Rogue One, Inc. - Quarter Report: 2008 September (Form 10-Q)
|
SECURITIES
AND EXCHANGE COMMISSION
|
|
Washington,
DC 20549
|
|
FORM
10-Q
|
(Mark
One)
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2008
OR
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from __________ to _________
Commission
file number: 000-24723
|
MOD
HOSPITALITY, INC.
|
|
(Exact
name of registrant as specified in its
charter)
|
|
Nevada
|
88-0393257
|
|
|
(State
of Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification Number)
|
|
11710
Old Georgetown Road, Suite 808, North Bethesda, MD
|
20852
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(301)
230-9674
|
|
(Registrant's
telephone number, including Area
Code)
|
|
PSPP
HOLDINGS, INC.
3435
Ocean Park Blvd. #107, Santa Monica, CA 90405
|
|
(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 preceding 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X ] No
[_]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer [_]
|
Accelerated
filer [_]
|
|
Non-accelerated
filer [_] (Do not check if a smaller reporting
company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes [ ] No [X]
The
aggregate number of shares issued and outstanding of the issuer's common stock
as of November 14, 2008 was 50,044,169 shares. (adjusted for the
stock splits effective June 2008 and September 2008)
TABLE OF
CONTENTS
|
Page
|
|
|
PART
I - FINANCIAL INFORMATION
|
|
|
Item
1. Financial Statements
|
F-1
|
|
Item
2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
|
2
|
|
Item
3. Quantitative and Qualitative Disclosures About
Market Risk
|
3
|
|
Item
4. Controls and Procedures
|
4
|
|
Item
4T. Controls and Procedures
|
|
|
PART
II - OTHER INFORMATION
|
|
|
Item
1. Legal Proceedings
|
4
|
|
Item
1A. Risk Factors
|
|
|
Item
2. Unregistered Sale of Equity Securities and Use
of Proceeds
|
5
|
|
Item
3. Defaults Upon Senior Securities
|
5
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
5
|
|
Item
5. Other Information
|
5
|
|
Item
6. Exhibits
|
5
|
|
SIGNATURES
|
6
|
FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
|
MOD
HOSPITALITY, INC.
|
||||||||
|
F/K/A
PSPP HOLDINGS, INC.
|
||||||||
|
BALANCE
SHEETS
|
||||||||
|
9/30/2008
|
12/31/2007
|
|||||||
|
Unaudited
|
Audited
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets
|
||||||||
|
Cash
|
$ | - | $ | 211 | ||||
|
Total
current assets
|
- | 211 | ||||||
|
Other
assets
|
||||||||
|
Investments
|
58,000 | 313,000 | ||||||
|
Total
other assets
|
58,000 | 313,000 | ||||||
|
Total
assets
|
$ | 58,000 | $ | 313,211 | ||||
|
LIABILITIES AND
DEFICIENCY IN ASSETS
|
||||||||
|
Current
liabilities
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 315,812 | $ | 175,951 | ||||
|
Loans
payable
|
301,925 | 468,840 | ||||||
|
Total
current liabilities
|
617,737 | 644,791 | ||||||
|
Long-term
liabilities
|
- | - | ||||||
|
Total
liabilities
|
617,737 | 644,791 | ||||||
|
Commitment
and contingencies
|
- | - | ||||||
|
Deficiency in
assets
|
||||||||
|
Preferred
stock, $.001 par value, 10,000,000 shares
|
||||||||
|
authorized,
1,000.000 issued and outstanding
|
10,000 | 300,000 | ||||||
|
Common
stock, $.001 par value, 100,000,000 shares
|
||||||||
|
authorized;
67,997 and 64,499,364
|
||||||||
|
shares
issued and outstanding, respectively
|
680 | 64,499 | ||||||
|
Additional
paid-in capital
|
5,268,603 | 4,948,968 | ||||||
|
Accumulated
deficit
|
(5,839,020 | ) | (5,645,047 | ) | ||||
|
Total
deficiency in assets
|
(559,737 | ) | (331,580 | ) | ||||
|
Total
liabilities and deficiency in assets
|
$ | 58,000 | $ | 313,211 | ||||
|
The
financial information presented herein has been prepared by
management
|
||||||||
|
without
audit by independent certified public accountants
|
||||||||
See
accompanying notes
|
MOD
HOSPITALITY, INC.
|
||||||||||||||||
|
F/K/A
PSPP HOLDINGS, INC.
|
||||||||||||||||
|
STATEMENTS
OF OPERATIONS
|
||||||||||||||||
|
For
the three
|
For
the three
|
For
the nine
|
For
the nine
|
|||||||||||||
|
months
ended
|
months
ended
|
months
ended
|
months
ended
|
|||||||||||||
|
September
30, 2008
|
September
30, 2007
|
September
30, 2008
|
September
30, 2007
|
|||||||||||||
|
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
|||||||||||||
|
Net
sales
|
$ | - | $ | - | $ | - | $ | - | ||||||||
|
Cost
of sales
|
- | - | - | - | ||||||||||||
|
Gross
profit
|
- | - | - | - | ||||||||||||
|
Consulting
|
38,629 | - | 38,629 | - | ||||||||||||
|
Legal
and professional fees
|
81,308 | - | 81,308 | - | ||||||||||||
|
General
and administrative
|
14,699 | 17,250 | 14,903 | 51,897 | ||||||||||||
|
Total
operating expenses
|
134,636 | 17,250 | 134,840 | 51,897 | ||||||||||||
|
Loss
from operations
|
(134,636 | ) | (17,250 | ) | (134,840 | ) | (51,897 | ) | ||||||||
|
Other income
(expense)
|
||||||||||||||||
|
Forgiveness
of debt income
|
- | - | 255,189 | - | ||||||||||||
|
Write-off
of investments
|
- | - | (300,000 | ) | - | |||||||||||
|
Interest
expense and financing costs
|
- | - | (14,322 | ) | - | |||||||||||
|
Total
other income (expense)
|
- | - | (59,133 | ) | - | |||||||||||
|
Net
loss
|
$ | (134,636 | ) | $ | (17,250 | ) | $ | (193,973 | ) | $ | (51,897 | ) | ||||
|
Weighted
average number of
|
||||||||||||||||
|
common
shares outstanding
|
||||||||||||||||
|
(basic
and fully diluted)
|
64,450 | 57,499 | 67,175 | 64,499 | ||||||||||||
|
Basic
and diluted (loss) per common share
|
$ | (2.09 | ) | $ | (0.30 | ) | $ | (2.89 | ) | $ | (0.80 | ) | ||||
|
The
weighted average number of common shares outstanding were adjusted for the
stock-spilt in February and September 2008
|
||||||||||||||||
|
The
financial information presented herein has been prepared by management
without
audit by independent certified public accountants
|
||||||||||||||||
See
accompanying notes
|
MOD
HOSPITALITY, INC.
|
||||||||||||||||
|
F/K/A
PSPP HOLDINGS, INC.
|
||||||||||||||||
|
STATEMENTS
OF CASH FLOWS
|
||||||||||||||||
|
(1)
|
(1)
|
|||||||||||||||
|
For
the three
|
For
the three
|
For
the nine
|
For
the nine
|
|||||||||||||
|
months
ended
|
months
ended
|
months
ended
|
months
ended
|
|||||||||||||
|
September
30, 2008
|
September
30, 2007
|
September
30, 2008
|
September
30, 2007
|
|||||||||||||
|
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
|||||||||||||
|
Cash
flows from operating activities
|
||||||||||||||||
|
Net
(loss)
|
$ | (134,636 | ) | $ | (17,250 | ) | $ | (193,973 | ) | $ | (51,897 | ) | ||||
|
Adjustments
to reconcile net (loss) to net
|
||||||||||||||||
|
cash
used in operating activities:
|
||||||||||||||||
|
Increase
(decrease) in accounts payable
|
(175,951 | ) | (43,857 | ) | (175,951 | ) | - | |||||||||
|
Other
|
227,834 | 471,175 | 235,084 | - | ||||||||||||
|
Net
cash (used in) operating activities
|
(82,753 | ) | 410,068 | (134,840 | ) | (51,897 | ) | |||||||||
|
Cash
flows from financing activities
|
||||||||||||||||
|
Proceeds
form loans payable
|
- | (48,557 | ) | - | 51,952 | |||||||||||
|
Net
cash provided by financing activities
|
- | (48,557 | ) | - | 51,952 | |||||||||||
|
Net
increase in cash and cash equivalents
|
(82,753 | ) | 361,511 | (134,840 | ) | 55 | ||||||||||
|
Cash
- beginning of period
|
211 | 12,435 | 211 | - | ||||||||||||
|
Cash
- end of period
|
$ | (82,542 | ) | $ | 373,946 | $ | (134,629 | ) | $ | 55 | ||||||
|
Supplemental
disclosure of cash flow information:
|
||||||||||||||||
|
Taxes
paid
|
- | - | - | - | ||||||||||||
|
Interest
paid
|
$ | - | $ | - | $ | - | $ | - | ||||||||
|
(1)
-as reported on the 10-QSB, as filed
|
||||||||||||||||
|
The
financial information presented herein has been prepared by management
without
audit by independent certified public accountants.
|
||||||||||||||||
See
accompanying notes
|
MOD
HOSPITALITY, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
|
NOTE 1 -
BASIS OF
PRESENTATION
The
accompanying unaudited consolidated financial statements of Mod Hospitality,
Inc. f/k/a PSPP Holdings, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and in accordance with the instructions to Form 10-Q under Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for annual financial statements. In
the opinion of management, all material adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended September 30, 2008
are not necessarily indicative of the results that are to be expected for the
year ended December 31, 2008. The information contained in this Form 10-Q should
be read in conjunction with the audited financial statements filed as part of
the Company's Form 10-KSB for the year ending December 31, 2007. The Company
filed a Form 10-KSB/A for the year ended December 31, 2007 on October 24,
2008.
NOTE 2 -
GOING
CONCERN
The
accompanying unaudited financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred an
accumulated deficit of $5,839,020 and a working capital deficiency of $559,737at
September 30, 2008. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans with respect to these
matters include restructuring its existing debt, settling its existing debt by
issuing shares of its common stock and raising additional capital through future
issuance of stock and or debentures. Because of these recurring losses, the
Company will require additional working capital to further its business
operations. The accompanying unaudited financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.
NOTE 3 -
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
INVESTMENTS
The
Company accounts for investments, where the Company holds from 20% up to 50%, in
the common stock, or membership interest, of an entity, using the equity method.
The investment is initially recorded at cost and the carrying amount is adjusted
to recognize the Company’s proportionate share of the earnings or losses of the
investee after the date of acquisition. The amount of the adjustment is included
in the determination of net income or loss of the Company in the period of the
adjustment. Any dividends received from the investee reduce the carrying value
of the investment.
As of
June 30, 2008, current management of the Company assessed the investment of
$300,000 that prior management made in Oxford Knight International. After
consultation with legal counsel, management made the decision to write-off the
$300,000.
As of
June 30, 2008, the $45,000 in Invest, Inc. was determined to be a
misclassification by prior management. The $45,000 was reclassified
as additional paid in capital.
As of
June 30, 2008, investments were reclassified from the equity section of the
balance sheet, as previously reported by prior management in the Company’s
quarterly and year-end securities filings, to other assets.
As of
September 30, 2008, Dream Apartments TV continued to pursue its planned
operations, therefore, current management made the decision to reflect the
$58,000 as the fair value of this investment.
ESTIMATES
In
preparing financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
|
MOD
HOSPITALITY, INC.
F/K/A/
PSPP HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
|
CASH AND CASH
EQUIVALENTS
The
Company classifies highly liquid temporary investments with an original maturity
of six months or less when purchased as cash equivalents.
ESTIMATES
In
preparing financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND CASH
EQUIVALENTS
The
Company classifies highly liquid temporary investments with an original maturity
of six months or less when purchased as cash equivalents.
CONCENTRATION OF CREDIT
RISK
Financial
instruments, which potentially expose the Company to concentrations of credit
risk, consist principally of cash. As of September 30, 2008, the Company
maintained its cash accounts with financial institutions located in the United
States.
The
Company's deposits with financial institutions that exceeded federally insured
guarantees amounted to $0 as of September 30, 2008. Historically, the Company
has not experienced any losses on its deposits in excess of federally insured
guarantees.
FAIR VALUE OF FINANCIAL
INSTRUMENTS
The
Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash and cash equivalents, accounts receivable, accounts
payable and accrued payroll and other expenses, the carrying amounts approximate
fair value due to their short maturities.
ADVERTISING
COSTS
For the
nine month periods ended September 30, 2008 and 2007, the Company did not incur
any advertising costs.
FURNITURE AND
EQUIPMENT
Furniture
and equipment are recorded at cost. Depreciation is calculated by using the
straight-line method for financial reporting and accelerated methods for income
tax purposes.
NET LOSS PER COMMON
SHARE
Basic
loss per share includes no dilution and is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings per share reflect the potential
dilution of securities that could share in the earnings of the
Company.
NOTE 4 -
LOANS
PAYABLE
As of
September 30, 2008, the Company had notes payable of $301,925
including accrued interest. These notes payable are demand notes
payable with an interest rate of 10%
|
F/K/A/
PSPP HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
|
NOTE 5 -
COMMON AND PREFERRED
STOCK
As of
September 30, 2008, the Company has 175,000,000 shares of common stock
authorized and 44,146 issued and outstanding.
As of
September 30, 2008, the Company has 10,000,000 shares of preferred stock
authorized and 1,000,000 issued and outstanding.
NOTE
6 - STOCK
PURCHASE AGREEMENT
On
February 12, 2008, East Coast Realty Ventures, LLC (ECRV, LLC) purchased from
Airport Road Associates One, LLC ("Airport LLC"), the then controlling
shareholder of the issuer, 900,000 shares of Preferred Stock and 25,865,000
shares of Common Stock in a privately negotiated transaction. ECRV, LLC paid
$153,750 for the Preferred and Common Stock.
As of
February 12, 2008, ECRV, LLC may be deemed to have sole voting power over
132,873,855 shares of Common Stock (which includes the 107,008,855 votes from
the Series A Shares) and dispositive power over 81,553,282 shares of Common
Stock (which includes shares of Common Stock issuable upon the conversion of the
Series A Shares). Airport LLC may be deemed to have shared voting and
dispositive power over no shares of Common Stock.
As of
February 12, 2008, Frederic Richardson may be deemed to have sole voting and
dispositive power over no shares of Common Stock and may be deemed to have
shared voting power over 132,873,855 shares of Common Stock (which includes the
107,008,855 votes from the Series A Shares held by Airport LLC) and shared
dispositive power over 81,553,282 shares of Common Stock (which includes shares
of Common Stock issuable upon the conversion of the Series A Shares held by
Airport LLC).
The
following is a description of all transactions in shares of Common Stock of the
Company by the Reporting Persons effected on February 12, 2008: (i) On February
12, 2008, ECRV, LLC entered into a stock purchase agreement, as amended on March
31, 2008, with Airport, LLC to purchase (A) 25,865,000 shares of Common Stock
and (B) the Series A Preferred Shares
NOTE 7
- REVERSE
SPLIT AND SYMBOL CHANGE
On April
29, 2008, the Company increased our authorized common stock from 80,000,000
shares to 175,000,000 shares by filing a Certificate of Change pursuant to NRS
78.209.
Effective
June 21, 2008, in order to meet a requirement of the Stock Purchase Agreement,
as amended, between Airport Road Associates One, LLC (“Airport, LLC”) and East
Coast Realty Ventures, LLC (“ECRV, LLC”), as previously reported on Form 8-K
filed March 20, 2008, the Board of Directors of the Company has declared a 100
to 1 round lot reverse split of the Company’s Common Stock. In accordance with
the reverse split, each shareholder will receive one (1) share of Common Stock
for each one hundred (100) shares currently held. No fractional
shares shall be issued; all fractional shares shall be rounded up to the next
whole share. Any shareholder that should own less than one hundred
(100) shares after completion of the reverse split shall be issued a sufficient
number of additional shares so that each such shareholder shall own a minimum of
one hundred (100) shares. The reverse split is effective as of the
opening of trading on June 2, 2008. Additionally, also effective June 2, 2008,
the Company’s trading symbol was changed to “PSPN” in conjunction with the
reverse split of the Company’s common stock.
On August
11, 2008, we changed our name to Cynosure Holdings, Inc. by filing a Certificate
of Amendment to Articles of Incorporation.
On August
11, 2008, the members of our Board of Directors were increased to six (6), and
Mark T. Johnson and Marc D. Manoff, Esq. were appointed to the Board of
Directors pursuant to the increase.
On August
21, 2008, we changed our name to Hybid Hospitality, Inc. by filing a Certificate
of Amendment to the Articles of Incorporation.
On August
27, 2008, we changed our name to Mod Hospitality, Inc. by filing a Certificate
of Amendment to the Articles of Incorporation.
Effective
September 22, 2008, we completed a 1 for 10 reserve split of its common stock
and changed our company name to Mod Hospitality, Inc. with a new symbol
“MODY.”
|
MOD
HOSPITALITY, INC.
F/K/A/
PSPP HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
|
NOTE 8 -
INCOME TAXES AND
CHANGE IN CONTROL
The
Company has approximately $2,200,000 in gross deferred tax assets as of
September 30, 2008, resulting from net operating loss carry
forwards. A valuation allowance has been recorded to fully offset
these deferred tax assets because the future realization of the related income
tax benefits is uncertain. Accordingly, the net provision for income taxes is
zero as of September 30, 2008.
As of
September 30, 2008, the Company has federal net operating loss carry forwards of
approximately $5,704,384 available to offset future taxable income through 2027
subject to the annual limitations imposed by Section 382 under the Internal
Revenue Code due to the change in control.
As of
September 30, 2008, the difference between the tax provision at the statutory
federal income tax rate and the tax provision attributable to loss before income
taxes is as follows (in percentages):
|
Statutory
federal income tax rate
|
-34%
|
|
State
taxes - net of federal benefits
|
-5%
|
|
Valuation
allowance
|
39%
|
|
Income
tax rate – net
|
0%
|
For the
nine months ended September 30, 2008, the valuation allowance adjustment was
zero.
NOTE 9 -
FORGIVENESS OF
DEBT
Effective
on June 30, 2008, after consultation with legal counsel, management of the
Company recognized $255,189 as forgiveness of debt income, which consists of
accounts payable and a note payable.
NOTE 10 -
SUBSEQUENT
EVENTS
On
October 21, 2008 (“the Closing Date”), the Company acquired all of the issued
and outstanding common stock of ECV Holdings, Inc., (“ECV”) a Delaware
corporation, in accordance with the Share Exchange Agreement. On the
Closing Date, pursuant to the terms of the Securities Exchange Transaction, the
Company acquired all of the outstanding common stock of ECV from Flora
Nutrients, Inc. (“FLNU”). In exchange, the Company issued FLNU 50,000,000 common
stock, or approximately 99.912% of the Company’s common stock
outstanding.
ECV is a
corporation formed on March 26, 2008 under the laws of Delaware. On April 4,
2008, ECV entered into a stock for membership interest agreement with East Coast
Realty Ventures, LLC (“ ECRV ”) which owned
all of the issued and outstanding capital (the “ Membership Interest
”) of ECRV Hanover LeaseCo, LLC (the “ Hanover ”), ECRV
Clinton LeaseCo, LLC (the “ Clinton ”), and ECRV
FM LeaseCo, LCC (the “ Absecon ”). Hanover,
Clinton, and Absecon are limited liability companies organized under the law of
the State of Delaware. As a result of the stock for membership interest
transaction, ECV acquired 100% of the membership interest in Hanover, Clinton
and Absecon by issuing Frederic Richardson 100,000 shares of its common
stock.
Effective
May 8, 2008, ECV entered into a share exchange agreement with Frederic
Richardson, and FLNU, a non-reporting small public company listed on the Pink
Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the
issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of
common stock of FLNU, which represents 80% of FLNU’s outstanding common stock.
As a result of the share exchange transaction, Hanover, Clinton and Absecon
became the wholly owned subsidiaries of FLNU.
ITEM
2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking
Statements
This
Report contains statements that we believe are, or may be considered to be,
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical fact included in this Report regarding the prospects of our industry
or our prospects, plans, financial position or business strategy, may constitute
forward-looking statements. In addition, forward-looking statements generally
can be identified by the use of forward-looking words such as "may," "will,"
"expect," "intend," "estimate," "foresee," "project," "anticipate," "believe,"
"plans," "forecasts," "continue" or "could" or the negatives of these terms or
variations of them or similar terms. Furthermore, such forward-looking
statements may be included in various filings that we make with the SEC or press
releases or oral statements made by or with the approval of one of our
authorized executive officers. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that these expectations will prove to be correct. These forward-looking
statements are subject to certain known and unknown risks and uncertainties, as
well as assumptions that could cause actual results to differ materially from
those reflected in these forward-looking statements. Readers are cautioned not
to place undue reliance on any forward-looking statements contained herein,
which reflect management's opinions only as of the date hereof. Except as
required by law, we undertake no obligation to revise or publicly release the
results of any revision to any forward-looking statements. You are advised,
however, to consult any additional disclosures we make in our reports to the
SEC. All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained in this Report.
GOING
CONCERN
The
accompanying unaudited financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred an
accumulated deficit of $5,839,020 and a working capital deficiency
of $559,737 as of September 30, 2008. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans with respect to these matters include restructuring its
existing debt, settling its existing debt by issuing shares of its common stock
and raising additional capital through future issuance of stock and or
debentures. Because of these recurring losses, the Company will require
additional working capital to further its business
operations. The accompanying unaudited financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
.
Net sales
for the three months ended September 30, 2008 and 2007 were zero.
RESULTS
OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
Net sales
for the nine months ended September 30, 2008 and 2007 were.zero.
LIQUIDITY
AND CAPITAL RESOURCES
As of
September 30, 2008, the Company maintained a bank account with a balance of
$0. The Company realized recurring losses. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Management's plans with respect to
these matters include restructuring its existing debt, raising additional
capital through future issuances of stock and/or equity in order to generate
sufficient cash to meet its business obligations. The accompanying financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
A summary
of significant accounting policies is included in the notes to the audited
financial statements for the year ended December 31, 2007 in the Form 10-KSB.
Management believes that the application of these policies on a consistent basis
enables us to provide useful and reliable financial information about our
operating results and financial condition. Our financial statements and
accompanying notes are prepared in accordance with U.S. Generally Accepted
Accounting Principles. Preparing financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies.
ITEM
3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
N/A.
The
Company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities and
Exchange Act of 1934, as amended, is recorded, processed, summarized, and
reported within the specified time periods.
The
Company's management, with the participation of its Chief Executive Officer and
its Chief Financial Officer, evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in the Securities Exchange Act of
1934 Rules 13a-15(e)) as of December 31, 2007. Based on that evaluation, the
Company's Chief Executive Officer and Chief Financial Officer concluded that, as
of that date, the Company's disclosure controls and procedures required by
paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, were not effective at the
reasonable assurance level.
Management's
assessment identified the following material weaknesses and significant
deficiencies:
1. The
Company identified a material weakness related to the concentration of duties,
lack of audit committee and access to additional financial expertise, both
within and external to the current composition of the Board of Directors as of
December, 31 2007. Specific weakness in internal control over
financial reporting exists because the Company is managed by a small number of
individuals. As of December 31, 2007, management did not have a large
enough number of independent staff or management members to provide third party
oversight in the review of our financial transactions on an ongoing
basis. The Company has undertaken a plan for resolving these
deficiencies by pursuing funding and the acquisition of projects that would
allow the company to increase its level of staffing and the increase of the
number of Directors of the Company. Management believes that the
implementation of this plan has remedied this material weakness.
2. The
Company identified a material weakness related to lack of accounting personnel
with the requisite knowledge of Generally Accepted Accounting Principles in the
US ("GAAP") and the financial reporting requirements of the Securities and
Exchange Commission in the year ending December 31, 2007. The Company has taken
the necessary steps to remedy this weakness and management has assessed the
operating effectiveness of these enhanced internal controls and believes this
material weakness has been remedied.
3. The
Company identified a material weakness related to insufficient written policies
and procedures to insure the correct applications of accounting and financial
reporting with respect to the current requirements of GAAP and SEC disclosure
requirements. The Company has taken the necessary steps to remedy this weakness
and management has assessed the operating effectiveness of these enhanced
internal controls and believes this material weakness has been
remedied.
The
Public Company Accounting Oversight Board has defined material weakness as a
"significant deficiency or combination of significant deficiencies that results
in more than a reasonable possibility that a material misstatement of the annual
or interim financial statements will not be prevented or detected".
The
material weaknesses identified and relate to:
As of
September 30, 2008 there was a continuing lack of segregation of duties, in that
we only had one person performing all accounting-related on-site duties. Because
of the "barebones" level of relevant personnel, however, certain deficiencies
which are cured by separation of duties cannot be cured, but only monitored as a
weakness. Due to this weakness, the Company’s internal controls are
not effective.
Notwithstanding
the existence of material weakness in our internal controls over financial
reporting, our management, including our Chief Executive Officer and Chief
Financial Officer, believe that the consolidated financial statements included
in this report fairly present in all material respects our financial condition,
results of operations and cash flows for the periods presented.
ITEM
4A CONTROLS AND PROCEDURES
The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. The Company's internal
control over financial reporting is designed to provide reasonable assurance as
to the reliability of the Company's financial reporting and the preparation of
financial statements in accordance with generally accepted accounting
principles.
All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
Management
conducted an evaluation of the effectiveness of the Company's internal control
over financial reporting as of December 31, 2007. In making this assessment, it
used the criteria set forth in INTERNAL CONTROL--INTEGRATED FRAMEWORK issued by
the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
We
identified the following material weakness in our internal control over
financial reporting:
(1) We
did not have adequate segregation of duties, in that we only had one person
performing all accounting-related on-site duties. Because of the "barebones"
level of relevant personnel, however, certain deficiencies which are cured by
separation of duties cannot be cured, but only monitored as a weakness, and
therefore the internal controls over financial reporting are not
effective.
(2) Certain
of our personnel had access to various financial application programs and data
that was beyond the requirements of their individual job
responsibilities. This may result in a material misstatement to our
interim or consolidated financial statements that would not be prevented or
detected, and therefore we have determined that this control deficiency
constitutes a material weakness and internal controls over financial reporting
are not effective.
Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent
limitations. It is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from
human failures. It also can be circumvented by collusion or improper
management override.
Because
of such limitations, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design
into the process certain safeguards to reduce this risk. Management
is responsible for establishing and maintaining adequate internal control over
financial reporting. However, as of December 31, 2007, management has
not yet designed effective internal controls over financial
reporting.
ITEM
1. LEGAL
PROCEEDINGS.
In 2005,
the Company retained the legal services of Weed & Co, LLP. On
December 3, 2007, Weed & Co, LLP filed a complaint in Superior Court of the
State of California in dispute over payment of legal fees against the Company
and other defendants. On March 11, 2008, the other defendants entered
into a settlement agreement where Weed & Co, LLP was to be paid
$87,500. Weed & Co., LP has the right to re-file the complaint
should the other defendants not satisfy this agreement. There is
no liability reflected in the accompanying unaudited financial statements for
this uncertainty.
ITEM
1A. RISK
FACTORS.
Please
see Part I, Item 2, Management’s Discussion and Analysis under the sub-heading
“Going Concern”. Such disclosure is incorporated by reference
herein.
ITEM
2. UNREGISTERED SALE OF EQUITY
SECURITIES AND USE OF PROCEEDS .
None.
ITEM
3. DEFAULTS UPON SENIOR
SECURITIES.
None.
ITEM
4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS.
None.
ITEM
5. OTHER
INFORMATION.
Subsequent
Events
On
October 21, 2008 (“the Closing Date”), the Company acquired all of the issued
and outstanding common stock of ECV Holdings, Inc., (“ECV”) a Delaware
corporation, in accordance with the Share Exchange Agreement. On the
Closing Date, pursuant to the terms of the Securities Exchange Transaction, the
Company acquired all of the outstanding common stock of ECV from Flora
Nutrients, Inc. (“FLNU”). In exchange, the Company issued FLNU 50,000,000 common
stock, or approximately 99.912% of the Company’s common stock
outstanding.
ECV is a
corporation formed on March 26, 2008 under the laws of Delaware. On April 4,
2008, ECV entered into a stock for membership interest agreement with East Coast
Realty Ventures, LLC (“ ECRV ”) which owned
all of the issued and outstanding capital (the “ Membership Interest
”) of ECRV Hanover LeaseCo, LLC (the “ Hanover ”), ECRV
Clinton LeaseCo, LLC (the “ Clinton ”), and ECRV
FM LeaseCo, LLC (the “ Absecon ”). Hanover,
Clinton, and Absecon are limited liability companies organized under the law of
the State of Delaware. As a result of the stock for membership interest
transaction, ECV acquired 100% of the membership interest in Hanover, Clinton
and Absecon by issuing Frederic Richardson 100,000 shares of its common
stock.
Effective
May 8, 2008, ECV entered into a share exchange agreement with Frederic
Richardson, and FLNU, a non-reporting small public company listed on the Pink
Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the
issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of
common stock of FLNU, which represents 80% of FLNU’s outstanding common stock.
As a result of the share exchange transaction, Hanover, Clinton and Absecon
became the wholly owned subsidiaries of FLNU.
|
ITEM
6.
|
EXHIBITS.
|
|
Description:
|
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act
of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act
of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of Sarbanes Oxley Act
of 2002
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of Sarbanes Oxley Act
of 2002
|
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
Dated:
November 17, 2008
|
By:
|
/s/ FREDERIC S.
RICHARDSON
|
|
Frederic
S. Richardson
|
||
|
Chief
Executive Officer (Principal Executive Officer)
|
||
|
Dated:
November 17, 2008
|
By:
|
/s/ SARAH JACKSON,
CPA
|
|
Sarah
Jackson, CPA
|
||
|
Chief
Financial Officer (Principal Executive
Officer)
|