Kallo Inc. - Quarter Report: 2008 March (Form 10-Q)

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number 000-53183

PRINTING COMPONENTS INC.
(Exact name of registrant as specified in its charter)

NEVADA
(State or other jurisdiction of incorporation or organization)

2795 Barton Street, East
Unit 5
Hamilton, Ontario
Canada L8E 2J8
(Address of principal executive offices, including zip code.)

(905) 578-3232
(telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.
YES [X]    NO [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [X]   NO [   ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 16,721,502 as of May 1, 2008
 

PART I – FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

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SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS

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SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS

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SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS

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PRINTING COMPONENTS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2008
(UNAUDITED)

 
NOTE 1 - ACCOUNTING POLICIES AND OPERATIONS

ORGANIZATION

Printing Components Inc. (the "Company"), a development stage company, was incorporated in Nevada on December 12, 2006. The Company offers media, inks, printing and graphic design services to the large format digital printing industry. At March 31, 2008, the Company has commenced business operations. The Company's fiscal year ends on December 31st.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

EARNINGS PER SHARE

The Company computes earnings per share in accordance with Statement of Accounting Standards No. 128, "Earnings per Share ("SFAS No. 128"). Under the provisions of SFAS No. 128, basic earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. There were no potentially dilutive common shares outstanding during the period.

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 estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

INVENTORY

Inventory is valued at the lower of cost or market on the first in, first out basis. The inventory at March 31 2008 consisted entirely of finished goods.

DEPRECIATION

The cost of computers and furniture is depreciated over the estimated useful life of the related assets from 3 to 7 years.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

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PRINTING COMPONENTS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2008
(UNAUDITED)

REVENUE RECOGNITION

Revenue from sale of printing products is reported on the accrual basis of accounting, whereby the sale is recorded upon the delivery or transfer of title of the goods.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company considers that the carrying amount of financial instruments, including accounts payable, approximates fair value because of the short maturity of these instruments.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company does not expect the adoption of recent accounting pronouncements to have a material impact on its financial condition or results of operations.

GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The assets and the satisfaction of liabilities in the normal course of business. The amounts of assets and liabilities in the financial statements do not purport to represent realizable or settlement values. However, the Company has incurred an operating loss. Such loss may impair its ability to obtain additional financing.

This factor raises substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has met its historical working capital requirements from sale of capital shares. Owners of the shares, in order not to burden the Company, have agreed to provide funding to the Company to pay its annual audit fees, filing costs and legal fees as long as the board of directors deems it necessary. However, there can be no assurance that such financial support shall be ongoing or available on terms or conditions acceptable to the Company.

INTERIM FINANCIAL INFORMATION

The interim financial statements of Printing Components, Inc. are unaudited. However, in the opinion of management, the interim data includes all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results for the interim period. The results of operations for the period ended March 31, 2008 are not necessarily indicative of the operating results for the entire year.

NOTE 2 - SHAREHOLDERS' EQUITY

On December 12, 2006, the Company issued 5,000,000 shares of common stock, par value $0.00001 per share, to its initial shareholders in exchange for $50 in cash. In the year ending December 31, 2007, the company sold 490,500 shares of common stock at $0.25 per share for total proceeds of $122,625 and 83,334 shares of common stock at $ .60 per share for total proceeds of $ 50,000

NOTE 3 - RELATED PARTY TRANSACTIONS

A shareholder/officer has provided funding to pay for the initial operating expenses of the Company.

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PRINTING COMPONENTS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2008
(UNAUDITED)

NOTE 4 - DUE TO SHAREHOLDER

Amounts due to shareholder are non-interest bearing and have no definite terms of repayment.

 
NOTE 5 - EQUIPMENT 

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ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

     This section of the report includes a number of forward-looking statements that reflect out current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

     Our auditors have issued a going concern opinion. This means that our auditors believe there is substance doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay out bills. This is because we have not generated substantial revenues and do not anticipate generating on-going revenue until we complete the development of our website and engage suppliers and customers to buy out products. Our only other source for cash at this time is investments by others in our company. Accordingly, we have raised a total of $172,625 in gross proceeds from our initial public offering and December 28, 2007 share sale and we are using the proceeds to implement our project.

     We have opened our office, purchased furniture and computers, installed phone lines and acquired finished goods for resale and made sales in the amount of $15,887.00. Suppliers have been contacted and initial inventory has been purchased at cost allowing for resale at reasonable margins. We have negotiated with our suppliers delivery timetable which minimizes the amount of inventory required on hand to meet sales demand.

     On November 26, 2007, we entered into an agreement with Majestic Supply Co. Inc. wherein we were appointed non-exclusive distributor for Majestic products within the United States of America. Products are comprised of printing ink and media products. Under the terms of the agreement we have minimum monthly volumes of 1,000 units per month in April and May 2008; 3,000 units for the balance of 2008 and all of 2009: 5,000 units in 2010 and 2011 to the end of the initial agreement. We were also granted an option to acquire exclusive distribution rights on empty cartridges in the United States west of the Mississippi River. The option will become exercisable when the empty cartridge product becomes available to Majestic Supply and for a period of six months thereafter. If the option is not exercised during the six month period, it will terminate. In the event we exercise the option, the minimum monthly volume requirements will be modified per the terms to an empty cartridge product agreement.

     We filed a Form 8-K on April 8, 2008 as we have canceled our agreement dated November 26, 2007 with Majestic Supply Co. Inc. as a non exclusive distributor for Majestic product due to the delay in the availability of the cartridge.

     We have signed a letter of intent with Majestic on February 2008 with a closing date 30 days after approval by Majestic shareholders. It is management’s opinion that this transaction will not occur.

Plan of Operation

     Our specific goal is to profitably introduce a comprehensive supply of products on our internet website to the printing industry. We are presently interviewing people with a background in graphics and computer programming. Once a suitable candidate is selected we will begin programming and designing the site providing us better control of the content and design of the site. This candidate once selected will start part time for the first 90 days and phase into a full time position.

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     By attending Trade Shows, we are able to observe firsthand which new products are introduced and the interest generated by print shop owner/operators in the printing industry. Each show we attend provides us the opportunity to meet personally with key management of small and medium size manufacturers to discuss the opportunity of marketing and distributing their products on a non exclusive basis. This will prove to be a valuable tool for providing us with a current list of suppliers, key management contacts, and an insight into upcoming products being released to the industry. We can also ascertain what the manufacturers deem to be key advantages of their products.

     Once this information is complied, we will enter it into our database: contact person, date we met, location of the meeting and product used. This information can then be tailored to create a personalized approach for e-mailing, telemarketing, direct mailing and/or personal visits. Where possible, we would like to offer products and services by direct link to their website.

     To date we have selected several potential manufacturers of products that we believe we can negotiate contracts for distribution of their product. One of these products had been secured, pursuant to an agreement dated November 26, 2007 however, on April 08, 2008 we filed form 8K canceling our agreement dated November 26, 2007 with Majestic Supply Co. Inc. do to delay in availability of the cartridge.

Limited operating history; need for additional capital

     There is no historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price increases in services and products.

     To become profitable and competitive, we have to locate and negotiate agreements with manufacturers to offer their products for sale to us at pricing that will enable us to establish and sell the products to our clientele.

     We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand out operations. Equity financing could result in additional dilution to existing shareholders.

Results of operations
From Inception on December 12, 2006 to March 31, 2008

     What did the revenues come from? Two sales of product

     During the year, we incorporated the company, hired the attorney and the auditor and began to negotiate contracts and sell product. Our loss since inception is $262,352. We have started our proposed business operations and we have completed our public offering.

     Since inception, we sold 5,000,000 shares of common stock to our officers and directors for $50 and 490,500 shares of common stock at $0.25 per share for $122,625 and 83,334 shares of common stock at $0.60 per share for $50,000.

     What have you done since the registration statement was declared effective?

     Over the past year we attended several trade shows establishing contacts with many manufactures through out the USA, working closely with US gent who has developed similar relationships.

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     Our research found a huge demand for third party high quality inks and big demand for refillable ink cartridges for large format printers.

     We sourced out a Canadian company that was on threshold of launching a complete product line which met all the demands after researching their products we negotiated a non exclusive distribution agreement on November 26 2007 with the rights to exclusivity in a protected area based on meeting certain volume requirements.

     From December 2007 to March 20 2008 we attended several meeting with Majestic requesting production schedules and delivery times, which our clients were requesting before placing any orders. On April 8, 2008 Printing Components Inc board decided to cancel the license do to the delay in the availability of the cartridge.

Liquidity and capital resources

     As of the date of this report, we have generated $15,887 in revenues from our business operations.

     In December 2006, we issued 5,000,000 shares of common stock pursuant to the exemption contained in Reg. S of the Securities Act of 1933. This was accounted for as a sale of common stock.

     On June 25, 2007, we completed our public offering of 490,500 shares of common stock at an offering price of $0.25 per share. We raised $122,625.

     On December 28, 2007 we sold 83,334 restricted shares of our common stock pursuant to the exemption contained in Reg. S of the Securities Act of 1933, as amended at an offering price of $0.60 per share we raised $50,000.

     As of March 31, 2008, our total assets were $66,779 in cash, accounts receivable, inventory and fixed assets and our total liabilities were $156,456 comprised of $281 owing to Herb Adams for advances made by Mr. Adams and $6,175 in accrued liabilities and $150,000 in accrued officer salaries.

 
ITEM 4.      CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

     We maintain “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our Disclosure Controls were effective as of the end of the period covered by this report.

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Changes in Internal Controls

     We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.

 
PART II. OTHER INFORMATION

ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

     On April 2, 2007, the Securities and Exchange Commission declared our Form SB-2 Registration Statement effective (File number 333-141057) permitting us to offer up to 800,000 shares of common stock at $0.25 per share. There was no underwriter involved in our public offering.

     On June 25, 2007, we sold 490,500 shares of common stock at $0.25 per share for cash proceeds of $122,625. On December 28, 2007 we sold 83,334 restricted shares of our common stock at $0.60 per share for cash proceeds of $50,000. As of the date of this report, we spent the money raised from this offering as follows: $22,717 on travel, $62,608 on professional fees, $11,145 on meals and entertainment, $5,600 on web page design, $8,003 on rent, $3,593 on office, $892 on bank charges, and $3,700 for registration fees.

 
ITEM 6.      EXHIBITS.

     The following documents are included herein:

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on this 9^th day of May, 2008.

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EXHIBIT INDEX

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