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INVO Bioscience, Inc. - Quarter Report: 2008 March (Form 10-Q)

Unassociated Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934
 
For the quarterly period ended March 31, 2008
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
For the transition period from _______________ to ___________________
 
Commission file number: 333-147330
 
EMY’S SALSA AJI DISTRIBUTION COMPANY, INC. 
(Exact Name of Registrant as Specified in Its Charter)
 
Nevada
  
20-4036208
(State or Other Jurisdiction of Incorporation
or Organization)
  
(I.R.S. Employer Identification No.)
     
P.O. Box 7,
Ellicott City, MD
 
21041-0007
(Address of Principal Executive Offices)
  
(Zip Code)
     

(443) 742-2134
(Registrant’s Telephone Number, Including Area Code)
 
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
 
As of May 9, 2008, there were 12,387,500 shares of the issuer’s common stock outstanding.
 
 
Table of Contents

   
Page
Part I
FINANCIAL INFORMATION
  
     
Item 1.
Financial Statements (Unaudited) 
  
     
 
Balance Sheets as of March 31, 2008 (Unaudited) and December 31, 2007 (Audited) 
 1
     
 
Statements of Operations for the three-months ended March 31, 2008 and 2007 and for the period from July 11, 2005 (inception) to March 31, 2008 (Unaudited) 
 2
     
 
Statements of Cash Flows for the three-months ended March 31, 2008 and 2007 and for the period from July 11, 2005 (inception) to March 31, 2008 (Unaudited)
3
     
 
Notes to Financial Statements (Unaudited)
 4
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 10
     
Item 3.
 Quantitative and Qualitative Disclosures About Market Risk
 13
     
Item 4.
Controls and Procedures 
 13
     
Part II
OTHER INFORMATION
 
     
Item 6.
Exhibits 
 15
 
 
 
 
PART I
FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
Emy’s Salsa AJI Distribution Company, Inc.
(A Development Stage Company)
Financial Statements
March 31, 2008
(Unaudited)


CONTENTS
 Page(s)
   
Financial Statements:
  
   
Balance Sheets - As of March 31, 2008 (Unaudited) and December 31, 2007 (Audited)
1
   
Statements of Operations -
  
For the three months ended March 31, 2008 and 2007 and for the period from July 11, 2005 (inception) to March 31, 2008 (Unaudited)
2
   
Statements of Cash Flows -
  
For the three months ended March 31, 2008 and 2007 and for the period from July 11, 2005 (inception) to March 31, 2008 (Unaudited)
3
   
Notes to Financial Statements (Unaudited)  
4-9


Emy's Salsa AJI Distribution Company, Inc.
(A Development Stage Company)
Balance Sheets

   
March 31, 2008 (Unaudited)
  
December 31, 2007 (Audited)
  
           
Assets
               
Current Assets
              
Cash
  
$
552
  
$
4,648
  
Total Current Assets
    
552
   
4,648
 
               
Other asset - net of accumulated amortization of $31,000 and $24,666
    
19,000
   
25,334
 
               
Total Assets
  
$
19,552
  
$
29,982
  
.
             
Liabilities and Stockholders’ Equity
               
Current Liabilities
              
Accounts payable
  
$
1,354
  
$
1,154
  
Accrued liabilities
    
635
   
875
 
Loans payable
    
7,638
   
200
 
Accrued interest payable
    
13
   
-
 
Total Current Liabilites
    
9,640
   
2,229
 
               
Stockholders’ Equity
              
Common stock ($0.0001 par value, 75,000,000 shares authorized, 12,387,500 shares issued and outstanding)
    
1,239
   
1,239
 
Additional paid in capital
    
78,086
   
78,086
 
Deficit accumulated during development stage
    
(69,413
)
  
(51,572
)
Total Stockholders’ Equity
    
9,912
   
27,753
 
               
Total Liabilites and Stockholders' Equity
  
$
19,552
  
$
29,982
   

See accompanying notes to unaudited financial statements
 

        

        
1

        

        

        

        

        

      
Emy's Salsa AJI Distribution Company, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
   
For the Three Months Ended March 31,
 
For the period from July 11, 2005 (inception) to
  
 
  
2008
  
2007
  
March 31, 2008
  
 
              
Revenues
  
$
-
  
$
-
  
$
-
  
 
                    
Operating expenses
                    
General and administrative
    
17,830
   
3,225
   
69,699
 
Total operating expenses
    
17,830
   
3,225
   
69,699
 
 
                    
Loss from operations
    
(17,830
)
  
(3,225
)
  
(69,699
)
 
                    
Other income (expense)
                    
Interest income
    
2
   
39
   
299
 
Interest expense
    
(13
)
  
-
   
(13
)
Total other income (expense)
    
(11
)
  
39
   
286
 
 
                    
Net loss
  
$
(17,841
)
$
(3,186
)
$
(69,413
)
 
    
         
 
Net loss per share - basic and diluted
  
$
(0.00
)
$
(0.00
)
$
(0.01
)
 
    
         
 
Weighted average number of shares outstanding during the period - basic and diluted
    
12,387,500
   
9,027,500
   
8,427,799
 

See accompanying notes to unaudited financial statements

2
 
Emy's Salsa AJI Distribution Company, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)

   
For the Three Months Ended March 31,
  
For the period
from July 11, 2005 (Inception) to
  
   
2008
  
2007
  
March 31, 2008
  
 
  
 
          
CASH FLOWS FROM OPERATING ACTIVITIES
    
             
Net loss
  
$
(17,841
)
$
(3,186
)
$
(69,413
)
Adjustments to reconcile net loss to net cash used in operating activities Amortization
    
6,334
   
3,000
   
31,000
 
Stock issued for services
    
-
   
-
   
10,925
 
Changes in operating assets and liabilities
                    
Accounts payable
    
200
   
-
   
1,354
 
Accrued liabilities
    
(240
)
  
-
   
635
 
Accrued interest payable
    
13
   
-
   
13
 
Net Cash Used In Operating Activities
    
(11,534
)
  
(186
)
  
(25,486
)
 
                    
CASH FLOWS FROM FINANCING ACTIVITIES
                    
Proceeds from loans payable
    
7,438
   
-
   
7,638
 
Proceeds from sale of common stock
    
-
   
-
   
18,400
 
Net Cash Provided By Financing Activities
    
7,438
   
-
   
26,038
 
 
    
         
 
Net increase (decrease) in cash
    
(4,096
)
  
(186
)
  
552
 
 
    
             
Cash - beginning of period
    
4,648
   
13,789
   
-
 
 
    
             
Cash - end of period
  
$
552
  
$
13,603
  
$
552
  
 
    
             
Supplemental Disclosure of Cash Flow Information
                    
Cash paid during the period for
                    
Income taxes
  
$
-
  
$
-
  
$
-
  
Interest
  
$
-
  
$
-
  
$
-
  

See accompanying notes to unaudited financial statements

3
 
Emy’s Salsa Aji Distribution Company, Inc.
(A Development Stage Company)
Financial Statements
March 31, 2008
(Unaudited)
 
Note 1 Basis of Presentation
 
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, stockholders’ equity or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the full year.

The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-KSB, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended December 31, 2007. The interim results for the period ended March 31, 2008 are not necessarily indicative of the results for the full fiscal year.

Note 2 Nature of Operations and Summary of Significant Accounting Policies

Nature of operations

Certiorari Corporation is a Nevada corporation incorporated on July 11, 2005. On August 23, 2005, the Company changed its name to Emy’s Salsa AJI Distribution Company, Inc. (the “Company”).

The Company is a development stage entity and expects to engage in the business of distributing products through distribution agreements with manufacturers. The initial focus of the Company’s efforts will be further development and future distribution of Emy’s Salsa (“Product”) for The Orbital Group (“Orbital”) (“Manufacturer”) - a related party.

Development stage

The Company's financial statements are presented as those of a development stage enterprise. Activities during the development stage primarily include negotiating distribution agreements and marketing the territory for distribution outlets for the Product. The Company, while seeking to implement its business plan, will look to obtain additional debt and/or equity related funding opportunities. The Company has not generated any revenues since inception.

Risks and uncertainties

The Company operates in an industry that is subject to intense competition and rapid technological change. The Company's operations are subject to significant risk and uncertainties including financial, operational, technological, and regulatory risks including the potential risk of business failure.

4

Emy’s Salsa Aji Distribution Company, Inc.
(A Development Stage Company)
Financial Statements
March 31, 2008
(Unaudited)

Use of estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Cash

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company had no cash equivalents at March 31, 2008.

Long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairment charges taken during the three months ended March 31, 2008 and 2007, and for the period from July 11, 2005 (inception) to March 31, 2008, respectively.

Earnings per share

Earnings/(loss) per share is computed by dividing net loss by weighted average number of shares of common stock outstanding during each period. Diluted earnings/(loss) per share is computed by dividing net income/(loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. For the three months ended March 31, 2008 and 2007, and for the period from July 11, 2005 (inception) to March 31, 2008, respectively, the Company did not have any dilutive securities.

Stock-based compensation

All share-based payments to employees will be recorded and expensed in the statement of operations as applicable under SFAS No. 123R “Share-Based Payment”. For the three months ended March 31, 2008 and 2007, and for the period from July 11, 2005 (inception) to March 31, 2008, respectively, the Company has not issued any stock based compensation.

Segment information

The Company follows Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." During 2008, the Company only operated in one segment; therefore, segment information has not been presented.

5

Emy’s Salsa Aji Distribution Company, Inc.
(A Development Stage Company)
Financial Statements
March 31, 2008
(Unaudited)

Fair value of financial instruments

The carrying amounts of the Company’s short-term financial instruments, including accounts payable, accrued liabilities, loans payable and accrued interest payable, approximates fair value due to the relatively short period to maturity for these instruments.

Recent accounting pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. It also defines fair value and established a hierarchy that prioritizes the information used to develop assumptions. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect SFAS No. 157 to have a material impact on its financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, which permits entities to choose to measure many financial instruments and certain other items at fair value. The unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings.  The decision to elect the fair value option is determined on an instrument-by-instrument basis, should be applied to an entire instrument and is irrevocable.  Assets and liabilities measured at fair values pursuant to the fair value option should be reported separately in the balance sheet from those instruments measured using other measurement attributes.  SFAS No. 159 is effective as of the beginning of the Company’s 2008 fiscal year. The adoption of SFAS No. 159 is not expected to have a material effect on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of SFAS No. 160 is not expected to have a material effect on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS 141R,“Business Combinations” (“SFAS 141R”), which replaces FASB SFAS 141,“Business Combinations”. This Statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control.  SFAS 141R will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition.  SFAS 141R will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date.  This compares to the cost allocation method previously required by SFAS No. 141.  SFAS 141R will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met.  Finally, SFAS 141R will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date.  This Statement will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008.  Early adoption of this standard is not permitted and the standards are to be applied prospectively only.  Upon adoption of this standard, there would be no impact to the Company’s results of operations and financial condition for acquisitions previously completed.  The adoption of SFAS No. 141R is not expected to have a material effect on its financial position, results of operations or cash flows.

6

Emy’s Salsa Aji Distribution Company, Inc.
(A Development Stage Company)
Financial Statements
March 31, 2008
(Unaudited)

In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133.” (“SFAS 161”). SFAS 161 establishes the disclosure requirements for derivative instruments and for hedging activities with the intent to provide financial statement users with an enhanced understanding of the entity’s use of derivative instruments, the accounting of derivative instruments and related hedged items under Statement 133 and its related interpretations, and the effects of these instruments on the entity’s financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. We do not expect its adoption will have a material impact on our financial position, results of operations or cash flows.
 
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption.
 
Note 3 Going Concern

As reflected in the accompanying financial statements, the Company has a net loss of $17,841 and net cash used in operations of $11,534 for the three months ended March 31, 2008; and a working capital deficit of $9,088 and a deficit accumulated during the development stage of $69,413 at March 31, 2008. In addition, the Company is in the development stage and has not yet generated any revenues. The ability of the Company to continue as a going concern is dependent on Management's plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt or equity raises. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

7

Emy’s Salsa Aji Distribution Company, Inc.
(A Development Stage Company)
Financial Statements
March 31, 2008
(Unaudited)

Note 4 Other Asset

On July 1, 2006, the Company issued 3,000,000 shares of common stock to acquire a distribution agreement (“DA”) from a manufacturer, having a fair value of $30,000 ($0.01/share), based upon recent cash offerings. This DA was scheduled for an initial one-year period. The DA provided the Company, as distributor, distribution rights in a specified geographic territory. The manufacturer is Orbital Group, LLC, which is operated by our Company’s Chairman and CEO.

On November 1, 2007, effective July 1, 2007, the Company issued an additional 2,000,000 shares of common stock, having a fair value of $20,000 ($0.01/share), based upon recent cash offerings, to extend the DA to December 31, 2008.

For the period from July 1, 2007 through December 31, 2008, the Company is required to purchase a minimum of $15,000 of products annually or the DA terminates. The DA would also terminate upon a change in control, or if the Company does not purchase at least $10,000 of products in any three consecutive month period. The DA renews automatically on the anniversary date for additional one-year periods.

The Company is amortizing the $30,000 over a period of thirty months and the $20,000 over a period of eighteen months. For the three months ended March 31, 2008 and 2007, and for the period from July 11, 2005 (inception) to March 31, 2008, respectively, the Company has amortized $6,334, $3,000 and $31,000, respectively. At March 31, 2008, the remaining $19,000 will be amortized through December 31, 2008.
 
Note 5 Refundable Stock Subscription

In 2006, the Company received $250 from a potential investor. The subscription was not accepted, and the Company returned the funds in September 2007.

Note 6 Loan Payable

In August 2007, a third party advanced $200 in exchange for a loan. The loan is unsecured, non-interest bearing and due on demand.

In March 2008, a third party advanced $7,438 in exchange for a loan. The loan is unsecured, bears interest at 6% and is due on demand.

At March 31, 2008, these third party advances represent a 100% concentration in debt financing.

Note 7 Stockholders’ Equity

(A) For the Year Ended December 31, 2005

During July 2005, the Company issued 4,500,000 shares of common stock, having a fair value of $450 ($0.0001/share), to its founders for compensation.

8

Emy’s Salsa Aji Distribution Company, Inc.
(A Development Stage Company)
Financial Statements
March 31, 2008
(Unaudited)

During July and August 2005, the Company issued an aggregate 35,000 shares of common stock, having a fair value of $350 ($0.01/share), based upon the fair value of the services provided.

During December 2005, the Company issued 1,050,000 shares of common stock to third parties in exchange for a subscription receivable totaling $10,500 ($0.01/share). Payment on subscription was received in January 2006.

(B) For the Year Ended December 31, 2006

In January 2006, the Company issued 70,000 shares of common stock for $700 ($0.01/share). Of the total, 60,000 shares were issued to related parties.

In March 2006, the Company issued 50,000 shares of common stock for $500 ($0.01/share).

In April 2006, the Company issued 10,000 shares of common stock for $100 ($0.01/share). These shares were issued to a family member of our Chairman and CEO.

In May 2006, the Company issued 250,000 shares of common stock for $2,500 ($0.01/share).

On July 1, 2006, the Company issued 3,000,000 shares of common stock to a related party. (See Note 4)

In July 2006, the Company issued 50,000 shares of common stock for $500 ($0.01/share).

In July 2006, the Company issued 12,500 shares of common stock for services having a fair value of $125 ($0.01/share) based upon recent cash offerings.

(C) For the Year Ended December 31, 2007

On November 1, 2007, effective July 1, 2007, the Company issued 2,000,000 shares of common stock to a related party. (See Note 4)

During August 2007, the Company issued 360,000 shares of common stock for $3,600 ($0.01/share).

During November 2007, the Company issued 1,000,000 shares of common stock for services provided by a third party, having a fair value of $10,000 ($0.01/share), based upon the fair value of the services provided.

Note 8 Related Party

During April 2007, a board member was paid $1,000 for services rendered.
 
9
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Company Overview
 
Emy’s Salsa Aji Distribution Company, Inc. was incorporated on July 11, 2005 under the laws of the State of Nevada under the name Certiorari Corp. On August 23, 2005 our name was changed to our present name and we entered into negotiations to act as regional distributor of salsa products for Orbital Group, LLC (“Orbital”), a Florida limited liability company. On July 11, 2005 our Board of Directors authorized negotiations with Orbital Group, LLC, and we entered into our initial Distribution Agreement (the “Distribution Agreement”) with Orbital. On July 1, 2006 we entered into a new agreement with Orbital under which we are a licensed distributor of products to be manufactured by Orbital and sold under the trade name of Emy’s Salsa Aji tm. Our Distribution Agreement provides us certain non-exclusive rights to distribute Emy’s Mild and Spicy Salsa in the New England states of New York, New Jersey, Connecticut, Vermont, Massachusetts, Maine and Rhode Island. On November 1, 2007, effective July 1, 2007 we formally approved and extended our agreement with Orbital for an additional period ending December 31, 2008.

We have made no sales of Emy’s Salsa products to date, although Orbital has commenced distribution of Emy’s brand products in Maryland and other mid-Atlantic states. We have distributed free samples and through Orbital have entered into informal discussions with several restaurants and retail chains. Our business is dependent upon the success of Emy’s Salsa, and the business of Orbital, including the ability of Orbital to manufacture and ship in volume quantities of Emy’s Salsa.

We are seeking to introduce Emy’s Salsa into new markets in the Northeast under a Distribution Agreement with Orbital. We have not made any sales of products and have received, through Orbital, non-binding letters expressing interest from several large and small food wholesalers and retailers. We intend to pursue these leads and offer distribution of Orbital’s products as our sole line of business for the foreseeable future. Orbital does not presently have adequate manufacturing, bottling, storage or transportation to satisfy any material demand we might generate for their products, and we do not possess nor do we intend on acquiring such resources. We do not maintain any website, have no employees, and do not lease or own any property that is used in our business and have no immediate plans to acquire any property or produce a website.

10
 
Quarter Ended March 31, 2008 Compared to the Quarter Ended March 31, 2007.

Revenues, Operating Loss, Cost of Revenues. Selling General and Administrative Expenses, Net Loss

During the quarter ended March 31, 2008, we had no sales. During the quarter ended March 31, 2007 we also had no sales. We are seeking to introduce Emy’s Salsa into new markets in the Northeast under a Distribution Agreement with Orbital. We have not made any sales of products and have received, through Orbital, non-binding letters expressing interest from several large and small food wholesalers and retailers.
 
We cannot predict what our level of activity will be over the next 12 months because we do not know what level of production, bottling, storage and transportation Orbital will develop, or if Orbital will be able to attract financing for such purposes, or if we will be able to interest others in purchasing Emy’s products by or through us.

Due to the startup nature of our business, each of the items from our Statement of Operations may not be indicative of future levels of activity. As such, we expect our costs and loss to increase in future periods as we seek active customers, and incur costs for infrastructure. During the prior periods, all expenses have been attributable to startup, organizational, legal and accounting expenses for services provided in connection with such matters and related to the preparation and filing of our registration statement.
 
ESD does not have any credit facilities or other commitments for debt or equity financing. No assurances can be given that advances when needed will be available. We do not believe that we need funding to continue our operations at our current level because we do not have a capital-intensive business plan, and our fixed cost level is low. However, we will need additional capital to maintain our status as a publicly reporting company, such as for audit, printing, legal and transfer agent fees. We would need some form of financing if Orbital increases its capacity significantly, and we decide to ramp up our activities in accordance with our business plan. If a market for our shares ever develops, of which there can be no assurances, we may use restricted shares or options to compensate employees, officers, directors, consultants and others wherever possible. If we are successful such steps may enable us to meet some or all of the obligations of being a public company without requiring additional sources of financing. We believe that we will not have sufficient cash on hand for 12 months of operations unless we commence activities related to our Distribution Agreement rights with Orbital and in such case will not generate sufficient cash to continue operations for the next 12 months from the date of this report without additional investment in our equity or we incur indebtedness.
 
Liquidity and Capital Resources

As of March 31, 2008, and December 31, 2007, we had cash and cash equivalents of $552 and $4,648, respectively. This reduction in cash and cash equivalents was primarily due to expenditures associated with bookkeeping and auditor fees associated with our filings and reports filed with the Securities and Exchange Commission.

11
 
We recorded $11,534 of net cash used in operating activities during the quarter ended March 31, 2007, as compared to $186 during the quarter ended March 31, 2007. This increase in net cash used in operating activities was attributable to increasing cost from operations and net loss, primarily from increasing general and administrative expenses.

We have historically met our liquidity and capital requirements from a variety of sources, including short-term borrowings from related parties and sales of common stock.

Loans From Related Parties
 
Since December 31, 2006 certain operating expenses have been advanced through short-term loans from a stockholder that are payable upon demand and which accrue interest at a rate of 6% per annum in the principal amount of $7,438 at March 31, 2008. An additional $200 was received which is non-interest bearing, unsecured and due on demand.

Critical Accounting Policies and Estimates
 
Critical Accounting Policies
 
Our financial statements are prepared in conformity with generally accepted accounting principles in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, we utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming our estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. We believe that of our significant accounting policies as described in the Notes accompanying our financial statements may involve a higher degree of judgment and estimation.

Going Concern Consideration

The financial statements contained herein have been prepared on a "going concern" basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  For the reasons discussed herein and in the footnotes to the financial statements, there is a significant risk that we will be unable to continue as a going concern.  Our audited financial statements included in the Report of our independent registered accounting firm for the period ended December 31, 2007 and the period ended March 31, 2008 contain additional note disclosures describing the circumstances that lead to this disclosure by our independent registered accounting firm.

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Off-Balance Sheet Arrangements
 
We have no off-balance sheet arrangements
 
Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. It also defines fair value and established a hierarchy that prioritizes the information used to develop assumptions. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect SFAS No. 157 to have a material impact on its financial position, results of operations or cash flows.
 
In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, which permits entities to choose to measure many financial instruments and certain other items at fair value. The unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings.  The decision to elect the fair value option is determined on an instrument-by-instrument basis, should be applied to an entire instrument and is irrevocable.  Assets and liabilities measured at fair values pursuant to the fair value option should be reported separately in the balance sheet from those instruments measured using other measurement attributes.  SFAS No. 159 is effective as of the beginning of the Company’s 2008 fiscal year. The adoption of SFAS No. 159 is not expected to have a material effect on its financial position, results of operations or cash flows.
 
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of SFAS No. 160 is not expected to have a material effect on its financial position, results of operations or cash flows.
 
In December 2007, the FASB issued SFAS 141R,“Business Combinations” (“SFAS 141R”), which replaces FASB SFAS 141,“Business Combinations”. This Statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control.  SFAS 141R will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition.  SFAS 141R will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date.  This compares to the cost allocation method previously required by SFAS No. 141.  SFAS 141R will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met.  Finally, SFAS 141R will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date.  This Statement will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008.  Early adoption of this standard is not permitted and the standards are to be applied prospectively only.  Upon adoption of this standard, there would be no impact to the Company’s results of operations and financial condition for acquisitions previously completed.  The adoption of SFAS No. 141R is not expected to have a material effect on its financial position, results of operations or cash flows.
 
In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133.” (“SFAS 161”). SFAS 161 establishes the disclosure requirements for derivative instruments and for hedging activities with the intent to provide financial statement users with an enhanced understanding of the entity’s use of derivative instruments, the accounting of derivative instruments and related hedged items under Statement 133 and its related interpretations, and the effects of these instruments on the entity’s financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. We do not expect its adoption will have a material impact on our financial position, results of operations or cash flows.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
The Company does maintain any market risk sensitive instruments
 
Item 4. Controls and Procedures.
 
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As noted below, we were unable to conclude that our disclosure controls and procedures are effective, as of the end of the period covered by this report (March 31, 2008), in ensuring that material information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. We believe that we will have effective internal controls to meet this requirement prior to the filing of our annual report for the year ended December 31, 2008.
 
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Changes in Internal Control Over Financial Reporting
 
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’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. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

As a result of a our status as a “newly public company” we did not have a reasonable period of time to design, implement and test compliance of our internal control over financial reporting. As a result, this report does not include an assessment by our management of our internal control over financial reporting as of March 31, 2008, as noted above.
 
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PART II
OTHER INFORMATION
 
Item 6. Exhibits
 
Exhibit
Number
  
 
Description
31.1*
  
Section 302 Certification of Principal Executive Officer
31.2*
  
Section 302 Certification of Principal Financial Officer
32.1*
  
Section 906 Certification of Principal Executive Officer and Principal Financial Officer
*
Filed herewith.
 
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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.
 
 
EMY’S SALSA AJI DISTRIBUTION COMPANY, INC.
     
Dated: May 14, 2008
By:
  
   
Andrew Uribe
President, Chief Financial Officer and Director
 
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EXHIBIT INDEX
 
Exhibit
Number
  
Description
31.1*
  
Section 302 Certification of Principal Executive Officer
31.2*
  
Section 302 Certification of Principal Financial Officer
32.1*
  
Section 906 Certification of Principal Executive Officer and Principal Financial Officer
*
Filed herewith.
 
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