Longwen Group Corp. - Quarter Report: 2008 December (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
Form
10-Q
(Mark
one)
x Quarterly Report
Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the
quarterly period ended: December 31, 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: 0-11596
ExperTelligence,
Inc.
(Exact
name of small business issuer as specified in its charter)
Nevada
95-3506403
(State of
incorporation)
(IRS
Employer ID Number)
83
Stanley Road
UN
1 Box 103
RR6
Woodville, Ontario K0M 2T0
(Address
of principal executive offices)
(416)
554-6546
(Issuer's
telephone number)
N/A
(Former
name, former address and former fiscal year, if changed since
last report)
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 past 90 days. YES o NO x
Indicate
by check mark whether the registrant is an accelerated filer, a non-accelerated
filer, or a smaller reporting company.
Large
accelerated filer o
Accelerated
filer
o
Non-accelerated
filer o Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule
12b-2 of the Exchange Act): YES x NO o
APPLICABLE
ONLY TO CORPORATE ISSUERS
State the
number of shares outstanding of each of the issuer's classes of common
equity,
as of the latest practicable date:
As of
January 27, 2009, there were approximately 104,818 shares
of the Issuer's common
stock, par value $0.0001 per share outstanding.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements in this quarterly report on Form 10-Q contain or may contain
forward-looking
statements that are subject to known and unknown risks, uncertainties
and other factors which may cause actual results, performance or achievements
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These forward-looking
statements were based on various factors and were derived utilizing
numerous assumptions and other factors that could cause our actual results
to differ materially from those in the forward-looking statements. These
factors
include, but are not limited to, economic, political and market conditions
and fluctuations, government and industry regulation, interest rate risk,
U.S. and global competition, and other factors including the risk factors
set forth
in our Form 10-KSB. Most of these factors are difficult to predict accurately
and are generally beyond our control. You should consider the areas of risk
described in connection with any forward-looking statements that may be
made
herein. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. Readers
should carefully review this quarterly report in its entirety, including
but not
limited to our financial statements and the notes thereto. Except for
our
ongoing obligations to disclose material information under the Federal
securities
laws, we undertake no obligation to release publicly any revisions to
any
forward-looking statements, to report events or to report the occurrence of
unanticipated
events. For any forward-looking statements contained in any document,
we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
ExperTelligence,
Inc.
Form
10-Q for the Quarter ended December 31, 2008
Table
of Contents
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Page
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1
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| 7 | |
| 7 | |
| 7 | |
| 7 | |
| 7 | |
| 8 | |
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SIGNATURES
|
INDEX
TO FINANCIAL STATEMENTS
|
Balance
Sheet
|
F-1
|
|
Statements
of Operations
|
F-2
|
|
Statements
of Cash Flows
|
F-3
|
|
Notes
to Financial Statement
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F-4
|
1
Expertelligence,
Inc.
(A
Development Stage Enterprise)
Balance
Sheets
December
31,
|
2008
|
2007
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
|
$ | 0 | $ | 0 | ||||
|
Prepaid Expenses
|
0 | 0 | ||||||
|
Total
current assets
|
0 | 0 | ||||||
|
OTHER
ASSETS
|
||||||||
|
Goodwill
|
0 | 0 | ||||||
|
Total
other assets
|
0 | 0 | ||||||
|
Total
Assets
|
$ | 0 | $ | 0 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
CURRENT
LIABILITIES
|
||||||||
|
Accounts
payable
|
||||||||
|
Trade
|
$ | 0 | $ | 0 | ||||
|
Accrued
interest payable
|
84,182 | 55,985 | ||||||
|
Total
current liabilities
|
84,182 | 55,985 | ||||||
|
LONG-TERM
LIABILITIES
|
||||||||
|
Line
of credit payable
|
304,318 | 289,734 | ||||||
|
Total
Liabilities
|
388,500 | 345,719 | ||||||
|
STOCKHOLDERS’
EQUITY
|
||||||||
|
Preferred
stock – no par value, 25,000,000 shares authorized, None issued and
outstanding
|
0 | 0 | ||||||
|
Common
stock, $0.0001 par value, 300,000,000 shares authorized.
104,818
and 20,463,023 shares issued and outstanding,
respectively
|
11 | 2,046 | ||||||
|
Additional
paid-in capital in excess of par
|
14,140,322 | 14,140,322 | ||||||
|
Deficit
accumulated during the development stage
|
(14,528,833 | ) | (14,461,065 | ) | ||||
|
Total
stockholders’ equity
|
(388,500 | ) | (345,719 | ) | ||||
|
Total
Liabilities and Stockholders’ Equity
|
$ | 0 | $ | 0 | ||||
The
accompanying notes are an integral part of the financial statements
F-1
Expertelligence,
Inc.
(A
Development Stage Enterprise)
Statement
of Operations and Comprehensive Loss
Three
months ended December 31,
Period
from October 1, 2003 (date of inception) through December 31,
2008
|
2008
|
2007
|
From
October
1, 2003 (Inception)
through
December 31, 2008
|
||||||||||
|
REVENUES
|
$ | 0 | $ | 0 | $ | 0 | ||||||
|
OPERATING
EXPENSES:
|
||||||||||||
|
General
and administrative expenses
|
1,266 | 3,912 | 314,318 | |||||||||
|
Professional
fees
|
5,000 | 6,000 | 40,000 | |||||||||
|
Interest
expense
|
7,608 | 5,795 | 72,867 | |||||||||
|
Total
expenses
|
13,874 | 15,707 | 427,185 | |||||||||
|
Loss
from operations
Before
provision for income taxes
|
$ | (13,874 | ) | $ | (15,707 | ) | $ | (427,185 | ) | |||
|
Provision
for income taxes
|
0 | 0 | 0 | |||||||||
|
Net
Loss
|
(13,874 | ) | (15,707 | ) | (427,185 | ) | ||||||
|
Other
Comprehensive Income
|
0 | 0 | 0 | |||||||||
|
Comprehensive
Loss
|
(13,874 | ) | (15,707 | ) | (427,185 | ) | ||||||
|
Income
(loss) per weighted average common share
|
Nil
|
Nil
|
||||||||||
|
Number
of weighted average common shares outstanding
|
104,818 | 20,463,023 | ||||||||||
The
accompanying notes are an integral part of the financial statements
F-2
Expertelligence,
Inc.
(A
Development Stage Enterprise)
Statement
of Cash Flows
Three
months ended December 31,
Period
from October 1, 2003 (date of inception)
Through
December 31, 2008
|
2008
|
2007
|
From
October
1, 2003 (Inception)
through
December 31, 2008
|
||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net
loss for the period
|
$ | (13,874 | ) | $ | (15,707 | ) | $ | (427,185 | ) | |||
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||||||
|
Stock
issued for services
|
0 | 0 | 0 | |||||||||
|
Changes
in operating assets and liabilities
|
||||||||||||
|
Increase
(decrease) in accounts payable - trade
|
0 | 0 | 0 | |||||||||
|
Increase
(decrease) in accrued interest payable
|
7,608 | 5,795 | 72,867 | |||||||||
|
Net
cash provided (used) by operating activities
|
(6,266 | ) | (9,912 | ) | (354,318 | ) | ||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
None
|
0 | 0 | 0 | |||||||||
|
Net
cash provided (used) by investing activities
|
0 | 0 | 0 | |||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Proceeds
from line of credit note
|
6,266 | 9,912 | 304,318 | |||||||||
|
Proceeds
from sale of common stock
|
0 | 0 | 50,000 | |||||||||
|
Net
cash provided by financing activities
|
6,266 | 9,912 | 354,318 | |||||||||
|
Net
increase (decrease) in cash
|
0 | 0 | 0 | |||||||||
|
CASH, beginning of
period
|
0 | 0 | 0 | |||||||||
|
CASH, end of
period
|
$ | 0 | $ | 0 | $ | 0 | ||||||
The
accompanying notes are an integral part of the financial statements
F-3
ExperTelligence,
Inc.
Notes
to Consolidated Financial Statements
Three
months ended December 31, 2008 and 2007
NOTE
A - Organization and Description of Business
ExperTelligence,
Inc. (Company) was originally incorporated in accordance with the Laws of the
State of California on March 31, 1980. The Company formerly developed
Internet portal technology, published database software products for the
Internet, and developed and hosted web/database and electronic commerce
application solutions.
On June
26, 2006, the Company changed its state of incorporation from California to
Nevada by means of a merger with and into a Nevada corporation formed on
November 17, 2005 solely for the purpose of effecting the
reincorporation. The Certificate of Incorporation and Bylaws of the
Nevada Corporation are the Certificate of Incorporation and Bylaws of the
surviving corporation. Such Certificate of Incorporation kept the
Company’s name of ExperTelligence, Inc. and modified the Company’s capital
structure to allow for the issuance of up to 300,000,000 shares of $0.0001 par
value common stock and 25,000,000 shares of $0.0001 par value preferred
stock.
On May
12, 2003, in a Current Report on Form 8-K, the Company announced that it would
conduct an auction to sell the Company’s assets and use the proceeds to settle
company debt, distributing any remainder to shareholders. This action
was precipitated by a lack of developmental and operating capital.
On
October 20, 2003, as announced in a Current Report on Form 8-K, the Company
confirmed that it conducted the previously-noticed public auction of Company
assets. That auction, held at noon on October 15, 2003, at the
Company’s offices, then located at 614 Chapala Street in Santa Barbara,
California, the Company sold:
|
-
|
the
WebBase product, including all related intellectual property and computer
hardware, software, and related equipment, license and customer
agreements, and operating accounts;
|
|
-
|
the
3DStockCharts product, including all related intellectual property and
computer hardware, software, and related equipment, license and customer
agreements, and operating accounts;
|
| - |
the
Advertising Commerce Network product, including all related intellectual
property and computer hardware, software, and related equipment, license
and customer agreements, and operating accounts;
|
| - | miscellaneous office furniture and computer equipment. |
| - | its interests in any and all third party corporations |
All sales
were made to creditors of the Company, and all payment for all items was made in
the form of a reduction of debt. The Company realized no cash from the
auction.
On
December 23, 2003, as announced in a Current Report on Form 8-K, the Company
issued 15,002,718 shares of the Company's unregistered, restricted Common Stock,
representing approximately 75.0% of the class, to Douglas P. Martin in exchange
for a cash payment of fifty thousand dollars ($50,000). The proceeds
of the sale were used to further reduce debt that was otherwise uncancelled by
the October 15, 2003 auction of the Company’s assets or incurred subsequent to
that date. The Company relied upon Section 4(2) of The Securities Act
of 1933, as amended, for an exemption from registration of these shares and no
underwriter was used in this transaction. The effect of this
transaction was a change of control, where Mr. Martin or transferees now
beneficially own approximately 75.0% of the issued and outstanding voting
securities of the Company.
F-4
ExperTelligence,
Inc.
Notes
to Consolidated Financial Statements
Three
months ended December 31, 2008 and 2007
NOTE
A - Organization and Description of Business - Continued
On
October 1, 2004, the Company secured a Line of Credit for the purposes of
bringing the financial information with respect to the Company current so that
it would be in a position to attract an operating company or a new business
operation. Since that time, the Company, through consultants and its
new auditor, has been able to update it’s records and bring its books and
records current.
On
October 1, 2004, the Company obtained a $250,000 unsecured line of credit to
provide for the updating, restructuring, and initial financing for
implementation of a Company business plan and model. The line of
credit bears interest at 10% per annum, payable quarterly, and all advanced
principal and unpaid interest is due and payable on December 31,
2008. The Lender has the right to convert the principal amount of the
indebtedness in whole or in part at any time prior to repayment into the
restricted common stock of the Company at a conversion rate of the lesser of 66
2/3 of the average of the closing bid and ask price on the date of conversion,
or $0.01 per share.
As of
December 31, 2008 a total of $304,318 has been advanced under this
agreement.
Since the
October 15, 2003 auction of the Company’s assets, the Company has had no
operations or significant assets. The Company’s current principal
business activity is to seek a suitable reverse acquisition candidate through
acquisition, merger or other suitable business combination method.
NOTE
B - Preparation of Financial Statements
The
Company follows the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America and has a year-end
of September 30.
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 the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Management
further acknowledges that it is solely responsible for adopting sound accounting
practices, establishing and maintaining a system of internal accounting control
and preventing and detecting fraud. The Company’s system of internal
accounting control is designed to assure, among other items, that 1) recorded
transactions are valid; 2) valid transactions are recorded; and 3) transactions
are recorded in the proper period in a timely manner to produce financial
statements which present fairly the financial condition, results of operations
and cash flows of the Company for the respective periods being
presented.
The
consolidated financial statements include the accounts of ExperTelligence, Inc.
and its wholly-owned subsidiaries, ExperClick.com, Inc. and ExperTelligence
Canada, Inc. and its majority-owned subsidiary 3DStockCharts.com, Inc. Minority
interest represents minority shareholders' proportionate share of the equity in
3DStockCharts.com, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation.
F-5
ExperTelligence,
Inc.
Notes
to Consolidated Financial Statements
Three
months ended December 31, 2008 and 2007
NOTE
B - Preparation of Financial Statements - Continued
For
segment reporting purposes, the Company operated in only one industry segment
during the periods represented in the accompanying financial statements and
makes all operating decisions and allocates resources based on the best benefit
to the Company as a whole.
NOTE
C - Going Concern Uncertainty
As of
October 15, 2003, the Company held an auction to sell the Company’s assets and
use the proceeds to settle company debt. This action was precipitated
by a lack of developmental and operating capital. All sales were made
to creditors of the Company, and all payment for all items was made in the form
of a reduction of debt. The Company realized no cash from the
auction. The Company has had no operations since 2003.
The
Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis.
The
Company anticipates future sales of equity securities to facilitate either the
consummation of a business combination transaction or to raise working capital
to support and preserve the integrity of the corporate
entity. However, there is no assurance that the Company will be able
to obtain additional funding through the sales of additional equity securities
or, that such funding, if available, will be obtained on terms favorable to or
affordable by the Company.
If no
additional operating capital is received during the next twelve months, the
Company will be forced to rely on existing cash in the bank and upon additional
funds loaned by management and/or significant stockholders to preserve the
integrity of the corporate entity at this time. In the event, the
Company is unable to acquire advances from management and/or significant
stockholders, the Company’s ongoing operations would be negatively
impacted.
It is the
intent of management and significant stockholders to provide sufficient working
capital necessary to support and preserve the integrity of the corporate
entity. However, no formal commitments or arrangements to advance or
loan funds to the Company or repay any such advances or loans
exist. There is no legal obligation for either management or
significant stockholders to provide additional future funding.
While the
Company is of the opinion that good faith estimates of the Company’s ability to
secure additional capital in the future to reach our goals have been made, there
is no guarantee that the Company will receive sufficient funding to sustain
operations or implement any future business plan steps.
F-6
ExperTelligence,
Inc.
Notes
to Consolidated Financial Statements
Three
months ended December 31, 2008 and 2007
NOTE
D - Summary of Significant Accounting Policies
1. Cash and cash
equivalents
For
Statement of Cash Flows purposes, the Company considers all cash on hand and in
banks, certificates of deposit and other highly-liquid investments with
maturities of three months or less, when purchased, to be cash and cash
equivalents.
Cash
overdraft positions may occur from time to time due to the timing of making bank
deposits and releasing checks, in accordance with the Company's cash management
policies.
2.
Earnings (loss) per
share
Basic
earnings (loss) per share is computed by dividing the net income (loss)
available to common shareholders by the weighted-average number of common shares
outstanding during the respective period presented in our accompanying financial
statements.
Fully
diluted earnings (loss) per share is computed similar to basic income (loss) per
share except that the denominator is increased to include the number of common
stock equivalents (primarily outstanding options and warrants).
Common
stock equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method, at
either the beginning of the respective period presented or the date of issuance,
whichever is later, and only if the common stock equivalents are considered
dilutive based upon the Company’s net income (loss) position at the calculation
date.
3. Recently Issued
Pronouncements
The
Company is of the opinion that any and all pending accounting pronouncements,
either in the adoption phase or not yet required to be adopted, will not have a
significant impact on the Company's financial position or results of
operations.
F-7
ExperTelligence,
Inc.
Notes
to Consolidated Financial Statements
Three
months ended December 31, 2008 and 2007
NOTE
E - Fair Value of Financial Instruments
The
carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest
rate risk is the risk that the Company’s earnings are subject to fluctuations in
interest rates on either investments or on debt and is fully dependent upon the
volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to interest rate risk, if any.
Financial
risk is the risk that the Company’s earnings are subject to fluctuations in
interest rates or foreign exchange rates and are fully dependent upon the
volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
NOTE
F - Concentrations of Credit Risk
The
Company and it’s subsidiaries maintain their cash accounts in various financial
institutions subject to insurance coverage issued by the Federal Deposit
Insurance Corporation (FDIC). Under FDIC rules, the Company is
entitled to aggregate coverage of $100,000 per account type per financial
institution.
NOTE
G - Income Taxes
The
components of income tax (benefit) expense for each of the years ended September
30, 2008 and 2007, respectively, are as follows:
|
Year
ended
September
30,
2008
|
Year
ended
September
30,
2007
|
|||||||
|
Federal:
|
||||||||
|
Current
|
$ | - | $ | - | ||||
|
Deferred
|
- | - | ||||||
|
|
- | - | ||||||
|
State:
|
||||||||
|
Current
|
||||||||
|
Deferred
|
- | - | ||||||
|
|
- | - | ||||||
|
Total
|
$ | - | $ | - | ||||
F-8
ExperTelligence,
Inc.
Notes
to Consolidated Financial Statements
Three
months ended December 31, 2008 and 2007
NOTE
G - Income Taxes - Continued
As of
September 30, 2003, the Company has a net operating loss carryforward of
approximately $14,000,000 to offset future taxable income. However,
due to a December 2003 change in control transaction and subject to current
regulations, the amount and availability of the net operating loss carryforwards
will be subject to limitations set forth by the Internal Revenue
Code. Factors such as the number of shares ultimately issued within a
three-year look-back period; whether there is a deemed more than 50 percent
change in control; the applicable long-term tax exempt bond rate; continuity of
historical business; and subsequent income of the Company all enter into the
annual computation of allowable annual utilization of the
carryforwards.
NOTE
H - Equity Transactions
Preferred
Stock
None
during this period and none issued and outstanding.
Common
Stock
None
issued during this period.
NOTE
I - Related Party Transactions
There are
currently none.
F-9
The following
discussion and analysis should be read in conjunction with our
Financial Statements and Notes thereto appearing elsewhere in this Report on
Form 10-Q
as well as our other SEC filings.
Results
of Operations
The Company
has had no operations or significant assets since October 15, 2003.
For the
period ended December 31, 2008 and 2007, the Company realized consolidated
net revenues of approximately $-0- and $-0-, respectively.
In
conjunction with the recognition of the above net revenues, the Company
experienced
costs of providing services of approximately $-0- and $-0-, respectively.
A major
component of the ultimate demise of the Company's operations was the
recognition of research and development costs of approximately $108,000 and
$480,000,
respectively; selling and marketing expenses of approximately $371,000
and
$449,000, respectively; and corporate general and administrative expenses of
approximately
$2,577,000 and $2,586,000, respectively, for each of the years ended
September 30, 2001 and 2000.
The Company
does not expect to generate any meaningful revenue or incur operating
expenses for purposes other than fulfilling the obligations of a reporting
company under the Securities Exchange Act of 1934 unless and until such time
that the Company completes a business combination transaction with an
operating
entity.
It is the
belief of management and significant stockholders that sufficient working
capital necessary to support and preserve the integrity of the corporate
entity
will be present. However, there is no legal obligation for either management
or significant stockholders to provide additional future funding. Should
this pledge fail to provide financing, the Company has not identified any
alternative
sources. Consequently, there is substantial doubt about the Company's
ability to continue as a going concern.
The Company's
need for working capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no assurance
that the Company will identify any such business, product, technology
or
company suitable for acquisition in the future. Further, there can be no
assurance
that the Company would be successful in consummating any acquisition
on
favorable terms or that it will be able to profitably manage the business,
product,
technology or company it acquires.
Revenues
The Company
did not generate any revenues from operations for the three months
ended December 2008 or 2007. Accordingly, comparisons with prior periods
are not
meaningful. The Company is subject to risks inherent in the establishment
of a new business enterprise, including limited capital resources and cost
increases in services.
Operating
Expenses
Operating
expenses decreased by $1,833 from $15,707 for the three months ended
December 31, 2007 to $13,874 for the three months ended December 31, 2008. The
decrease
in our operating expenses is due to decreased administrative expenses
we
incurred for the three months ended December 31, 2008.
2
Interest
Expense
Interest
expense for the three months ended December 31, 2008, and 2007 was $7,608
and $5,795 respectively.
Net Income/Loss
Net loss decreased by $1,833 from net loss of $15,707 for the three months ended December 31, 2007 to a net loss of $13,874 for the three months ended December 31, 2008. The decrease in net operating loss is due to the decrease in operating expenses.
Assets
and Liabilities
Our total
assets were $0 at December 31, 2008.
Total Current
Liabilities are $84,182 at December 31, 2008. Our notes payable are for
$304,318.
Financial
Condition, Liquidity and Capital Resources
At December
31, 2008, we had cash and cash equivalents of $0. Our working capital
is presently minimal and there can be no assurance that our financial
condition
will improve. To date, we have not generated cash flow from operations.
Consequently, we have been dependent upon a third party non-affiliate,
NBI-Joint Venture ("NBI-JV"), to fund our cash requirements. The entire
unpaid balance of principal(subject to conversion of such principal as
provided
in the Note) and all accrued and unpaid interest shall be due and payable
on the day prior to the first anniversary of the Effective Date of the
Note.
As of December 31, 2008, we had a working capital deficit of $388,500. At December 31, 2008, we had no outstanding debt other than convertible notes payable to NBI-JV and accrued interest payable on the Notes. The Company will seek funds from possible strategic and joint venture partners and financing to cover any short term operating deficits and provide for long term working capital. No assurances can be given that the Company will successfully engage strategic or joint venture partners or otherwise obtain sufficient financing through the sale of equity.
No trends have been identified which would materially increase or decrease our results of operations or liquidity.
We have short-term liquidity problems that will be addressed by the Convertible Note. For long-term liquidity, we believe that we will need to raise additional capital to remain an ongoing concern; however, as stated above no commitments have been made as of this date.
Plan of
Business
General
The Company
intends to locate and combine with an existing, privately_held company
which is profitable or, in management's view, has growth potential, irrespective
of the industry in which it is engaged. However, the Company does not
intend to combine with a private company which may be deemed to be an
investment
company subject to the Investment Company Act of 1940. A combination
may be
structured as a merger, consolidation, exchange of the Company's common
stock for
stock or assets or any other form, which will result in the combined
enterprise's
becoming a publicly held corporation.
Pending
negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination
partner, no business activities, and, thus, will have no source of revenue.
Should the Company incur any significant liabilities prior to a combination
with a private company, it may not be able to satisfy such liabilities
as are incurred.
3
If the
Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any
successful
combination can be consummated. In that event, the Company's common stock
will become worthless and holders of the Company's common stock will
receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, the Company's management intends to consider only combination candidates which are profitable or, in management's view, have growth potential. The Company's management does not intend to pursue any combination proposal beyond the preliminary negotiation stage with any combination candidate which does not furnish the Company with audited financial statements for at least its most recent fiscal year and unaudited financial statements for interim periods subsequent to the date of such audited financial statements, or is in a position to provide such financial statements in a timely manner. The Company will, if necessary funds are available, engage attorneys and/or accountants in its efforts to investigate a combination candidate and to consummate a business combination. The Company may require payment of fees by such combination candidate to fund the investigation of such candidate. In the event such a combination candidate is engaged in a high technology business, the Company may also obtain reports from independent organizations of recognized standing covering the technology being developed and/or used by the candidate. The Company's limited financial resources may make the acquisition of such reports difficult or even impossible to obtain and, thus, there can be no assurance that the Company will have sufficient funds to obtain such reports when considering combination proposals or candidates. To the extent the Company is unable to obtain the advice or reports from experts, the risks of any combined enterprise's being unsuccessful will be enhanced. Furthermore, to the knowledge of the Company's officers and directors, neither the candidate nor any of its directors, executive officers, principal shareholders or general partners:
1. will not have been convicted of securities fraud, mail fraud, tax fraud, embezzlement, bribery, or a similar criminal offense involving misappropriation or theft of funds, or be the subject of a pending investigation or indictment involving any of those offenses;
2. will not have been subject to a temporary or permanent injunction or restraining order arising from unlawful transactions in securities, whether as issuer, underwriter, broker, dealer, or investment advisor, may be the subject of any pending investigation or a defendant in a pending lawsuit arising from or based upon allegations of unlawful transactions in securities; or
3. will not have been a defendant in a civil action which resulted in a final judgement against it or him awarding damages or rescission based upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking pertinent questions of the management of prospective combination candidates. Such persons will also ask pertinent questions of others who may be involved in the combination proceedings. However, the officers and directors of the Company will not generally take other steps to verify independently information obtained in this manner which is favorable. Unless something comes to their attention which puts them on notice of a possible disqualification which is being concealed from them, such persons will rely on information received from the management of the prospective combination candidate and from others who may be involved in the combination proceedings.
4
Liquidity
and Capital Resources
It is the belief of management and significant stockholders that sufficient working capital necessary to support and preserve the integrity of the corporate entity will be present. However, there is no legal obligation for either management or significant stockholders to provide additional future funding. Should this pledge fail to provide financing, the Company has not identified any alternative sources. Consequently, there is substantial doubt about the Company's ability to continue as a going concern.
The Company has no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities prior to the location of a merger or acquisition candidate. Accordingly, there can be no assurance that sufficient funds will be available to the Company to allow it to cover the expenses related to such activities.
The Company does not currently contemplate making a Regulation S offering.
Regardless of whether the Company's cash assets prove to be inadequate to meet the Company's operational needs, the Company might seek to compensate providers of services by issuances of stock in lieu of cash. For information as to the Company's policy in regard to payment for consulting services, see Certain Relationships and Transactions.
Critical Accounting Policies
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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
Loss per share: Basic loss per share excludes dilution and is computed by dividing the loss attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company. Diluted loss per share is computed by dividing the loss available to common shareholders by the weighted average number of common shares outstanding for the period and dilutive potential common shares outstanding unless consideration of such dilutive potential common shares would result in anti-dilution. Common stock equivalents were not considered in the calculation of diluted loss per share as their effect would have been anti-dilutive for the periods ended June 30, 2008 and 2007.
Going Concern.
The Company has suffered recurring losses from operations and is in serious need of additional financing. These factors among others indicate that the Company may be unable to continue as a going concern, particularly in the event that it cannot obtain additional financing or, in the alternative, affect a merger or acquisition. The Company's continuation as a going concern depends upon its ability to generate sufficient cash flow to conduct its operations and its ability to obtain additional sources of capital and financing. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
5
The Company is not subject to any specific market risk other than that encountered by any other public company related to being publicly traded.
Our management, which includes our Chief Executive Officer who also serves as our principal financial officer, have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended) as of a date (the "Evaluation Date") as of the end of the period covered by this report. Based upon that evaluation, our management has concluded that our disclosure controls and procedures are not effective for timely gathering, analyzing and disclosing the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934, as amended, because of adjustments required by our independent auditors, primarily in the area of notes payable. Specifically, our independent auditors identified deficiencies in our internal controls and disclosures related to the valuation and amortization of beneficial conversion features on our notes payable. We have made the necessary adjustments to our financial statements and footnote disclosures in our Interim Report on Form 10-Q. We are in the process of improving our internal controls in an effort to remediate the deficiencies. There have been no significant changes made in our internal controls or in other factors that could significantly affect our internal controls subsequent to the end of the period covered by this report based on such evaluation.
6
None.
None.
None
None
None
7
(a) The following
sets forth those exhibits filed pursuant to Item 601 of Regulation
S-K:
Exhibit
No. Description
31.1 Rule
13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer
31.2 Rule
13a-14(a)/ 15d-14(a) Certification of Principal Financial and accounting
officer
32.1 Section
1350 Certification of Chief Executive Officer and Principal Financial
and Accounting officer
(b) The
following sets forth the Company's reports on Form 8-K that have been
filed during the quarter for which this report is filed:
None.
8
Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on
its
behalf by the undersigned thereunto duly authorized.
| ExperTelligence, Inc. | |||
|
Date:
February 17, 2009
|
By:
|
/s/ Jason Smart | |
| Jason Smart* | |||
| Chief Executive Officer, | |||
| President and Chairman of the Board* | |||
* Jason
Smart has signed both on behalf of the registrant as a duly authorized
officer and as the Registrant's principal accounting officer.