporation
|
||||||||||||
|
For the
|
For
the
|
May
2, 2003
|
||||||||||
|
Year
Ended
|
Year
Ended
|
to
|
||||||||||
|
September
30,
|
September
30,
|
September
30,
|
||||||||||
|
2008
|
2007
|
2008
|
||||||||||
|
General and Administrative
Expenses
|
||||||||||||
|
Accounting
and auditing
|
$ | 38,572 | $ | 56,593 | $ | 243,293 | ||||||
|
Amortization
and Depreciation
|
3,364 | 10,500 | 28,403 | |||||||||
|
Bank
Charges
|
76 | -0- | 76 | |||||||||
|
Consulting
fees
|
60,604 | 119,599 | 201,068 | |||||||||
|
Filing
fees (recovered)
|
3,355 | (1,629 | ) | 12,943 | ||||||||
|
Intellectual
properties
|
-0- | -0- | 3,000,000 | |||||||||
|
Investor
relations
|
-0- | 18,250 | 18,250 | |||||||||
|
Legal
|
31,819 | 14,414 | 129,793 | |||||||||
|
Transfer
agent fees
|
3,192 | 390 | 5,597 | |||||||||
|
Total General and
Administrative Expenses
|
140,982 | 218,117 | 3,639,423 | |||||||||
|
Loss from Continuing
Operations
|
(140,982 | ) | (218,117 | ) | (3,639,423 | ) | ||||||
|
Loss
from Discontinued Operations
|
(36,897 | ) | (50,835 | ) | (394,753 | ) | ||||||
|
Other Income
(Expense)
|
||||||||||||
|
Gain on Settlement
of Debt
|
20,144 | -0- | 20,144 | |||||||||
|
Foreign
Exchange Loss
|
(2,639 | ) | (6,521 | ) | (12,027 | ) | ||||||
|
Interest
Expense
|
(4,657 | ) | ( 499 | ) | (11,391 | ) | ||||||
|
Net Loss
|
$ | (165,031 | ) | $ | (275,972 | ) | $ | (4,037,449 | ) | |||
|
ITEM 7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
The
summarized financial data set forth in the table below is derived from and
should be read in conjunction with our audited financial statements for the
period from inception (May 2, 2003) to year ended September 30, 2008, including
the notes to those financial statements which are included in this Annual
Report. The following discussion should be read in conjunction with our audited
financial statements and the related notes that appear elsewhere in this Annual
Report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to
those discussed below and elsewhere in this Annual Report, particularly in the
section entitled "Risk Factors". Our audited financial statements are stated in
United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
We are a
developmental company and have not generated any revenue to date. The following
table sets forth selected financial information for the periods
indicated.
RESULTS
OF OPERATIONS
Fiscal
Year Ended September 30, 2008 Compared to Fiscal Year September 30,
2007.
|
Our
loss from operations for fiscal year ended September 30, 2008 was
($165,031) compared to loss from operations of ($275,972) during fiscal
year ended September 30, 2007 (a decrease of $110,941). During fiscal
years ended September 30, 2008 and September 30, 2007, we did not generate
any revenue.
|
During
fiscal year ended September 30, 2008, we incurred general and administrative
expenses of $140,982 compared to $218,117 incurred during fiscal year ended
September 30, 2007 (a decrease of $77,135). These expenses incurred during
fiscal year ended September 30, 2008 consisted of: (i) accounting and auditing
of $38,572 (2007: $56,593); (ii) amortization and depreciation of $3,364 (2007:
$10,500); (iii) bank charges of $76 (2007: $-0-); (iv) consulting fees of
$60,604 (2007: $119,599); (v) filing fees, net of recovery of $3,355 (2007:
($1,629)); (vi) investor relations of $-0- (2007: $18,250); (vii) legal of
$31,819 (2007: $14,414); and (viii) transfer agent fees of $3,192 (2007:
$390).
Our
general and administrative expenses decreased during fiscal year ended September
30, 2008 from fiscal year ended September 30, 2007 primarily based upon
decreases in accounting and auditing fees, consulting fees and amortization and
depreciation. Accounting and auditing expenses are attributable to the
preparation and audit of our financial statements. Accounting and auditing
expenses decreased to $82,287 during fiscal 2007 compared to $136,503 during the
fiscal 2006. Accounting and audited expenses in fiscal 2007 were attributable to
our audited annual and unaudited interim financial statements prepared in
connection with the filing of a registration statement with the SEC during
fiscal 2006. Current accounting and auditing expenses are attributable to
compliance by us with our reporting obligations under the Securities Exchange
Act of 1934, as amended.
Consulting
fees are primarily comprised of consulting fees that we pay to Debondo Capital
Limited on account of consulting services. Our consulting fees decreased
significantly to $60,604 during fiscal 2008 compared to $119,599 during fiscal
2007, which decrease reflects the consulting agreement that we entered into with
Debondo Capital on August 1, 2006. This agreement was terminated on June 30,
2008.
We
incurred $3,364 in amortization expenses during fiscal 2008 compared to $10,000
during fiscal 2007 as a result of the amortization of the server and software
platform we needed to host and operate the Coloured mobile games (excluding
Mobile Warrior, which is hosted by agreement with TrackWell). We purchased the
server and platform in 2005, and it was slated to be amortized over a three year
period.
Legal
expenses increased during fiscal year ended September 30, 2008, which are
attributable to legal fees paid to our legal counsel in connection with our
statutory obligations as a reporting company under the Securities Exchange Act
of 1934, including the preparations and filings of our quarterly and annual
reports with the SEC.
We did
not incur any expenses on any intellectual properties during fiscal year ended
September 30, 2008 and September 30, 2007. We have determined that the cost of
the intellectual property purchased during our fiscal year 2006 does not meet
the criteria for capitalization as set out in SFAS No. 86.
Our loss
from operations during fiscal year ended September 30, 2008 decreased
significantly to $140,982 compared to $218,117 during fiscal year ended
September 30, 2006, primarily as a result of the decrease in accounting and
auditing expenses, consulting fees and amortization and
depreciation.
During
fiscal year ended September 30, 2008, we recorded a loss from discontinued
operations of ($36,897) compared to ($50,835) incurred during fiscal year ended
September 30, 2007. This resulted from the winding up of our subsidiary. During
fiscal year ended September 30, 2008, we recorded: (i) a gain from settlement of
debt of $20,144 (2007: $-0-); (ii) a loss from foreign exchange rates of
($2,639) (2007: $(6,521)); and (ii) interest expense of ($4,657) (2007:
$499)).
This
resulted in a net loss during fiscal year ended September 30, 2008 of ($165,031)
compared to a net less of ($275,972) during fiscal year ended September 30,
2007. The weighted average number of shares outstanding was 35,654,124 for
fiscal year ended September 30, 2008 compared to 30,634,824 for fiscal year
ended September 30, 2007.
LIQUIDITY
AND CAPITAL RESOURCES
Fiscal
Year Ended September 30, 2008
As at
fiscal year ended September 30, 2008, our current assets were $28,111 and our
current liabilities were $319,840, which resulted in a working capital deficit
of $291,729. As at fiscal year ended September 30, 2008, current assets were
comprised of $21,181 in cash of continuing operations and $6,930 in cash of
discontinued operations. As at fiscal year ended September 30, 2008, current
liabilities were comprised of: (i) $2,835 in accounts payable; (ii) $6,608 in
accrued liabilities; and (iii) $310,396 in current liabilities of discontinued
operations.
As at
fiscal year ended September 30, 2008, our total assets were $28,111 comprised of
current assets. The slight increase in total assets during fiscal year ended
September 30, 2008 from fiscal year ended September 30, 2007 was primarily due
to the increase in cash of continuing operations and cash of discontinued
operations.
As at
fiscal year ended September 30, 2008, our total liabilities were $382,265
comprised of current liabilities and of long term liability consisting of loan
payable in the amount of $62,425. The decrease in total liabilities during
fiscal year ended September 30, 2008 from fiscal year ended September 30, 2007
of $405,269 was primarily due to the decrease in accounts payable and accrued
liabilities. See “ – Material Commitments.”
Stockholders’
equity (deficit) decreased from ($390,871) for fiscal year ended September 30,
2007 to ($354,153) for fiscal year ended September 30, 2008.
Cash
Flows from Operating Activities
We have
not generated positive cash flows from operating activities. For fiscal year
ended September 30, 2008, net cash flows used in operating activities was
($209,948) consisting primarily of a net loss of ($165,031). For fiscal year
ended September 30, 2007, net cash flows used in operating activities was
($24,154) consisting primarily of a net loss of ($275,972). During fiscal year
ended September 30, 2008, net cash flows used in operating activities was
adjusted by items not requiring the use of cash for: (i) amortization and
depreciation of $5,463 (2007: $10,500); (ii) gain on settlement of debt of
($20,144) (2007: $-0-); (iii) interest accrued on promissory note of $2,309
(2007: $-0-); and (iv) shares for consulting services of $-0- (2007:
$6,250).
Net cash
flows used in operating activities was further changed by:
(i) prepaid expenses of $2,624 (2007: ($2,624)); (ii) accounts
payable of ($69,515) (2007: $54,191); (iii) accrued liabilities of ($23,560)
(2007: $2,878); (iv) effects of current assets in discontinued operations of
$403 (2007: $3,596); (v) effects of accounts payable in discontinued operations
of ($63,749) (2007: $33,726); (vi) effects of accrued liabilities in
discontinued operations of ($12,798) (2007: 6,993); and (vii) effects of amounts
owing to related parties in discontinued operations of $134,050 (2007:
$136,308).
Cash
Flows from Investing Activities
For
fiscal year ended September 30, 2008, net cash flows used in investing
activities was $-0-. For fiscal year ended September 30, 2007, net cash flows
used in investing activities was also $-0-.
Cash
Flows from Financing Activities
We have
financed our operations primarily from either advancements or the issuance of
equity and debt instruments. For fiscal year ended September 30, 2008, net cash
flows provided from financing activities was $230,000 compared to $32,425 for
fiscal year ended September 30, 2007. Cash flows from financing activities for
fiscal year ended September 30, 2008 consisted primarily of $30,000 (2007:
$32,425) in loan proceeds and $200,000 (2007: $-0-) from sale of stock issued
for cash.
We have
applied cash generated from financing activities to fund cash used in operating
activities. We expect that working capital requirements will continue to be
funded through a combination of our existing funds and further issuances of
securities and debt instruments. Our working capital requirements are expected
to increase in line with the growth of our business.
PLAN
OF OPERATION
We
estimate that our total expenditures over the next twelve months will be
approximately $168,000. We anticipate that our cash and working capital will not
be sufficient to enable us to undertake our plan of operations over the next
twelve months without our obtaining additional financing. We presently require
immediate financing in order that we have the cash necessary for us to continue
our operations. We anticipate that we will require additional financing in the
approximate amount of $526,000 in order to enable us to sustain our operations
for the next twelve months.
We plan
to exploit our mobile games in their present form. While our strategy in each
geographic market will vary according to a number of factors including the
maturity of the local mobile gaming market and the telecom infrastructure
available, our overall objective is to establish greater awareness of our mobile
games in each marketplace in order to generate initial revenues. We plan to
achieve this objective by undertaking sales and marketing campaigns in each
market directed at local gateway owners. We will also continue creating
relationships with strategic partners/resellers in different markets where we
have few direct contacts. We also anticipate proceeding with the continued
enhancement of our mobile games with a view to increasing their features and
functionality.
We are
presently inactive in our business operations due to a lack of financing. We are
presently seeking financing that would enable us to continue our plan of
operations or target the acquisition of a new business or properties. There is
no assurance that we will be able to achieve the necessary financing to enable
us to continue our plan of operations or complete any acquisition.
Our plan
of operations for the next twelve months is to complete the following objectives
within the time periods and within the budgets specified, subject to our
achieving the necessary financing:
|
1.
|
We
plan to carry out our sales and marketing efforts for our applications and
games with the objective of securing sales to gateway owners and entering
into further agreements with resellers. We anticipate that marketing
activities will be carried throughout the course of the next twelve
months. We anticipate that we will spend approximately $7,000 per month on
sales and marketing activities during the next twelve months, for a total
anticipated expenditure of $84,000.
|
|
2.
|
We
anticipate spending approximately $20,000 over the next twelve months on
the development of new features for our mobile games.
|
|
3.
|
We
anticipate spending approximately $2,000 in ongoing general and
administrative expenses per month for the next twelve months, for a total
anticipated expenditure of $24,000 over the next twelve months. The
general and administrative expenses for the year will consist primarily of
rent and office services, technical support and hosting services and
general office expenses.
|
|
4.
|
We
anticipate spending approximately $40,000 in complying with our
obligations as a reporting company under the Securities Exchange Act of
1934, as amended. These expenses will consist primarily of professional
fees relating to the preparation of our financial statements and
completing our annual report, quarterly report, current report and proxy
statement filings with the SEC.
|
During
the twelve month period following the date of this Annual Report, we anticipate
that we will not generate revenues that exceed our operating costs. We
anticipate based on our current cash and working capital and our planned
expenses that we will be able to continue our plan of operations for three more
months without additional financing. We believe that we will require substantial
additional financing in order to commercialize our mobile games in order to earn
revenues that exceed our operating expenses. We believe that debt financing from
third parties will not be an alternative for funding of our planned activities
as we do not have tangible assets to secure any debt financing. We anticipate
that additional funding will be in the form of equity financing from the sale of
our common stock or sales of convertible promissory notes that are convertible
into shares of our common stock. If we do not obtain the necessary additional
financing, we will be forced to abandon our plan of operations and our business
activities.
CRITICAL
ACCOUNTING POLICIES/RECENTLY ADOPTED ACCOUTING STANDARDS
Development
Stage Company
We are a
development stage company as defined by Financial Accounting Standards No. 7. We
are presently devoting all of our present efforts to establishing a new
business. All losses accumulated since inception have been considered as part of
our development stage activities.
Revenue
Recognition
We
recognize revenue when all of the following criteria have been met: persuasive
evidence for an arrangement exists; delivery has occurred; the fee is fixed or
determinable and collection is reasonably assured. Upfront contract payments
received from the sale of services not yet earned are initially recorded as
deferred revenue on the balance sheet. The amount is recognized as income over
the term of the contract.
Revenue
from time and material service contracts is recognized as the services are
provided. Revenue from fixed price, long-term service or development contracts
is recognized over the contract term based on the percentage of services that
are provided during the period compared with the total estimated services to be
provided over the entire contract. Losses on fixed price contracts are
recognized during the period in which the loss first becomes apparent. Payment
terms vary by contract.
Foreign
Currency Translations
Our
functional currency is pounds sterling (“₤”). Our reporting currency is the U.S.
dollar. All transactions initiated in other currencies are translated into U.S.
dollars as follows:
|
(i)
|
assets
and liabilities at the rate of exchange in effect at the balance sheet
date;
|
|
(ii)
|
equity
at historical rates; and
|
|
(iii)
|
revenue
and expense items at the average rate of exchange prevailing during the
period.
|
Unrealized
exchange gains and losses arising from such translations are deferred until
realization and are included as a separate component of shareholder’s equity as
a component of comprehensive income or loss. Upon realization, the amount
deferred is recognized as income in the period when it is realized.
Recently
Adopted Accounting Standards
In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51”. SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. The guidance will
become effective for the fiscal year beginning after December 15, 2008.
Management is in the process of evaluating the impact SFAS 160 will have on our
financial statements upon adoption.
In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities - Including an amendment of FASB Statement No.
115 (“SFAS No. 159”). This statement permits entities to choose to
measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings cause by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. This Statement is expected to expand the use of fair
value measurement, which is consistent with the Board’s long-term measurement
objectives for accounting for financial instruments. This statement is effective
as of the beginning of our first fiscal year that begins after November 15,
2007, although earlier adoption is permitted. As of the date of this Annual
Report, we have not adopted this statement and management has not determined the
effect that adopting this statement would have on our financial position or
results of operations.
MATERIAL
COMMITMENTS
As of the
date of this Annual Report, we do not have any material commitments other than
as disclosed below:
Loan
Agreement
On April
15, 2008, we entered into a loan agreement with Green Shoe Investments Ltd., an
unrelated third party (“Green Shoe”), for debt financing. The loan was for
$30,000 bearing interest at a rate of 5% per annum calculated monthly for a
period of one year ending April 15, 2009. The loan is due on demand after the
maturity date. As of September 30, 2008, interest in the amount of $688 was
accrued.
PURCHASE
OF SIGNIFICANT EQUIPMENT
We do not
intend to purchase any significant equipment during the next twelve
months.
OFF-BALANCE
SHEET ARRANGEMENTS
As of the
date of this Annual Report, we do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
GOING
CONCERN
The
independent auditors' report accompanying our September 30, 2008 and September
30, 2007 financial statements contains an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern. The
financial statements have been prepared "assuming that we will continue as a
going concern," which contemplates that we will realize our assets and satisfy
our liabilities and commitments in the ordinary course of business.
|
ITEM 7A.
|
QUANTITY
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
|
Market
risk represents the risk of loss that may impact our financial position, results
of operations or cash flows due to adverse change in foreign currency and
interest rates.
Exchange
Rate
Our
reporting currency is United States Dollars (“USD”). The Britsh Pound has
been pegged to the USD with regards to the exchange rate system. Exchange rate
fluctuations may have a material impact on our consolidated financial reporting
and make realistic revenue projections difficult. Recently the British Pund
rose in value compared to the USD. This has not had an appreciable effect on our
operations and seems unlikely to do so.
The
exchange rate of the British Pound or other foreign currency may have positive
or negative impacts on our results of operations. Since all proposed
future sale revenues and expenses may be dominated in the British Pound or other
foreign currency, the net income effect of appreciation and devaluation of such
currency against the USD may be limited to our net operating
results.
Interest
Rates
Interest
rates in the United Kingdom are relatively low and stable and inflation is
controlled, due to the habit of the population to deposit and save money in the
banks (among with other reasons, such as the balance of trade surplus). Any
potential loans may relate mainly to trade payables and may be mainly
short-term. However our debt may be likely to rise in connection with
expansion and were interest rates to rise at the same time, this could become a
significant impact on our operating and financing activities.
We have
not entered into derivative contracts either to hedge existing risks or for
speculative purposes.
|
ITEM 8.
|
FINANCIAL STATEMENTS AND
SUPPLEMENTAL
DATA
|
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND
ADVISORS
PCAOB REGISTERED
To
the Board of Directors
Coloured
(US), Inc.
(A
Development Stage Company)
We have
audited the accompanying balance sheets of Coloured (US), Inc. (A Development
Stage Company) as of September 30, 2008 and 2007, and the related statements of
operations, stockholders’ equity and cash flows for the years then ended and
since May 2, 2003 (Incorporation) through September 30, 2008. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Coloured (US), Inc. (A Development
Stage Company) as of September 30, 2008 and 2007, and the related statements of
operations, stockholders’ equity and cash flows for the years then ended and
since May 2, 2003 (Incorporation) through September 30, 2008, in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has an accumulated deficit of $4,062,596,
which raises substantial doubt about its ability to continue as a going
concern. Management’s plans concerning these matters are also
described in Note [insert note #]. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/
Moore & Associates, Chartered
Moore
& Associates Chartered
Las
Vegas, Nevada
December
23, 2008
6490 West Desert Inn Rd, Las
Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
F-1
|
Coloured
(US) Inc.
|
||||||||
|
(A
Development Stage Company)
|
||||||||
|
As
of
|
As
of
|
|||||||
|
Tuesday,
September 30, 2008
|
Sunday,
September 30, 2007
|
|||||||
|
ASSETS
|
||||||||
|
Current
Assets
|
||||||||
|
Cash
of Continuing Operations
|
$ | 21,181 | $ | 1,364 | ||||
|
Cash
of Discontinued Operations
|
6,930 | 4,947 | ||||||
|
Prepaid
Expenses
|
- | 2624 | ||||||
|
Other
current assets of Discontinued Operations
|
- | 403 | ||||||
|
Total
Current Assets
|
28,111 | 8,935 | ||||||
|
Rights
and Technology
|
$ | - | $ | 5,463 | ||||
|
TOTAL
ASSETS
|
28,111 | 14,398 | ||||||
|
LIABILITIES
|
||||||||
|
Current
Liabilities
|
||||||||
|
Accounts
payable
|
$ | 2,835 | $ | 72,350 | ||||
|
Accrued
liabilities
|
6,608 | 40,658 | ||||||
|
Current
Liabilities of Discontinued Operations
|
310,396 | 259,836 | ||||||
|
Total
Current Liabilities
|
319,840 | 372,844 | ||||||
|
Long
Term Liabilities
|
||||||||
|
Loans
Payable
|
62,425 | 32,425 | ||||||
|
Total
Long Term Liabilites
|
62,425 | 32,425 | ||||||
|
STOCKHOLDERS’
EQUITY
|
||||||||
|
Preferred
Stock
|
||||||||
|
Authorized: 5,000,000
shares with $0.001 par value. Issued: Nil
|
- | - | ||||||
|
Common
Stock
|
||||||||
|
Authorized:
100,000,000 common shares with $0.001 par value
|
||||||||
|
Issued: 38,648,660
(September 30, 2008)
|
38,649 | 30,649 | ||||||
|
30,648,660
(September 30, 2007)
|
||||||||
|
Additional
paid-in capital
|
3,663,710 | 3,471,710 | ||||||
|
Accumulated
Comprehensive Loss
|
(19,063 | ) | (20,812 | ) | ||||
|
Deficit
- Accumulated during the development stage
|
(4,037,449 | ) | (3,872,418 | ) | ||||
| (354,153 | ) | (390,871 | ) | |||||
| $ | 28,111 | $ | 14,398 | |||||
|
The
accompanying notes are an integral part of these consolidated financials
statements.
|
||||||||
F-2
|
Coloured
(US) Inc.
|
||||||||||||
|
(A
Development Stage Company)
|
||||||||||||
|
Cumulative
|
||||||||||||
|
From
|
||||||||||||
|
Incorporation
|
||||||||||||
|
For
the Year
|
For
the Year
|
Friday,
May 02, 2003
|
||||||||||
|
Ended
|
Ended
|
to
|
||||||||||
|
Tuesday,
September 30, 2008
|
Sunday,
September 30, 2007
|
Tuesday,
September 30, 2008
|
||||||||||
|
General
and Administrative Expenses
|
||||||||||||
|
Accounting
and auditing
|
38,572 | 56,593 | 243,293 | |||||||||
|
Amortization
& Depreciation
|
3,364 | 10,500 | 28,403 | |||||||||
|
Bank
Charges
|
76 | - | 76 | |||||||||
|
Consulting
fees
|
60,604 | 119,599 | 201,068 | |||||||||
|
Filing
fees, net of recovery
|
3,355 | (1,629 | ) | 12,943 | ||||||||
|
Intellectual
properties
|
- | - | 3,000,000 | |||||||||
|
Investor
relations
|
- | 18,250 | 18,250 | |||||||||
|
Legal
|
31,819 | 14,414 | 129,793 | |||||||||
|
Transfer
agent fees
|
3,192 | 390 | 5,597 | |||||||||
|
Total
General and Administrative Expenses
|
140,982 | 218,117 | 3,639,423 | |||||||||
| (140,982 | ) | (218,117 | ) | (3,639,423 | ) | |||||||
|
Income
(loss) from Continuing Operations
|
||||||||||||
|
Income
(loss) from Discontinued Operations
|
(36,897 | ) | (50,835 | ) | (394,753 | ) | ||||||
|
Other
Income (Expense)
|
||||||||||||
|
Gain
on settlement of debt
|
20,144 | - | 20,144 | |||||||||
|
Foreign
exchange gain (loss)
|
(2,639 | ) | (6,521 | ) | (12,027 | ) | ||||||
|
Interest
expense
|
(4,657 | ) | (499 | ) | (11,391 | ) | ||||||
|
Provision
for income taxes
|
- | - | - | |||||||||
|
Loss
for the period
|
$ | (165,031 | ) | $ | (275,972 | ) | $ | (4,037,449 | ) | |||
|
Loss
per Share – Basic and Diluted
|
$ | 0.00 | $ | (0.01 | ) | |||||||
|
Weighted
Average Shares Outstanding
|
35,654,124 | 30,634,824 | ||||||||||
|
Comprehensive
Loss
|
||||||||||||
|
Net
Loss
|
(165,031 | ) | (275,972 | ) | (4,037,449 | ) | ||||||
|
Gain
(loss) on foreign exchange translation
|
- | (7,673 | ) | (19,063 | ) | |||||||
|
Total
Comprehensive Loss
|
(165,031 | ) | (283,645 | ) | (4,056,512 | ) | ||||||
|
The
accompanying notes are an integral part of these consolidated financials
statements.
|
||||||||||||
F-3
|
Coloured
(US) Inc.
|
||||||||||||||||||||||||
|
(A
Development Stage Company)
|
||||||||||||||||||||||||
|
Deficit
Accumulated
|
||||||||||||||||||||||||
|
Additional
|
During
the
|
Accumulated
|
Total
|
|||||||||||||||||||||
|
Common
Stock
|
Paid-in
|
Development
|
Comprehensive
|
Stockholders’
|
||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Stage
|
Income
|
Deficiency
|
|||||||||||||||||||
|
Shares
issued for cash at $0.33 per share - May 2, 2003
|
575 | 1 | 1 | 2 | ||||||||||||||||||||
|
Loss
for the year
|
(13,421 | ) | (13,421 | ) | ||||||||||||||||||||
|
Foreign
currency translation adjustment
|
(391 | ) | (391 | ) | ||||||||||||||||||||
|
Balance
- September 30, 2003
|
575 | 1 | 1 | (13,421 | ) | (391 | ) | (13,810 | ) | |||||||||||||||
|
Shares
issued for cash at $0.003 per share - Dec 22, 2003
|
2,874,365 | 2,875 | 6,018 | 8,893 | ||||||||||||||||||||
|
Shares
issued for cash at $0.003 per share – April 30, 2004
|
1,466,220 | 1,466 | 3,211 | 4,677 | ||||||||||||||||||||
|
Shares
issued for consulting at $0.003 per share – August 26,
2004
|
939,139 | 939 | 2,008 | 2,947 | ||||||||||||||||||||
|
Loss
for the year
|
(144,692 | ) | (144,692 | ) | ||||||||||||||||||||
|
Foreign
currency translation adjustment
|
(2,175 | ) | (2,175 | ) | ||||||||||||||||||||
|
Balance
- September 30, 2004
|
5,280,299 | 5,281 | 11,238 | (158,113 | ) | (2,566 | ) | (144,160 | ) | |||||||||||||||
|
Shares
issued for consulting at $0.003 per share – November 17,
2004
|
234,790 | 235 | 545 | 780 | ||||||||||||||||||||
|
Shares
issued for consulting at $0.003 per share – March 9, 2005
|
234,791 | 235 | 545 | 780 | ||||||||||||||||||||
|
Shares
issued for consulting at $0.033 per share – April 16, 2005
|
68,999 | 68 | 2,241 | 2,309 | ||||||||||||||||||||
|
Shares
issued for debt at $0.033 per share – April 26, 2005
|
6,181,121 | 6,181 | 200,541 | 206,722 | ||||||||||||||||||||
|
Reacapitalization
of Coloured Industry Limited
|
5,677,660 | 5,678 | 23,887 | 29,565 | ||||||||||||||||||||
|
Loss
for the year
|
(137,972 | ) | (137,972 | ) | ||||||||||||||||||||
|
Foreign
currency translation adjustment
|
(6,517 | ) | (6,517 | ) | ||||||||||||||||||||
|
Balance
- September 30, 2005
|
17,677,660 | 17,678 | 238,997 | (296,085 | ) | (9,083 | ) | (48,493 | ) | |||||||||||||||
|
Shares
issued for debt at $0.25 per share - February 28, 2006
|
344,000 | 344 | 88,590 | 88,934 | ||||||||||||||||||||
|
Shares
issued for purchase of technology (Colour Industry) at $0.25 per share -
February 28, 2006
|
6,000,000 | 6,000 | 1,494,000 | 1,500,000 | ||||||||||||||||||||
|
Shares
issued for purchase of technology (Mobile Warrior) at $0.25 per share -
February 28, 2006
|
6,000,000 | 6,000 | 1,494,000 | 1,500,000 | ||||||||||||||||||||
|
Shares
issued for cash at $0.25 per share - March 9, 2006
|
202000 | 202 | 50,298 | 50,500 | ||||||||||||||||||||
|
Shares
issued for cash at $0.25 per share - June 23, 2006
|
200000 | 200 | 49,800 | 50,000 | ||||||||||||||||||||
|
Shares
issued for cash at $0.25 per share - July 3, 2006
|
200000 | 200 | 49,800 | 50,000 | ||||||||||||||||||||
|
Loss
for the year
|
(3,300,361 | ) | (3,300,361 | ) | ||||||||||||||||||||
|
Foreign
currency translation adjustment
|
(4,056 | ) | (4,056 | ) | ||||||||||||||||||||
|
Balance
– September 30, 2006
|
30,623,660 | 30,624 | 3,465,485 | (3,596,446 | ) | (13,139 | ) | (113,476 | ) | |||||||||||||||
|
Shares
issued for consulting at $0.25 per share - April 20, 2007
|
25000 | 25 | 6,225 | 6,250 | ||||||||||||||||||||
|
Loss
for the year
|
(275,972 | ) | (275,972 | ) | ||||||||||||||||||||
|
Foreign
currency translation adjustment
|
(7,673 | ) | (7,673 | ) | ||||||||||||||||||||
|
Balance
– September 30, 2007
|
30,648,660 | 30,649 | 3,471,710 | (3,872,418 | ) | (20,812 | ) | (390,871 | ) | |||||||||||||||
|
Share
issued for cash at $0.025 per share - February 14, 2008
|
8,000,000 | 8,000 | 192,000 | 200,000 | ||||||||||||||||||||
|
Loss
for the period
|
(165,031 | ) | (165,031 | ) | ||||||||||||||||||||
|
Foreign
currency translation adjustment
|
1,749 | 1,749 | ||||||||||||||||||||||
|
Balance
– September 30, 2008
|
38,648,660 | 38,649 | 3,663,710 | (4,037,449 | ) | (19,063 | ) | (354,153 | ) | |||||||||||||||
|
The
accompanying notes are an integral part of these consolidated financials
statements.
|
||||||||||||||||||||||||
F-4
|
Coloured
(US) Inc.
|
||||||||||||
|
(A
Development Stage Company)
|
||||||||||||
|
For
the Year Ending September 30,2008
|
For
the Year Ending September 30,2007
|
Cumulative
from Incorporation May 2, 2003 to September 30, 2008
|
||||||||||
|
Operating
Activities
|
||||||||||||
|
Net
Loss
|
$ | (165,031 | ) | $ | (275,972 | ) | $ | (4,037,449 | ) | |||
|
Items
not involving cash:
|
||||||||||||
|
Amortization
and Depreciation
|
5,463 | 10,500 | 30,502 | |||||||||
|
Gain
on settlement of debt
|
(20,144 | ) | - | (20,144 | ) | |||||||
|
Interest
accrued on promissory notes
|
2,309 | - | 4,738 | |||||||||
|
Shares
for consulting services
|
- | 6,250 | 13,066 | |||||||||
|
Shares
for intellectual properties
|
- | - | 3,000,000 | |||||||||
|
Changes
in non-cash working capital items:
|
||||||||||||
|
Prepaid
expenses
|
2,624 | (2,624 | ) | - | ||||||||
|
Accounts
payable
|
(69,515 | ) | 54,191 | 2,835 | ||||||||
|
Accrued
liabilities
|
(23,560 | ) | 2,878 | (8,335 | ) | |||||||
|
Effects
of current assets in discontinued operation
|
403 | 3,596 | - | |||||||||
|
Effects
of accounts payable in discontinued operation
|
(63,749 | ) | 33,726 | - | ||||||||
|
Effects
of accrued liabilities in discontinued operations
|
(12,798 | ) | 6,993 | - | ||||||||
|
Effects
of amounts owing to related parties in discontinued
operations
|
134,050 | 136,308 | 537,262 | |||||||||
|
Net
cash flows provided by (used in) operations
|
(209,948 | ) | (24,154 | ) | (477,525 | ) | ||||||
|
Investing
Activities
|
||||||||||||
|
Acquisition
of rights and technology
|
- | - | (28,403 | ) | ||||||||
|
Cash
acquired in purchase of Emcor Holdings Inc.
|
- | 127,705 | ||||||||||
|
Net
cash flows from investing activities
|
0 | 0 | 99,302 | |||||||||
|
Financing
Activities
|
||||||||||||
|
Loan
proceeds
|
30,000 | 32,425 | 62,425 | |||||||||
|
Convertible
promissory note
|
- | - | 1,000 | |||||||||
|
Share
issuances for cash
|
200,000 | - | 364,072 | |||||||||
|
Net
cash flows from financing activities
|
230,000 | 32,425 | 427,497 | |||||||||
|
Effects
of foreign translation on rights and technology
|
- | (982 | ) | (2,099 | ) | |||||||
|
Effective
of foreign rate changes on cash
|
1,749 | (7,673 | ) | (19,063 | ) | |||||||
| 1,749 | (8,655 | ) | (21,162 | ) | ||||||||
|
Change
in Cash
|
21,800 | (384 | ) | 28,111 | ||||||||
|
Cash
- Beginning
|
6,311 | 6,695 | - | |||||||||
|
Cash
- Ending
|
$ | 28,111 | $ | 6,311 | $ | 28,111 | ||||||
|
Supplemental
Cash Flow Information
|
||||||||||||
|
Cash
paid for:
|
||||||||||||
|
Income
Taxes
|
$ | - | $ | - | $ | - | ||||||
|
Interest
Paid
|
$ | - | $ | (95 | ) | $ | (95 | ) | ||||
|
The
accompanying notes are an integral part of these consolidated financials
statements.
|
||||||||||||
F-5
|
Coloured
(US) Inc.
|
|
(Formerly
Emcor Holdings Inc.)
|
|
(A
Development Stage Company)
|
|
Notes
to Consolidated Financial Statements
|
|
September
30, 2008
|
|
US
Funds
|
1.
Basis of Presentation
Organization
Coloured
(US) Inc. (the “Company” or "Emcor") was incorporated on April 5, 2005 under the
laws of the State of Nevada, under the name of Emcor Holdings Inc. Effective
September 30, 2005, the Company completed a Share Exchange Agreement
(“Agreement”) with Coloured Industry Limited (“Coloured”). Coloured, a
technology and marketing company headquartered in London, England, was
incorporated on May 2, 2003. Pursuant to the Agreement, the Company agreed to
issue to the shareholders of Coloured 12,000,000 common shares in exchange for
100% of the issued and outstanding shares of Coloured. On September 30, 2005,
Coloured complete the reverse acquisition under a Stock Exchange Agreement
(“RTO”) with Emcor. Immediately before the date of the RTO, Emcor had
100,000,000 shares authorized and 5,667,660 shares of common stock issued and
outstanding. Pursuant to the RTO, all of the 2,087,000 issued and outstanding
shares of common stock of Coloured were exchanged for 12,000,000 shares of
Emcor, on an approximately 5.75 to 1 basis. The transaction was accounted for as
a recapitalization of the Company. On December 8, 2005, the Company changed its
name to Coloured (US) Inc. The accompanying financial statements are the
historical financial statements of Coloured.
Effective
July 1, 2008, the Company wound up Coloured Industry Limited, the UK Subsidiary.
The Company does not currently have any ongoing business operations. The
historical results of the wound-up subsidiary have been reclassified as
discontinued operations in these financial statements. This wind-up
is described in more detail in Note 6.
|
2.
|
Significant
Accounting Policies
|
|
|
The
following is a summary of significant accounting policies used in the
preparation of these financial statements.
|
||
|
a)
|
Basis
of Consolidation
|
|
|
These
consolidated financial statements have reclassified the accounts of
Coloured Industry Limited since its incorporation on May 3, 2003 as
discontinued operations.
|
||
|
b)
|
Use
of Estimates
|
|
|
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect the
reported amounts and timing of revenues and expenses, the reported amounts
and classification of assets and liabilities, and disclosure of contingent
assets and liabilities. These estimates and assumptions are based on the
Company’s historical results as well as management’s future expectations.
The Company’s actual results could vary materially from management’s
estimates and assumptions.
|
||
F-6
F-7
|
c)
|
Development
Stage Company
|
|
|
The
Company is a development stage company as defined by SFAS No. 7. The
Company is devoting substantially all of its present efforts to establish
a new business. All losses accumulated since inception have been
considered as part of the Company’s development stage
activities.
|
||
|
d)
|
Foreign
Currency Translations
|
|
|
The
Company’s reporting currency is the U.S. dollar. All transactions
initiated in other currencies are re-measured into the reporting currency
as follows:
· Assets
and liabilities at the rate of exchange in effect at the balance sheet
date,
· Equity
at historical rates, and
· Revenue
and expense items at the prevailing rate on the date of the
transaction.
Translation
adjustments resulting from translation of balances are accumulated as a
separate component of shareholders’ equity and reported as a component of
comprehensive income or loss.
|
||
|
e)
|
Income
Taxes
|
|
|
Income
taxes are accounted for using the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of 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. A valuation allowance is provided for
deferred tax assets when it is more likely than not that such assets will
not be recovered.
|
||
|
f)
|
Fair
Value of Financial Instruments
|
|
|
The
Company’s financial instruments consist of cash, accounts receivable,
accounts payable, accrued liabilities and amounts due to related parties.
Unless otherwise noted, it is management’s opinion that this Company is
not exposed to significant interest or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
|
||
|
g)
|
Segment
Reporting
|
|
|
SFAS
No. 131, "Disclosures
about Segments of an Enterprise and Related Information,” changed
the way public companies report information about segments of their
business in their quarterly reports issued to stockholders. It also
requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assets and reports
revenues and its major customers. The Company currently operates in two
segments, Western Europe and United
States.
|
F-7
|
h)
|
Stock-Based
Compensation
|
|
|
Effective
January 1, 2006, the Company adopted the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”,
which establishes accounting for equity instruments exchanged for employee
services. Under the provisions of SFAS 123(R), stock-based compensation
cost is measured at the grant date, based on the calculated fair value of
the award, and is recognized as an expense over the employees’ requisite
service period (generally the vesting period of the equity grant). Before
January 1, 2006, the Company accounted for stock-based compensation to
employees in accordance with Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees,” and complied with the
disclosure requirements of SFAS No. 123, “Accounting for Stock-Based
Compensation”.
|
||
|
The
Company adopted FAS 123(R) using the modified prospective method, which
requires the Company to record compensation expense over the vesting
period for all awards granted after the date of adoption, and for the
unvested portion of previously granted awards that remain outstanding at
the date of adoption. As the Company had no invested stock options
outstanding on the adoption date the financial statements for the periods
prior to January 1, 2006 have not been restated to reflect the fair value
method of expensing share-based compensation. Adoption of SFAS No. 123(R)
does not change the way the Company accounts for share-based payments to
non-employees, with guidance provided by SFAS 123 (as originally issued)
and Emerging Issues Task Force Issue No. 96-18, “Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services”.
|
||
|
i)
|
Comprehensive
Income
|
|
|
SFAS
No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. At June 30, 2008, comprehensive loss
consisted of the net loss for the period and foreign currency translation
adjustments.
|
||
|
j)
|
Loss
per Share
|
|
|
The
Company computes net loss per share in accordance with SFAS No. 128,
“Earnings per
Share”, which requires presentation of both basic and diluted loss
per share (“LPS”) on the face of the statement of operations. Basic LPS is
computed by dividing the net loss available to common shareholders by the
weighted average number of outstanding common shares during the period.
Diluted LPS gives effect to all potentially dilutive common shares
outstanding including convertible debt, stock options and share purchase
warrants, using the treasury stock method. The computation of diluted LPS
does not assume conversion, exercise or contingent exercise of securities
that would have an anti-dilutive effect on LPS. The diluted LPS equals the
basic LPS since the potentially dilutive securities are
anti-dilutive.
|
||
|
k)
|
Recently
Adopted Accounting Standards
|
|
|
In
February 2007, the Financial Accounting Standards Board (the “FASB”)
issued Statement of Financial Accounting Standards (“SFAS”) 159, “The Fair
Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”).
SFAS 159 allows the Company to choose to measure many financial assets and
financial liabilities at fair value. Unrealized gains and losses on items
for which the fair value option has been elected are reported in earnings.
SFAS 159 is effective for fiscal years beginning after November 15, 2007.
The adoption of SFAS 158 is not expected to have a material impact on the
Company’s financial position, results of operation or cash
flows.
|
F-8
|
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”. This Statement amends ARB 51 to
establish accounting and reporting standards for the non-controlling
(minority) interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary
is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. The Company
has not yet determined the impact, if any, that SFAS No. 160 will have on
its consolidated financial statements. SFAS No. 160 is effective for the
Company’s fiscal year beginning October 1, 2009.
|
||
|
In
December 2007, the FASB issued SFAS 141R, Business Combinations.
SFAS 141R replaces SFAS 141. The statement retains the purchase method of
accounting for acquisitions, but requires a number of changes, including
changes in the way assets and liabilities are recognized in the purchase
accounting. It changes the recognition of assets acquired and liabilities
assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the
expensing of acquisition-related costs as incurred. The statement will
apply prospectively to business combinations occurring in the Comapnys
fiscal year beginning October 1, 2009. We are evaluating the impact
adopting SFAS 141R will have on our financial statements.
|
||
|
3.
|
Advertising
and Promotion
|
|
|
The
Company did not engage in any advertising or promotional activity for the
year ended September 30, 2008 or 2007.
|
||
|
4.
|
Rights
and Technology
|
|
|
The
Company has a software licence for the mobile platform known as ARTE. The
Company amortizes the software on a straight-line basis over the estimated
useful life of three years. At September 30, 2008, the software was fully
amortized
|
||
|
5.
|
Loans
Payable
|
|
|
a)
|
On
July 1, 2007, the Company entered into a formal loan agreement with Karada
Ltd., an unrelated third party, for debt financing. The loan is a draw
down facility which is unsecured and available in minimum traunches of
$5,000 up to a maximum of $250,000 bearing interest at a rate of 5% per
annum calculated monthly, for a period of five years ending July 1, 2012.
The loan is due on demand after the maturity date. In the event of a
default, the interest rate increases to 10% per annum calculated monthly.
In addition, a lending fee of $1,000 will be applied to the balance owing
and due on the maturity date.
At
September 30, 2008, the loan balance was $32,425 and interest in the
amount of $2,421 was accrued.
|
|
|
b)
|
On
April 15, 2008, the Company entered into a formal loan agreement with
Green Shoe Investments Ltd., an unrelated third party, for debt financing.
The loan was for $ 30,000 bearing interest at a rate of 5% per annum
calculated monthly, for a period of one year ending April 15, 2009. The
loan is due on demand after the maturity date.
At
September 30, 2008, interest in the amount of $688 was
accrued.
|
|
F-9
|
6.
|
Wind-up
of UK Subsidiary
|
Because
the Company has had a history of accumulating debt through its UK subsidiary,
the Company’s Board of Directors determined that it was in the best interests of
the Company to wind-up the UK subsidiary. An effective date of July
1, 2008 was set by the Board.
The
following table summarizes the net assets disposed of and accounted for in these
financials as discontinued operations:
|
Assets
|
||||
|
Cash
|
6,930 | |||
|
Total
Assets Disposed of
|
$ | 6,930 | ||
|
Liabilities
|
||||
|
Accounts
Payable
|
6,000 | |||
|
Taxes
Payable
|
2,805 | |||
|
Due
to related parties
|
301,591 | |||
|
Total
Liabilities disposed of
|
$ | 310,396 | ||
|
Net
Liabilities disposed of
|
$ | 303,466 | ||
|
7.
|
Capital
Stock
|
|
|
The
Company’s capitalization is 100,000,000 common shares with a par value of
$0.001 per share and 5,000,000 preferred shares with a par value of
$0.001.
|
||
|
a)
|
All
share information presented in these financial statements relating to
share transactions taking place prior to September 30, 2005 has been,
restated to reflect the approximately 5.75 to 1 ratio based upon the
12,000,000 shares issued on September 30, 2005 to acquire the shares of
Coloured (Note
1).
|
|
|
b)
|
During
the year ended September 30, 2004, the Company split its stock on a 100
new for 1 old basis.
|
|
|
c)
|
On
November 7, 2007, the Company received $200,000 as total cash
consideration for the purchase of 4,000,000 units, each unit consisting of
one common share and a warrant to acquire one additional common share for
$0.05 per share by November 7, 2009. On December 17, 2007, the Company
amended the terms of the above offering to increase the number of units to
8,000,000 and reduce the price to $0.025. The new expiry date of the
warrants is December 17, 2009. On February 14, 2008, these shares were
issued.
There
were 8,000,000 warrants and no stock options outstanding as at September
30, 2008.
|
|
|
8.
|
Going
Concern
|
|
|
The
accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and satisfaction of
liabilities in the normal course of business. As at September 30, 2008,
the Company has an accumulated deficit of $4,056,512 and has incurred an
accumulated operating cash flow deficit of $477,525 since incorporation.
The Company intends to continue funding operations through equity
financing arrangements, which may be insufficient to fund its capital
expenditures, working capital and other cash requirements for the next
fiscal year.
Thereafter,
the Company will be required to seek additional funds, either through
equity financing, to finance its long-term operations. The successful
outcome of future activities cannot be determined at this time, and there
is no assurance that, if achieved, the Company will have sufficient funds
to execute its intended business plan or generate positive operating
results. In response to these conditions, management intends to raise
additional funds through future private placement
offerings.
These
factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
|
||
|
9.
|
Subsequent
Event
|
|
|
On
December 12, 2008, the Company entered into a Settlement Agreement and
General Mutual Release with Karada Ltd., a company incorporated in the
Republic of the Marshall Islands (“Karada”). Under the terms of the
Agreement, Karada received 34,845,950 restricted shares of the common
stock of the Company in full and final settlement of a USD $34,846 debt
owing to Karada by the Company (see Note
5a).
|
||
F-10
|
ITEM
9.
|
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
On July
23, 2008, we terminated the services of Dale Matheson Carr-Hilton Labonte LLP
(“DM”) as our independent registered public accounting firm.
During
the fiscal year ended September 30, 2007 and the subsequent interim periods up
through the date of termination, there were no disagreements with DM on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of DM, would have caused DM to make reference thereto in its report
on the Registrants financial statements for such years. Further, there were no
reportable events as described in Item 304(a)(1)(iv)(B) of Regulation S-B
occurring within the Registrant's two most recent fiscal years and the
subsequent interim period up through the date of termination (July 23,
2008). Other than as set forth below, the report issued by DM with
respect to our financial statements for the year ended September 30, 2007 did
not contain any adverse or disclaimer of opinion, and were not modified as to
uncertainty, scope or accounting principals.
The audit
report of DM for our financial statements as of September 30, 2007 contained a
separate paragraph stating:
“The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated revenues since inception,
has incurred losses in developing its business, and further losses are
anticipated. The Company requires additional funds to meet its obligations and
the costs of its operations. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in this
regard are described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.”
During
our two most recent fiscal years and the subsequent interim periods up through
the date of this Report, neither we nor anyone on our behalf consulted with any
other independent auditor regarding the application of accounting principles to
a specific, completed or contemplated transaction, or the type of audit opinion
that might be rendered on the Registrant's financial statements. Further, no
other independent auditor has provided written or oral advice to us that was an
important factor considered by us in reaching a decision as to any
accounting, auditing or financial reporting issues during the period that DM
served as our independent auditor.
We
provided a copy of the foregoing disclosures to DM prior to the date of the
filing of this Report and requested that DM furnish us with a letter addressed
to the Securities and Exchange Commission stating whether or not it agrees with
the statements in this Report.
On July
23, 2008, we engaged Moore & Associates, CHTD (“Moore”), as our independent
registered public accounting firm.
We have
not consulted with Moore regarding the application of accounting principles to a
specified transaction or the type of audit opinion that might be rendered on our
financial statements during the two most recent fiscal years through
present.
|
ITEM 9A.
|
CONTROLS AND
PROCEDURES
|
As
required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange
Act”), we carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of September 30, 2008,
being the date of our most recently completed fiscal year. This evaluation was
carried out under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, Mr. Lars Brannvall. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified by the rules and forms of the Securities and
Exchange Commission (the “SEC”) .
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and our Chief Financial
Officer, to allow timely decisions regarding required disclosure.
During
the fiscal year ended September 30, 2008, there were no changes in our internal
control over financial reporting that have materially affected, or are
reasonably likely to affect, our internal control over financial reporting
during the fiscal year ended September 30, 2008.
The term
“internal control over financial reporting” is defined as a process designed by,
or under the supervision of, the registrant’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
registrant’s board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:
|
(a)
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the
registrant;
|
|
|
(b)
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
registrant are being made only in accordance with authorizations of
management and directors of the registrant; and
|
|
|
(c)
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the registrant’s assets
that could have a material effect on the financial
statements.
|
|
|
ITEM 9A(T).
|
CONTROLS AND
PROCEDURES
|
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
No report
required.
PART
III
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
|
IDENTIFICATION
OF DIRECTORS AND EXECUTIVE OFFICERS
All of
our directors hold office until the next annual general meeting of the
shareholders or until their successors are elected and qualified. Our officers
are appointed by our board of directors and hold office until their earlier
death, retirement, resignation or removal.
Our
executive officer and director and his age as of the date of this Annual Report
is as follows:
|
Name of
Director
|
Age
|
|||
|
Lars
Brannvall
|
43
|
|||
|
Name of Executive
Officer
|
Age
|
Office
|
||
|
Lars
Brannvall
|
43
|
President
and Chief Executive
Officer
|
Lars Brannvall. Mr. Brannvall
is our president, secretary, treasurer and sole director, having been appointed
to those roles concurrent with the closing of our acquisition of our subsidiary,
Coloured UK on September 30, 2005. Mr. Brannvall was the managing director of
Coloured UK since August 15, 2003, and serves as our sole officer and director.
His focus is on our distribution and sales channels, building relationships with
mobile operators, portals, media houses, resellers and agents to create new
opportunities for the company and its products.
Prior to
joining Coloured UK, Mr. Brannvall was the Business Development Manager at LDC
Network Limited, a UK-based mobile gaming company, from July 2002 until June
2003. He was also the European Marketing and Business Development Manager for
Pricejamieson, a UK-based recruitment consultant, for the period from August
2000 until February 2002. In his career, Mr. Brannvall has over 10 years of
experience in sales, marketing and international business development with
various companies in the recruitment and hospitality industries, in addition to
his experience in the wireless industry. He has a Bachelor of Arts in Business
Management and Economics from Orebro University, Sweden.
Mr.
Brannvall currently devotes his efforts to our business on a part-time basis.
Mr. Brannvall has not been a director of any reporting company under the
Exchange Act or any other publicly traded company.
AUDIT
COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
Our board
of directors has not established an audit committee. Our Board of Directors has not
established an audit committee. The respective role of an audit
committee has been conducted by our Board of Directors. We are contemplating
establishment of an audit committee during fiscal year 2009. When established,
the audit committee's primary function will be to provide advice with respect
our financial matters and to assist our Board of Directors in fulfilling its
oversight responsibilities regarding finance, accounting, and legal compliance.
The audit committee's primary duties and responsibilities will be to: (i) serve
as an independent and objective party to monitor our financial reporting process
and internal control system; (ii) review and appraise the audit efforts of our
independent accountants; (iii) evaluate our quarterly financial performance as
well as its compliance with laws and regulations; (iv) oversee management's
establishment and enforcement of financial policies and business practices; and
(v) provide an open avenue of communication among the independent accountants,
management and our Board of Directors.
Our board
of directors has determined that Mr. Lars Brannvall, our sole director and
officer, does not qualify as an “audit committee financial expert”, as defined
by the rules of the SEC. Further, Mr. Brannvall is not “independent”, as that
term is defined in Rule 121 of the American Stock Exchange (“AMEX”) listing
standards, as he is our sole executive officer in addition to being our sole
director.
CODE
OF ETHICS
Our Board
of Directors has not adopted a code of ethics due to the fact that we presently
only have one director, officer and shareholder, namely Mr. Lars Brannvall, and
we are in the development stage of our operations. We anticipate that we will
adopt a code of ethics when we increase either the number of our directors and
officers or the number of our employees.
SIGNIFICANT
EMPLOYEES
We have
no significant employees other than Mr. Lars Brannvall, our president, chief
executive officer and sole director.
COMMITTEES
OF THE BOARD OF DIRECTORS
At
present, we do not have an audit committee, compensation committee, nominating
committee, an executive committee of our board of directors, stock plan
committee or any other committees. However, we will consider seeking suitable
candidates for election as directors, and establishing various committees,
during the current fiscal year.
FAMILY
RELATIONSHIPS
We do not
currently anticipate the election or appointment as directors and officers of
our company any persons who are related to each other or to our existing officer
and director.
INVOLVEMENT
IN CERTAIN LEGAL PROCEEDINGS
None of
our directors, executive officers and control persons have been involved in any
of the following events during the past five years:
|
1.
|
any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
|
|
2.
|
any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offences);
|
|
3.
|
being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
|
4.
|
being
found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law, and the judgment or decision has not been reversed, suspended, or
vacated.
|
PROMOTERS
The term
“promoter” is defined in Rule 405 under the Securities Act of 1933 to include,
with reference to an issuer such as the Company, any person who, acting alone or
in conjunction with one more persons, directly or indirectly takes initiative in
founding and organizing the business of the issuer, as well as any person who,
in connection with the founding and organizing of business of the issuer,
directly or indirectly receives in consideration of services and/or property, 10
percent or more of any class of securities of the issuer or 10 percent or more
of the proceeds from the sale of any class of such securities.
Debra
Rosales, Lars Brannvall, Colour Industry Inc. and Outlander Management are
considered promoters of our company, having taken initiative in organizing our
current business. (For additional details, please see the discussion under the
heading “Description of Business”)
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section
16(a) of the Exchange Act requires our executive officers and directors, and
persons who beneficially own more than ten percent of the our equity securities,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file. Based on our review of the copies of such forms
received by us, we believe that during the fiscal year ended September 30, 2008
all such filing requirements applicable to our officers and directors were
complied with.
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
SUMMARY
COMPENSATION TABLE
The
following table sets forth certain compensation information as to our president
and chief executive officer, Lars Brannvall for the fiscal years ended September
30, 2008, 2007 and 2006. No compensation was paid to our officers other than the
compensation set forth below.
|
Name and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compen-
sation
($)
|
Non-
Qualified
Deferred
Compen-
sation
Earnings
($)
|
All
Other
Compen-
sation
($)
|
Total
($)
|
|
Lars
Brannvall
|
2008
|
$Nil
|
Nil
|
$Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$Nil
|
|
2007
|
$Nil
|
Nil
|
$Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$Nil
|
|
|
(1)
|
2006
|
$1,851
|
Nil
|
$Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$1,851
|
(1) Mr.
Brannvall has been our Chief Executive Officer since September 30,
2005.
STOCK
OPTIONS/SAW GRANTS IN FISCAL YEAR ENDED MARCH 31, 2008
As of the
date of this Annual Report, we do not have a stock option plan. The following
table reflects as at September 30, 2008 no stock options have been granted to
the Named Executive Officer:
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|||||||||
|
OPTION
AWARDS
|
STOCK
AWARDS
|
||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options
Exercisable
(#)
|
Number
of Securities Underlying Unexercised Options
Unexercisable
(#)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not Vested
(#)
|
|
Lars Brannvall,
President
|
-0-
|
-0-
|
-0-
|
-0-
|
n/a
|
-0-
|
-0-
|
-0-
|
-0-
|
The
following table sets forth information relating to compensation paid to our
director during fiscal year ended September 30, 2008:
DIRECTOR
COMPENSATION TABLE
|
Name
|
Fees
Earned
or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Lars
Brannvall
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
EMPLOYMENT
AGREEMENT
Lars
Brannvall provides his services as managing director to Coloured UK under a
contract dated August 6, 2003. Mr. Brannvall is obligated to devote his full
business time to our business. We have agreed to pay to Mr. Brannvall a salary
of ₤24,000 per annum ($47,040 based on a foreign exchange rate on December 27,
2006 of $1.96: ₤1.00). In addition, Coloured UK agreed to issue to Mr. Brannvall
ordinary shares of Coloured UK up to a maximum of 245,000 shares. By agreement,
all 245,000 shares were issued to Mr. Brannvall prior to the execution of the
Share Exchange Agreement. These shares were exchanged for 1,408,720 shares of
our common stock upon completion of our acquisition of Coloured UK. No
additional shares are issuable to Mr. Brannvall pursuant to his employment
contract.
Effective
November 1, 2005, Mr. Brannvall has agreed not to take any salary until such
time as we secure an arrangement with a gateway owner to provide our mobile
games and which has the potential to generate earnings for us. Effective as of
September 30, 2008 and based upon the winding up of the subsidiary, the
employment agreement between Mr. Brannvall and Coloured UK has been terminated.
See “Item 12. Certain Relationships and Related Transactions and Director
Independence.”
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|
The
following table sets forth certain information concerning the number of shares
of our common stock owned beneficially as of January 11, 2009 by: (i) each
person (including any group) known to us to own more than five percent (5%) of
any class of our voting securities, (ii) each of our directors, (iii) each of
our officers, and (iv) our officers and directors as a group. Each person has
sole voting and investment power with respect to the shares of common stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated. As of the
date of this Annual Report, there are 73,494,610 shares of common stock issued
and outstanding
|
|
|
|||||
|
Title of
class
|
Name and
address of
beneficial owner(2)
|
Amount and nature
of beneficial owner
|
Percentage of class(1)
|
|||
|
Directors and Officers
|
||||||
|
Common
Stock
|
Lars
Brannvall
|
1,608,721
|
2.18%
|
|||
|
46
Buckingham Road
|
||||||
|
Brighton,
UK
|
||||||
|
BN1
3RQ
|
||||||
|
Common
Stock
|
All
executive officers and
|
1,608,721
|
2.18%
|
|||
|
directors
as a group (one
|
||||||
|
person)
|
||||||
|
5%
Shareholders
|
||||||
|
Common
Stock
|
Colour
Industry Inc.(3)
|
5,772,292
|
7.85%
|
|||
|
FD
ICIC Building,
|
||||||
|
Lower
Factory Road,
|
||||||
|
St.
John’s, Antigua
|
||||||
|
Common
Stock
|
The
Coloured Industry
|
6,000,000
|
8.16%
|
|||
|
Technology
Partnership 2
|
||||||
|
LLP(4)
|
||||||
|
4
Bedford Road
|
||||||
|
London,
UK WC1R 4DF
|
||||||
|
Common
Stock
|
The
Mobile Warrior
|
6,000,000
|
8.16%
|
|||
|
Technology
Partnership LLP(5)
|
||||||
|
4
Bedford Road
|
||||||
|
London,
UK WC1R 4DF
|
||||||
|
Common
Stock
|
Karada
Ltd.
|
34,845,950
|
47.41%
|
|||
|
Ajeltake
Rd
|
||||||
|
Ajeltake,
Majuro
|
||||||
|
Marshall
Islands
|
(1) The
percentage of class is based on 73,494,610 shares of common stock issued and
outstanding as of the date of this Annual Report.
(2) Under
Rule 13d-3, a beneficial owner of a security includes any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares: (i) voting power, which includes the power to vote, or
to direct the voting of shares; and (ii) investment power, which includes the
power to dispose or direct the disposition of shares. Certain shares may be
deemed to be beneficially owned by more than one person (if, for example,
persons share the power to vote or the power to dispose of the shares). In
addition, shares are deemed to be beneficially owned by a person if the person
has the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In computing
the percentage ownership of any person, the amount of shares outstanding is
deemed to include the amount of shares beneficially owned by such person (and
only such person) by reason of these acquisition rights.
(3) All
of the shares of Coloured Industry Inc. are owned by The Outlander Trust. The
trustees of The Outlander Trust have voting and dispositive control over the
shares held by The Outlander Trust. There are two co-trustees of The Outlander
Trust, namely Wealth Management Inc. and United Trust Company Limited. The
director of Wealth Management Inc. is Laura Mouck. The directors of United Trust
Company Limited are Margaret Ferrari, Andrew Cummings, G. Grahame Bollers and
Monica Roberts.
(4)
The Coloured Industry Technology Partnership 2 LLP is a limited liability
partnership comprised of twenty three equity partners and two designated
partners, each of whom is a limited partner. Mr. Paul Carter is a designated
partner and is the administrator of the partnership pursuant to a services
agreement between Mr. Paul Carter and the partnership. The administrator is
responsible for the administration of the business of the partnership and,
subject to the partnership’s operating agreement, makes decisions regarding
management of the business of the partnership. Accordingly, Mr. Paul Carter
exercises voting and investment control over the securities held by The Coloured
Industry Technology Partnership 2 LLP.
(5) The
Mobile Warrior Technology Partnership LLP is a limited liability partnership
comprised of forty equity partners and two designated partners, each of whom is
a limited partner. Mr. Paul Carter is a designated partner and is the
administrator of the partnership pursuant to a services agreement between Mr.
Paul Carter and the partnership. The administrator is responsible for the
administration of the business of the partnership and, subject to the
partnership’s operating agreement, makes decisions regarding management of the
business of the partnership. Accordingly, Mr. Paul Carter exercises voting and
investment control over the securities held by The Mobile Warrior Technology
Partnership LLP.
Changes
in Control
We are
unaware of any contract, or other arrangement or provision of our articles of
incorporation or our by-laws, the operation of which may at a subsequent date
result in a change of control of our company.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|
Except as
described below, none of the following parties has, since our date of
incorporation, had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will materially
affect us:
|
·
|
Any
of our directors or officers;
|
|
·
|
Any
person proposed as a nominee for election as a
director;
|
|
·
|
Any
person who beneficially owns, directly or indirectly, shares carrying more
than 10% of the voting rights attached to our outstanding shares of common
stock;
|
|
·
|
Any
member of the immediate family (including spouse, parents, children,
siblings and in-laws) of any of the above
persons.
|
PURCHASE
OF FOUNDER’S SHARES
Sharon
Cocker, our initial director and officer, acquired 500,000 shares of our common
stock effective May 31, 2005 at a price of $0.001 per share. Ms. Cocker paid a
total purchase price of $500 for these shares.
EMPLOYMENT
AGREEMENT
Lars
Brannvall is our sole officer and director. Prior to our acquisition of Coloured
UK, Mr. Brannvall was the managing director and a shareholder of Coloured UK.
Under the share exchange agreement whereby we acquired Coloured UK as our
wholly-owned subsidiary, Mr. Brannvall received 1,408,720 shares in our company
in exchange for his shares in Coloured UK. Upon the acquisition of Coloured UK,
Mr. Brannvall was appointed to replace Ms. Cocker as our sole officer and
director.
Mr.
Brannvall previously provided services as chief executive officer to us under a
contract between Mr. Brannvall and Coloured UK dated August 6, 2003. Mr.
Brannvall is obligated to devote his full business time to our business. We
agreed to pay to Mr. Brannvall a salary of ₤24,000 per annum. In addition,
Coloured UK agreed to issue to Mr. Brannvall up to a maximum of 245,000 ordinary
shares of Coloured UK. By agreement, all 245,000 shares were issued to Mr.
Brannvall prior to the execution of the Share Exchange Agreement. These shares
were exchanged for 1,408,720 shares of our common stock upon completion of our
acquisition of Coloured UK. No additional shares are issuable to Mr. Brannvall
pursuant to his employment contract. Effective approximately June 30, 2008 and
based upon the winding up of the subsidiary, the employment agreement between
Mr. Brannvall and Coloured UK has been terminated.
COLOUR
INDUSTRY INC.
Coloured
UK’s initial corporate activities were funded by CII. Coloured UK entered into a
loan agreement dated October 8, 2003 with CII whereby CII agreed to extend a
secured loan facility to Coloured UK in the maximum amount of ₤120,000
($199,211.16, based on the foreign exchange rate on October 8, 2003 of $1.6601:
₤1.0000). As at April 26, 2005, Coloured UK’s outstanding debt to CII under the
secured loan facility was ₤108,450 ($206,722, based on a foreign exchange rate
on April 26, 2005 of $1.9062: ₤1.0000). Coloured UK and CII entered into a debt
settlement agreement on April 26, 2005 whereby the outstanding debt was settled
by the issuance to CII of 1,075,000 Ordinary A shares in the capital of Coloured
UK at a deemed value of ₤0.1009 per share. CII subsequently exchanged these
shares for shares of our common stock upon completion of the share exchange
agreement on September 30, 2005.
CII was
issued 9,947,292 shares of our common stock on September 30, 2005 upon the
completion of our acquisition of Coloured UK pursuant to the Share Exchange
Agreement. These shares were issued by us in exchange for CII’s shares in
Coloured UK. The cost to CII of its shares in Coloured UK was $218,458, being:
(i) $206,722 for the shares issued upon the debt settlement, (ii) ₤5,000 ($8,893
based on a foreign exchange rate on December 22, 2003 of $1.7786: ₤1.0000) for
the purchase of its initial shares of Coloured UK, and (iii) ₤1,550 ($2,843
based on a foreign exchange rate on April 30, 2004 of $1.8341: ₤1.0000) for a
subsequent purchase of shares of Coloured UK. CII subsequently transferred
4,175,000 shares to five of the selling shareholders named herein in private
transactions.
We
purchased five of our six mobile games from CII on February 28, 2006 pursuant to
the an intellectual property acquisition agreement between us and CII dated
January 31, 2006. This acquisition followed the re-acquisition by CII of the
intellectual property for those mobile games from the Coloured Technology
Partnership. We issued 6,000,000 shares of our common stock to CII in
consideration of these intellectual property assets. CII in turn paid as
consideration 6,000,000 shares of our common stock to The Coloured Technology
Partnership 2 LLP in connection with the acquisition of these five mobile games
from The Coloured Technology Partnership 2 LLP.
CONTRACTUAL
ARRANGEMENTS
Outlander
Management Ltd.
Outlander
Management, a private corporation that provided administration services to
Coloured UK, was issued 574,992 shares of our common stock on September 30, 2005
in exchange for the shares of Coloured UK held by Outlander Management. The cost
to Outlander Management of its shares in Coloured UK was ₤1,000 ($1,834 based on
a foreign exchange rate on April 30, 2004 of $1.8341: ₤1.000).
We paid
or accrued the following fees to Outlander Management during 2008 and 2007 in
respect of administrative services provided by Outlander
Management:
|
Expense
|
Year ended
September 30,
2008
|
Year ended
September 30,
2007
|
|
Accounting
|
$Nil
|
$Nil
|
|
Legal
fees
|
$Nil
|
$Nil
|
|
Salaries
and Wages
|
$Nil
|
$Nil
|
As at
September 30, 2008, we have an amount payable to Outlander Management of
$27,224.72 for management services. Effective approximately June 30,
2008 and based upon the winding up of the subsidiary, the agreement between
Outlander Management and Coloured UK has been terminated.
Azuracle
Ltd.
As at
September 30, 2008, we owed $35,917.20 to Azuracle for accrued rent. Azuracle is
a related party to our company because it had a director in common, namely Ulrik
DeBo, with Outlander Management, one of our promoters. Mr. DeBo was previously,
but is no longer, a director of Outlander Management. Effective approximately
June 30, 2008 and based upon the winding up of the subsidiary, the agreement
between Azuracle and Coloured UK has been terminated. Azuracle has agreed to
provide the Company the same office space rent free until such time as we have
arranged and received sufficient funding to pay our accrued
liabilities. At that point, new rental terms will be
negotiated.
DeBondo
Capital Inc.
As at
September 30, 2008, we owed $236,583.43 to DeBondo for advances made to pay for
some of our expenses. DeBondo is a related party to our company because it had a
director in common, namely Ulrik DeBo, with Outlander Management, one of our
promoters. Mr. DeBo was previously, but is no longer, a director of Outlander
Management.
DeBondo
Capital Limited
We entered into a one year consulting
agreement dated August 1, 2006 with DeBondo Capital Limited, a related company
that has an officer in common with a corporate shareholder of the Company. The
monthly payments for general consulting services is $9,326 (GBP 5,000) per month
for a minimum of one year beginning on the agreement date. During fiscal 2008,
$117,460 was accrued on account of amounts owing under this agreement, such that
the amount owing as at September 30, 2008 was $138,325. The agreement will
automatically renew on a month-to-month basis with the same terms and
conditions. At any time after August 1, 2007, either party may terminate this
agreement with one month’s advance written notice. Effective approximately June 30, 2008
and based upon the winding up of the subsidiary, the agreement between DeBondo
Capital Limited and Coloured UK has been terminated.
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
|
The following table sets forth information regarding amounts billed to us by our independent auditors for each of our last two fiscal years: |
|
|
Year Ended September
30,
|
||||||
|
2008
|
2007
|
|||||
|
Audit
Fees
|
$38,572.15
|
$10,500.00
|
||||
|
Audit Related
Fees
|
$Nil
|
$Nil
|
||||
|
Tax Fees
|
$Nil
|
$Nil
|
||||
|
All Other
Fees
|
$Nil
|
$Nil
|
||||
|
Total
|
$38,572.15
|
$10,500.00
|
||||
AUDIT
FEES
Audit
fees are the aggregate fees billed by our independent auditor for the audit of
our annual consolidated financial statements, reviews of our interim
consolidated financial statements and attestation services that are provided in
connection with statutory and regulatory filings or engagements.
During
fiscal year ended September 30, 2008, we did not incur any other fees for
professional services rendered by our principal independent accountant for all
other non-audit services which may include, but is not limited to, tax-related
services, actuarial services or valuation services.
|
ITEM 15.
|
EXHIBITS AND FINCIAL STATEMENT
SCHEDULES
|
The
following exhibits are included with this Annual Report on Form
10-KSB:
|
|
|
|
Exhibit
Number
|
Description of
Exhibit
|
|
3.1(1)
|
Articles
of Incorporation
|
|
3.2(1)
|
Certificate
of Amendment to Articles of Incorporation
|
|
3.3(1)
|
By-Laws
|
|
10.1(1)
|
Agency
Exploitation Agreement dated March 31, 2003, between The Mobile Warrior
Technology Partnership LLP and LDC Network Limited
|
|
10.2(1)
|
Letter
Agreement dated effective April 2, 2004, between LDC Network Limited and
Coloured UK
|
|
10.3(1)
|
Agency
Exploitation Agreement dated August 6, 2003, between The Coloured Industry
Technology Partnership and Coloured UK
|
|
10.4(1)
|
Employment
Agreement between Coloured UK and Lars Brannvall dated August 6,
2003
|
|
10.5(1)
|
Loan
Agreement dated October 8, 2003, between Coloured UK and
CII
|
|
10.6(1)
|
Debt
Settlement Agreement dated April 26, 2005, between Coloured UK and
CII
|
|
10.7(1)
|
Share
Exchange Agreement dated May 23, 2005, as amended, among Emcor Holdings
Inc., Coloured UK and the stockholders of Coloured UK
|
|
10.8(1)
|
Asset
Purchase Agreement dated January 31, 2006, between Coloured (US) Inc. and
CII (Coloured Mobile Games)
|
|
10.9(1)
|
Asset
Purchase Agreement dated January 31, 2006, between Coloured (US) Inc. and
ABS Capital (Mobile Warrior Game)
|
|
10.10(1)
|
Debt
Conversion Agreement dated February 28, 2006, between Emcor Holdings Inc.
and CISA Holdings APS
|
|
10.11(1)
|
Debt
Conversion Agreement dated February 28, 2006, between Emcor Holdings Inc.
and Dan Simmons
|
|
10.12(1)
|
Termination
and Release Agreement dated February 28, 2006, among Coloured UK and the
Coloured Industry Technology Partnership LLP
|
|
10.13(1)
|
Termination
and Release Agreement dated February 28, 2006, among Coloured UK and The
Mobile Warrior Technology Partnership LLP
|
|
10.14(1)
|
Debenture
Agreement dated October 8, 2003 between Coloured UK and CII evidencing The
indebtedness of Coloured UK under the Loan Agreement
|
|
10.15(1)
|
Service
Agreement dated August 4, 2004, between Coloured UK and Outlander
Management
|
|
10.16(1)
|
Reseller
Agreement dated February 19, 2004, between Coloured UK and Mtertainment
Korea covering the territory of Asia, with exclusivity in
Singapore
|
|
10.17(1)
|
Reseller
Agreement dated February 20, 2004, between Coloured UK and Tele-
Publishing UK Ltd. (also known as G8wave) covering the territory of the
United Kingdom
|
|
Exhibit
Number
|
Description of
Exhibit
|
|
10.18(1)
|
Worldwide
Reseller Agreement dated February 20, 2004, between Coloured UK and
Mocondi Ltd.
|
|
10.19(1)
|
Reseller
Agreement dated March 13, 2004, between Coloured UK and Mobiletones Asia
Pte Ltd. covering the territory of Asia, excluding
Singapore
|
|
10.20(1)
|
Reseller
Agreement dated March 10, 2005, between Coloured UK and Net People
International Inc. covering the territory of Latin America (South &
Central America), Mexico and the Caribbean
|
|
10.21(1)
|
Reseller
Agreement dated April 19, 2004, between Coloured UK and Mobilkraft
covering the territory of Sweden
|
|
10.22(1)
|
Reseller
Agreement dated September 27, 2004, between Coloured UK and Nostromo ICT
covering the territory of the Czech Republic
|
|
10.23(1)
|
Reseller
Agreement dated November 25, 2004, between Coloured UK and Voicelock Ltd.
(also known as Trust5) covering the territory of the United Kingdom and
Ireland
|
|
10.24(1)
|
Worldwide
Reseller Agreement dated December 12, 2004, between Coloured UK and
Tracebit Ltd
|
|
10.25(1)
|
Reseller
Agreement dated December 22, 2004, between Coloured UK and Mobile Minds
covering the territory of Hungary, Slovakia, Czech Republic and
Pakistan
|
|
10.26(1)
|
Reseller
Agreement dated February 3, 2005, between Coloured UK and iTech Solutions
India PVT Ltd covering the territory of India and the Indian
Subcontinent
|
|
10.27(1)
|
Subscription
agreement between the Company and Sharon Cocker dated April 8, 2005
relating to the Company’s private offering of 500,000
shares
|
|
10.28(1)
|
Form
of subscription agreement relating to the Company's May 31, 2005 private
offering of 4,500,000 common shares at $0.01 per share
|
|
10.29(1)
|
Administration
Agreement dated July 1, 2005 between Coloured UK and Azuracle
Limited
|
|
10.30(1)
|
Closing
Agreement dated September 30, 2005 amongst Emcor Holdings Inc., and the
shareholders of Coloured UK
|
|
10.31(1)
|
Form
of subscription agreement and amendment agreement relating to the
Company’s September 30, 2005 private offering of 677,660 common shares at
$0.05 per share
|
|
10.32(1)
|
Form
of subscription agreement relating to the Company’s March 13, 2006 private
offering of 202,000 common shares at $0.25 per share
|
|
10.33(2)
|
Consulting
agreement dated August 1, 2006 between the Company and DeBondo Capital
Limited
|
|
10.34
(4)
|
Release
and Settlement Agreement between Coloured (US) Inc. and Karada Ltd. dated
December 12, 2008.
|
|
16 (5)
|
Letter
from Dale Matheson Carr-Hilton Labonte dated July 24,
2008.
|
|
31.1(3)
|
Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act
|
|
32.1(3)
|
Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
(1)
|
Filed
as an exhibit to the original registration statement on Form SB-2 filed
with the Securities and Exchange Commission on April 24,
2006.
|
|
(2)
|
Filed
as an exhibit to our annual report on Form 10-K filed with the Securities
and Exchange Commission on January 4, 2007.
|
|
(3)
|
Filed
as an exhibit to this annual report on Form 10-K.
|
|
(4)
|
Filed
as an exhibit to the current report on Form 8-K filed with the Securities
and Exchange Commission on December 22, 2008.
|
|
(5)
|
Filed
as an exhibit to the current report on Form 8-K filed with the Securities
and Exchange Commission on July 25,
2008.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
| COLOURED (US) INC. | |||
|
Date:
January 9, 2009
|
By:
|
/s/ LARS BRANNVALL | |
| Lars Brannvall, | |||
| Chief Executive Officer | |||
|
Date:
January 9, 2009
|
By:
|
/s/ LARS BRANNVALL | |
| Lars Brannvall, | |||
| Treasurer/Chief Financial Officer | |||