Longwen Group Corp. - Quarter Report: 2010 June (Form 10-Q)
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: June 30, 2010
Commission file no.: 0-11596
EXPERTELLIGENCE, INC.
(Name of Small Business Issuer in its Charter)
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Nevada
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95-3506403
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(State or other jurisdiction of
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(I.R.S.Employer
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incorporation or organization)
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Identification No.)
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| 2101 Vista Pkwy. Ste. 292 |
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West Palm Beach, FL
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33411
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(Address of principal executive offices)
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(Zip Code)
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Issuer=s telephone number: (561) 228-6148
Securities registered under Section 12(b) of the Act:
| Title of each class |
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Name of each exchange
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| on which registered |
| None |
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None
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Securities registered under Section 12(g) of the Act:s
| Common Stock, $0.0001 par value per share |
(Title of class)
Copies of Communications Sent to:
Indicate by 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 x No o
Indicate by check mark whether the registrant is an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes x Noo
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 August 11, 2010, 2010, there were 25,104,818 shares of voting stock of the registrant issued and outstanding.
PART I
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ITEM 1.
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FINANCIAL STATEMENTS
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INDEX TO FINANCIAL STATEMENTS
| Balance Sheets | F-2 |
| Statements of Operations | F-3 |
| Statements of Stockholders= Equity | F-4 |
| Statements of Cash Flows | F-5 |
| Notes to Financial Statements | F-6 |
EXPERTELLIGENCE, INC.
(A Development Stage Enterprise)
Balance Sheets
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June 30,
2010
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September 30,
2009
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(unaudited)
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ASSETS
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CURRENT ASSETS
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Cash and equivalents
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$ | 9,808 | $ | 333 | ||||
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Prepaid expenses
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1,250 | 0 | ||||||
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Total current assets
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11,058 | 333 | ||||||
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PROPERTY AND EQUIPMENT
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Equipment
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0 | 0 | ||||||
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Less: Accumulated depreciation
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0 | 0 | ||||||
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Net property and equipment
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0 | 0 | ||||||
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OTHER ASSETS
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Deposits
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0 | 0 | ||||||
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Total other assets
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0 | 0 | ||||||
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Total Assets
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$ | 11,058 | $ | 333 | ||||
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LIABILITIES AND STOCKHOLDERS= EQUITY
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CURRENT LIABILITIES
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Accounts Payable and accrued liabilities
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$ | 2,747 | $ | 2,747 | ||||
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Accrued interest payable
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11,843 | 107,215 | ||||||
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Total current liabilities
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14,590 | 109,962 | ||||||
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Line of credit payable
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20,000 | 313,210 | ||||||
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Total long-term liabilities
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20,000 | 313,210 | ||||||
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Total liabilities
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34,590 | 423,172 | ||||||
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STOCKHOLDERS= EQUITY
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Preferred stock, $0.0001 par value, 25,000,000 shares authorized, 0 issued and outstanding
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0 | 0 | ||||||
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Common stock, $0.0001, authorized 300,000,000 shares; 94,964,118 and 25,104,818 issued and outstanding, respectively
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9,496 | 2,510 | ||||||
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Additional paid in capital in excess of par
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14,831,465 | 14,139,858 | ||||||
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Deficit accumulated during the development stage
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(14,864,493 | ) | (14,565,207 | ) | ||||
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Total stockholders= equity
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(23,532 | ) | (422,839 | ) | ||||
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Total Liabilities and Stockholders= Equity
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$ | 11,058 | $ | 333 | ||||
The accompanying notes are an integral part of the financial statements
F - 2
EXPERTELLIGENCE, INC.
(A Development Stage Enterprise)
Statements of Operations
(unaudited)
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Three Months
Ended June 30,
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Nine Months
Ended June 30,
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Period from
Oct 1, 2003
(Inception)
through
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2010
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2009
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2010
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2009
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June 30, 2010
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REVENUES
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$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
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OPERATING EXPENSES
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General and administrative
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5,526 | 1,747 | 265,775 | 6,905 | 587,399 | |||||||||||||||
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Professional fees
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2,500 | 1,000 | 13,500 | 6,000 | 57,500 | |||||||||||||||
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Interest expense
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3,506 | 7,600 | 20,011 | 22,804 | 115,911 | |||||||||||||||
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Total expenses
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11,532 | 10,347 | 299,286 | 35,709 | 760,810 | |||||||||||||||
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Net loss
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$ | (11,532 | ) | $ | (10,347 | ) | $ | (299,286 | ) | $ | (35,709 | ) | $ | (760,810 | ) | |||||
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Basic net loss per weighted average share
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$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||
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Weighted average number of shares
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94,964,118 | 25,104,818 | 94,964,118 | 25,104,818 | ||||||||||||||||
The accompanying notes are an integral part of the financial statements
F - 3
EXPERTELLIGENCE, INC.
(A Development Stage Enterprise)
Statements of Stockholders= Equity
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Number of Common
Shares
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Common
Stock
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Add=tl
Paid in
Capital
in
Excess
of Par
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Deficit
Accumulated
During the
Development
Stage
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Total
Stockholders=
Equity
(Deficit)
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INCEPTION BALANCE, Sept 30, 2002
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2,343,180 | $ | 234 | $ | 11,399,832 | $ | (9,226,896 | ) | $ | 2,173,170 | ||||||||||
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Shares issued to settle debt
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3,117,125 | 312 | 2,691,990 | 0 | 2,692,302 | |||||||||||||||
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Net loss
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0 | 0 | 0 | (4,865,472 | ) | (4,865,472 | ) | |||||||||||||
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BALANCE, September 30, 2003
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5,460,305 | 546 | 14,091,822 | (14,092,368 | ) | 0 | ||||||||||||||
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Sale of stock for cash
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19,644,513 | 1,964 | 48,036 | 0 | 50,000 | |||||||||||||||
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Net loss
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0 | 0 | 0 | (50,000 | ) | (50,000 | ) | |||||||||||||
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BALANCE, September 30, 2004
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25,104,818 | 2,510 | 14,139,858 | (14,142,368 | ) | 0 | ||||||||||||||
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Net loss
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0 | 0 | 0 | (145,486 | ) | (145,486 | ) | |||||||||||||
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BALANCE, September 30, 2005
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25,104,818 | 2,510 | 14,139,858 | (14,287,854 | ) | (145,486 | ) | |||||||||||||
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Net loss
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0 | 0 | 0 | (80,265 | ) | (80,265 | ) | |||||||||||||
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BALANCE, September 30, 2006
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25,104,818 | 2,510 | 14,139,858 | (14,368,119 | ) | (225,751 | ) | |||||||||||||
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Net loss
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0 | 0 | 0 | (104,261 | ) | (104,261 | ) | |||||||||||||
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BALANCE, September 30, 2007
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25,104,818 | 2,510 | 14,139,858 | (14,472,380 | ) | (330,012 | ) | |||||||||||||
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Net loss
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0 | 0 | 0 | (44,614 | ) | (44,614 | ) | |||||||||||||
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BALANCE, September 30, 2008
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25,104,818 | 2,510 | 14,139,858 | (14,516,994 | ) | (374,626 | ) | |||||||||||||
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Net loss
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0 | 0 | 0 | (48,213 | ) | (48,213 | ) | |||||||||||||
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BALANCE, September 30, 2009
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25,104,818 | 2,510 | 14,139,858 | (14,565,207 | ) | (422,839 | ) | |||||||||||||
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Common shares issued for services
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25,000,000 | 2,500 | 247,500 | 0 | 250,000 | |||||||||||||||
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Common shares issued to settle debt & interest
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44,859,300 | 4,486 | 444,107 | 0 | 448,593 | |||||||||||||||
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Net loss
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0 | 0 | 0 | (299,286 | ) | (299,286 | ) | |||||||||||||
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ENDING BALANCE, June 30, 2010 (unaudited)
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94,964,118 | $ | 9,496 | $ | 14,831,465 | $ | (14,864,493 | ) | $ | (23,532 | ) | |||||||||
The accompanying notes are an integral part of the financial statements
F - 4
EXPERTELLIGENCE, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
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Nine Months Ended
June 30,
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From
October 1, 2003 (Inception)
through
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2010
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2009
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June 30, 2010
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(unaudited)
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(unaudited)
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(unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (299,286 | ) | $ | (35,709 | ) | $ | (760,810 | ) | |||
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Adjustments to reconcile net loss to net cash used by operating activities:
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Stock issued for services
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250,000 | 0 | 250,000 | |||||||||
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Changes in operating assets and liabilities
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(Increase) decrease in prepaid expenses
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(1,250 | ) | 0 | (1,250 | ) | |||||||
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Incr (decrease) in accounts payable and accrued liabilities
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0 | 2,747 | 2,747 | |||||||||
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Increase (decrease) in accrued interest payable
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20,011 | 22,804 | 115,911 | |||||||||
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Net cash used by operating activities
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(30,525 | ) | (10,158 | ) | (393,402 | ) | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Draw on line of credit
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40,000 | 10,158 | 353,210 | |||||||||
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Proceeds from issuance of common stock
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0 | 0 | 50,000 | |||||||||
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Net cash provided by financing activities
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40,000 | 10,158 | 403,210 | |||||||||
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Net increase (decrease) in cash
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9,475 | 0 | 9,808 | |||||||||
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CASH, beginning of period
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333 | 0 | 0 | |||||||||
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CASH, end of period
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$ | 9,808 | $ | 0 | $ | 9,808 | ||||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Common stock issued to settle debt and accrued interest
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$ | 448,593 | $ | 0 | ||||||||
The accompanying notes are an integral part of the financial statements
F - 5
EXPERTELLIGENCE, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(Information with regard to the nine months ended June 30, 2010 and 2009 is unaudited)
(1) Summary of Significant Accounting Policies
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TheCompany Expertelligence, Inc., (the Company), was incorporated on March 31, 1980, under the laws of the State of California. On June 26, 2006, the Company reincorporated in Nevada.
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The Company is a United States public company and trades on the Over-the-Counter Bulletin Board, (OTC:BB). The Company is available as a public shell to be acquired or to merge with another entity. The Company is considered to be in the development stage since October 1, 2003, and the accompanying financial statements represent those of a development stage company in accordance with SFAS No. 7, Accounting and Reporting by Development Stage Enterprises.@
The following summarize the more significant accounting and reporting policies and practices of the Company:
a) Use of estimates The financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates.
b) Start-Up costs Costs of start-up activities, including organization costs, are expensed as incurred, in accordance with Statement of Position (SOP) 98-5.
c) Net loss per share Basic loss per weighted average common share excludes dilution and is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The Company applies Statement of Financial Accounting Standards No. 128, Earnings Per Share@ (FAS 128).
d) Fair value of financial instruments The carrying values of cash and accrued liabilities approximate their fair values due to the short maturity of these instruments.
e) Income taxes The Company accounts for income taxes according to Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes@. Under the liability method specified by SFAS No. 109, deferred income taxes are recognized for the future tax consequences of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities.
f) Interim financial information The financial statements for the nine months ended June 30, 2009 and 2008 are unaudited and include all adjustments which in the opinion of management are necessary for fair presentation, and such adjustments are of a normal and recurring nature. The results for the six months are not indicative of a full year results.
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(2)
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Stockholders= Equity The Company has authorized 300,000,000 shares of $0.0001 par common stock. At June 30, 2010 and September 30, 2009 there were 50,104,818 and 25,104,818 shares issued and outstanding, respectively.
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In March 2010 the Company issued 25,000,000 shares for services valued at $250,000, or $0.01 per share, the then current market value. In May 2010, the Company issued 44,859,300 shares of common stock to settle $333,210 of then outstanding convertible debt and $115,383 of accrued interest thereon, after a fairness hearing in the Circuit Court of the 18th Judicial Circuit, in and for Seminole County, Florida.
(3) Income Taxes Deferred income taxes (benefits) are provided for certain income and expenses which are recognized in different periods for tax and financial reporting purposes. The Company had net operating loss carry-forwards
F - 6
EXPERTELLIGENCE, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
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(3)
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Income Taxes, continued for income tax purposes of approximately $760,800 expiring beginning September 30, 2028. The amount recorded as deferred tax asset as of June 30, 2010 is approximately $300,000, which represents the amount of tax benefit of the loss carry-forward.
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Deferred tax assets are reduced by a valuation allowance if, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management=s valuation procedures consider projected utilization of deferred tax assets prospectively over the next several years, and continually evaluate new circumstances surrounding the future realization of such assets. The difference between income taxes and the amount computed by applying the federal statutory tax rate to the loss before income taxes is due to an increase in the deferred tax asset valuation allowance.
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(4)
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Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company=s financial position and operating results raise substantial doubt about the Company=s ability to continue as a going concern, as reflected by the net loss of $14,864,500 accumulated from March 31, 1980 (Inception) through June 30, 2010. The ability of the Company to continue as a going concern is dependent upon commencing operations, developing sales and obtaining additional capital and financing. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company is currently seeking additional capital to allow it to begin its planned operations.
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(5)
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Convertible Line of Credit Payable In October 2004, the Company entered into a line of credit with a third party, convertible into common stock at the discretion of the lender, for $250,000. This line of credit carries an 10% rate of interest. It is convertible into common stock at any time prior to repayment at a conversion rate of the lesser of 66 2/3 of the average closing price on the date of conversion or $0.01 per share, This line of credit carried an maturity date of December 31, 2008. In August 2009, the Company received an extension of the maturity of the line of credit to December 31, 2010 and an increase in the line of credit to $500,000. As of June 30, 2010, $20,000 has been advanced under this line of credit. In May 2010, the Company issued 44,859,300 shares of common stock to settle $333,210 of then outstanding convertible debt and $115,383 of accrued interest thereon, after a fairness hearing in the Circuit Court of the 18th Judicial Circuit, in and for Seminole County, Florida.
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F - 7
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ITEM 2.
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MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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Results of Operations
The Company had no revenues for the three and nine months ended June 30, 2010 and 2009, respectively.
The Company expended $11,532 and $10,347; and $299,286 and $35,709, for the three and nine months ended June 30, 2010 and 2009, respectively, on operating expenses.
Future expenditure levels are expected to be nominal, generally for the purpose of maintaining the Company's stockholder records and filing requirements to comply with the Securities Exchange Act of 1934 and for initiating the Company's current business plan, as discussed previously.
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's operating subsidiary begins meaningful operations.
Liquidity and Capital Resources
At June 30, 2010, the Company had working capital of ($124,118).
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, there is no legal obligation for either management or significant stockholders to provide additional future funding. Consequently, there is substantial doubt about the Company's ability to continue as a going concern, notwithstanding this funding just described.
The Company's need for capital may change dramatically as a result of the implementation of a business plan instead of a reverse merger.
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.
Net Operating Losses
The Company has net operating loss carry-forwards of $760,800, expiring beginning September 30, 2028. Until the Company=s current operations begin to produce earnings, it is unclear whether the Company can utilize such carry-forwards.
Plan of Operation
The Company is seeking either a viable business plan or a suitable reverse merger candidate.
At June 30, 2010, we had cash and cash equivalents of $9,808. 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 our line of credit to fund our cash requirements . In August 2009, the Company received an extension of the maturity of the line of credit to December 31, 2010 and an increase in the line of credit to $500,000. Specifically, we have borrowed a total of $20,000 on this line We therefore have $480,000 available to draw upon.
As of June 30, 2010, we had a working capital deficit of $3,532. The Company will seek funds from possible investors, lenders, 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.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company is not subject to any specific market risk other than that encountered by any other public company related to being publicly traded.
Forward-Looking Statements
This Form 10-Q includes forward-looking statements@ within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-Q which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), finding suitable merger or acquisition candidates, expansion and growth of the Company=s business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results or developments will conform with the Company=s expectations and predictions is subject to a number of risks and uncertainties, general economic market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
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ITEM 4T.
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CONTROLS AND PROCEDURES
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As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's President, Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, the Company's President, Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
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ITEM 1.
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LEGAL PROCEEDINGS.
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The Company knows of no legal proceedings to which it is a party or to which any of its property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against the Company.
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ITEM 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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In May 2010, the Company issued 44,859,300 shares of common stock to settle $333,210 of then outstanding convertible debt and $115,383 of accrued interest thereon, after a fairness hearing in the Circuit Court of the 18th Judicial Circuit, in and for Seminole County, Florida.
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ITEM 3.
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DEFAULTS IN SENIOR SECURITIES
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None
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ITEM 4.
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matter was submitted during the quarter ending June 30, 2010, covered by this report to a vote of the Company's shareholders, through the solicitation of proxies or otherwise.
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ITEM 5.
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OTHER INFORMATION
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None
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ITEM 6.
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EXHIBITS
|
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-K, as described in the following index of exhibits, are incorporated herein by reference, as follows:
| Exhibit No. | Description |
31.1 * Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1 * Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
* Filed herewith
(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.
SIGNATURES
In accord with Section 13 or 15(d) of the Securities Act of 1933, as amended, the Company caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
EXPERTELLIGENCE, INC.
Dated: August 12, 2010
| By: | /s/ Francisco Terreforte | |
| Francisco Terreforte | ||
| Chief Executive Officer, | ||
| Chief Financial Officer | ||
| President and Chairman of the Board |