Rogue One, Inc. - Quarter Report: 2010 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
_______________
X . | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
. | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
STAKOOL, INC.
(Exact name of registrant as specified in Charter)
NEVADA |
| 000-24723 |
| 88-0393257 |
(State or other jurisdiction of incorporation or organization) |
| (Commission File No.) |
| (IRS Employee Identification No.) |
18565 Soledad Canyon Rd., #153
Canyon Country, CA
(Address of Principal Executive Offices)
(301) 309-9080
(Issuer Telephone number)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the Indicate by check mark whether the registrant (1) has 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 issuer 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes . No X .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer . Accelerated Filer . Non-Accelerated Filer . 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 . No X . |
State the number of shares outstanding of each of the issuer’s classes of common equity, as of July 27, 2010: 55,047,167 shares of Common Stock.
FORM 10-Q
June 30, 2010
INDEX
PART I -- FINANCIAL INFORMATION
Item 1. | Financial Statements | 3 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 16 |
Item 4T. | Controls and Procedures | 16 |
PART II -- OTHER INFORMATION
Item 1 | Legal Proceedings | 17 |
Item 1A | Risk Factors | 17 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
Item 3. | Defaults Upon Senior Securities | 17 |
Item 4. | Submission of Matters to a Vote of Security Holders | 17 |
Item 5. | Other Information | 17 |
Item 6. | Exhibits | 17 |
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SIGNATURE |
| 17 |
2
Part I – Financial Information
Item 1. Financial Statements.
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Consolidated Balance Sheets | 4 |
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Consolidated Statements of Operations | 5 |
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Consolidated Statements of Cash Flows | 6 |
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Notes to the Consolidated Financial Statements | 7 |
3
STAKOOL. INC.
F/KA/ MOD HOSPITALITY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements
4
STAKOOL. INC.
F/KA/ MOD HOSPITALITY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements
5
STAKOOL. INC.
F/KA/ MOD HOSPITALITY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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| For the Six |
| For the Six |
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| months ended |
| months ended |
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| June 30, 2010 |
| June 30, 2009 |
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| Unaudited |
| Unaudited |
Cash flows from operating activities: |
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Net loss | $ | (74,746) | $ | (16,000) |
Adjustments to reconcile net loss from operations to |
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net cash used in operating activities: |
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Net cash provided by (used in) operating activities |
| (74,746) |
| (16,000) |
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Cash flows from investing activities: |
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Proceeds from stock issuance |
| 336,817 |
| - |
Net cash (used in) investing activities |
| 336,817 |
| - |
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Cash flows from financing activities: |
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Increase in note receivable |
| (200,000) |
| - |
Payment on notes payable |
| (54,100) |
| - |
Due to related party, net |
| (3,453) |
| 16,000 |
Net cash provided by (used in) financing activities |
| (257,553) |
| 16,000 |
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Net increase (decrease) in cash and cash equivalents |
| 4,518 |
| - |
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Cash and cash equivalents , beginning |
| 100 |
| - |
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Cash and cash equivalents, ending | $ | 4,618 | $ | - |
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Supplemental disclosure of cash flow information: |
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Interest paid | $ | - | $ | - |
Taxes paid | $ | - | $ | - |
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements
6
STAKOOL. INC.
F/KA/ MOD HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010
_____________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Nature of Business
On September 22, 2008, the Company changed its name to Mod Hospitality, Inc.
On December 16, 2009 the Company changed its name to Stakool, Inc.
Stakool, Inc. f/k/a Mod Hospitality, Inc. f/k/a PSPP Holdings, Inc. (“the Company”) was incorporated in the State of Delaware in 1993. In 1997, the Company changed its Corporate Charter to the State of Nevada. As of June 30, 2010, the Company maintained its Corporate Charter in the State of Nevada.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. As part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
The company will continue to develop Dream Apartments, TV. Dream Apartments TV is a diverse apartment advertising and search engine company for Apartments and properties in California and Nationwide. We have been working on making the intellectual property of Dream Apts. more suited for 2010. We have also been adding many aspects to the core structure enabling us to roll out our technology for prospective apartment tenants to locate and find apartment properties.
As of June 7, 2010 STKO has entered into a definitive agreement with LinQpay Inc. STKO will acquire 100% LinQpay, with it’s global and mobil platforms for processing transactions around the world. Closing of the transaction is anticipated to be before the beginning of next quarter
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, 2010, 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.
Basis of Presentation
Management's plans in this regard include raising additional cash from current and potential stockholders and lenders, making strategic acquisitions and increasing the marketing of its products and services. Until the Company generates sufficient revenues from the sale of its products, the Company will continue to be dependent on raising substantial amounts of additional capital through any one of a combination of debt offerings or equity offerings. The Company has no current arrangements with respect to any additional financing. Consequently, there can be no assurance that any future financing will be available to the Company when needed, and on commercially reasonable terms. The Company's inability to derive sufficient revenues from the sale of its products, or obtain additional financing when needed, would have a material adverse effect on the company, requiring the Company to curtail or cease operations. In addition, any equity financing may involve substantial dilution to the Company's then current stockholders.
Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of these factors raise substantial doubt as to the ability of the Company to continue as a going concern.
These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
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NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
Basis of Presentation
The condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). All material intercompany balances and transactions have been eliminated
Financial Reporting
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. Revenues and expenses are reported on the accrual basis, which means that income is recognized as it is earned and expenses are recognized as they are incurred
Use of Estimates
The Company’s significant estimates include allowance for doubtful accounts and accrued expenses. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that such estimates are fair when considered in conjunction with the financial statements taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted
Cash and Cash Equivalents
Cash and cash equivalents include all interest-bearing deposits or investments with maturities of three and nine months or less
Concentration Of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, which is insured by the Federal Deposit
Insurance Corporation (“FDIC”). The FDIC insured institution insures up to $250,000 on account balances. The amounts that are not insured by FDIC limitations are held in short-term securities.
Fair value of financial instruments
The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses, debenture and loans payable approximate their fair market value based on the short-term maturity of these instruments.
Accounts Receivable
The Company extends credit to its customers in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company also performs ongoing credit evaluations of customers’ financial condition. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations.
Impairment of Long-Lived Assets And Long-Lived Assets To Be Disposed Of
The Company accounts for the impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” (“SFAS No. 144”). SFAS No. 144 requires write-downs to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.
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Goodwill and Other Intangible Assets
In June 2001, the FASB issued Statement No. 142 Goodwill and Other Intangible Assets. This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements.
Goodwill and intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives are amortized generally on a straight-line basis over the periods benefited, with a weighted average useful life of 15 years. In performing this assessment, management uses the income approach and the similar transactions method of the market approach to develop the fair value of the acquisition in order to assess its potential impairment of goodwill. The income approach is based on a discounted cash flow model which relies on a number of factors, including operating results, business plans, economic projections and anticipated future cash flows. Rates used to discount future cash flows are dependent upon interest rates and the cost of capital at a point in time. The similar transactions method is a market approach methodology in which the fair value of a business is estimated by analyzing the prices at which companies similar to the subject, which are used as guidelines, have sold in controlling interest transactions (mergers and acquisitions). Target companies are compared to the subject company, and multiples paid in transactions are analyzed and applied to subject company data, resulting in value indications. Comparability can be affected by, among other things, the product or service produced or sold, geographic markets served, competitive position, profitability, growth expectations, size, risk perception, and capital structure. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in the future.
Revenue Recognition
Revenue is recognized monthly as services are provided pursuant to the terms of contracts or purchase orders, which have prices that are fixed and determinable. The Company assesses the client’s ability to meet the contract terms, including meeting payment obligations, before entering into the contract. Deferred revenue results from customers who are billed for monitoring in advance of the period in which the services are provided, on a monthly, quarterly or annual basis.
The Company follows Staff Accounting Bulletin 104 (SAB 104), which requires the Company to defer certain revenue and expenses, primarily equipment related to, and direct labor incurred. The capitalized costs and deferred revenues related to the installation are then amortized over the life of an average customer relationship, on a straight line basis. If the customer is discontinued prior to the expiration of the original expected life, the unamortized portion of the deferred installation revenue and related capitalized costs are recognized in the period the discontinuation becomes effective. In accordance with EITF 00-21, “Revenue Arrangements with Multiple Deliverables”, the service contracts that include a single unit of accounting. The criteria in EITF 00-21 that the Company does not meet for services and installation services to be considered separate units of accounting is that the installation service to customers has no stand alone value. The installation service alone is not functional to customers without the service.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for major betterments and additions are capitalized while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are currently charged to expense. Any gain or loss on disposition of assets is recognized currently in the statement of income.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.
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Income Taxes
The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company determine whether the benefits of the Company’s tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. The Company did not have any unrecognized tax benefits and there was no effect on the financial condition or results of operations as a result of implementing FIN 48. The Company does not have any interest and penalties in the statement of operations for the years ended quarters ended June 30, 2010 and 2009. In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (“the FSP”). The FSP provides guidance about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.
NOTE 3 GOING-CONCERN AND MANAGEMENT'S PLAN
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, as shown in the accompanying consolidated financial statements, the Company has incurred losses from operations since inception. Management anticipates incurring additional losses in 2010. Further, the Company may incur additional losses thereafter, depending on its ability to generate revenues from the licensing or sale of its technologies and products. The Company's technologies and products have never been utilized on a large-scale commercial basis and there is no assurance that any of its technologies or products will receive market acceptance. As reflected in the accompanying consolidated financial statements, the Company's operations for the quarter ended June 30, 2010 and 2009, resulted in a net loss of $16,929 and $16,000, respectively.
Management's plans in this regard include raising additional cash from current and potential stockholders and lenders, making strategic acquisitions and increasing the marketing of its products and services. As a result of the Company's acquisition of 1stAlerts, and the anticipated cash flow from the combined company's operations, the Company believes that it will have sufficient capital to fund its operations. However, until such time as the Company generates sufficient revenues from the sale of its products, the Company will continue to be dependent on raising substantial amounts of additional capital through any one of a combination of debt offerings or equity offerings. The Company has no current arrangements with respect to any additional financing. Consequently, there can be no assurance that any future financing will be available to the Company when needed, and on commercially reasonable terms. The Company's inability to derive sufficient revenues from the sale of its products, or obtain additional financing when needed, would have a material adverse effect on the company, requiring the Company to curtail or cease operations. In addition, any equity financing may involve substantial dilution to the Company's then current stockholders.
Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of these factors raise substantial doubt as to the ability of the Company to continue as a going concern.
These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Regulation S-K. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2008included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission. The unaudited interim consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2010.
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Recently Adopted Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements and Disclosures,” which amends the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. The guidance is effective for annual and interim reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual and interim periods beginning after December 15, 2010. The Company adopted these amendments in the first quarter of 2010 and the adoption did not have a material impact on the disclosures in the Company’s consolidated financial statements.
In June 2009, the FASB issued ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which changes various aspects of accounting for and disclosures of interests in variable interest entities. ASU 2009-17 is effective for interim and annual periods beginning after November 15, 2009. The Company adopted these amendments in the first quarter of 2010 and the adoption did not have a material impact on the Company’s consolidated financial statements.
In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance on accounting for transfers of financial assets. This guidance was issued to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. This guidance is effective for fiscal years and interim periods beginning after November 15, 2009. The adoption of this statement did not have a material effect on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In July 2010, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that will require additional disclosures about the credit quality of loans, lease receivables and other long-term receivables and the related allowance for credit losses. Certain additional disclosures in this new accounting guidance will be effective for the Company on December 31, 2010 with certain other additional disclosures that will be effective on March 31, 2011. The Company does not expect the adoption of this new accounting guidance to have a material impact on its consolidated financial statements.
In April 2010, the FASB issued ASU 2010-13, “Compensation — Stock Compensation (Topic 718) — Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.” ASU 2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010 and are not expected to have a significant impact on the Company’s consolidated financial statements.
In March 2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic 815) — Scope Exception Related to Embedded Credit Derivatives.” ASU 2010-11 clarifies that the only form of an embedded credit derivative that is exempt from embedded derivative bifurcation requirements are those that relate to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The provisions of ASU 2010-11 will be effective on July 1, 2010 and are not expected to have a significant impact on the Company’s consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-14, “Software (Topic 985) — Certain Revenue Arrangements That Include Software Elements (A Consensus of the FASB Emerging Issues Task Force)”. ASU 2009-14 requires tangible products that contain software and non-software elements that work together to deliver the products essential functionality to be evaluated under the accounting standard regarding multiple deliverable arrangements. This standard update is effective January 1, 2011 and may be adopted prospectively for revenue arrangements entered into or materially modified after the date of adoption or retrospectively for all revenue arrangements for all periods presented. The Company does not expect that this standard update will have a significant impact on its consolidated financial statements.
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In September 2009, the FASB issued certain amendments as codified in ASC Topic 605-25, “Revenue Recognition; Multiple-Element Arrangements.” These amendments provide clarification on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. An entity is required to allocate revenue in an arrangement using estimated selling prices of deliverables in the absence of vendor-specific objective evidence or third-party evidence of selling price. These amendments also eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. The amendments significantly expand the disclosure requirements for multiple-deliverable revenue arrangements. These provisions are to be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. The Company will adopt the provisions of these amendments in its fiscal year 2011 and is currently evaluating the impact of these amendments to its consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
NOTE 5 RECLASSIFICATIONS
Certain prior periods' balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications had no impact on previously reported results of operations or stockholders' equity.
NOTE 6 COMMON STOCK
LOSS PER COMMON SHARE
Basic loss per common share is computed based upon weighted-average shares outstanding and excludes any potential dilution. Diluted loss per share reflects the potential dilution from the exercise or conversion of all dilutive securities into Common Stock based upon the average market price of common shares outstanding during the period. For the quarter ended June 30, 2010 and 2009, no effect has been given to outstanding options, warrants, convertible debentures and convertible preferred stock in the diluted computation, as their effect would be anti-dilutive.
NOTE 7 MANAGEMENT AGREEMENTS
The company has an agreement with Kyle Gotshalk and Cherish Adams as consultants of the company. Kyle Gotshalk and Cherish Adams are also serving as Officers and the company has issued them stock in lieu of cash payments.
NOTE 8 COMMON AND PREFERRED STOCK
As of June 30, 2010, the Company has 175,000,000 shares of common stock authorized and 55,047,167 issued and outstanding.
During the year ended December 31, 2009, 6,876,469 shares of common stock were issued at par value of $.001 for a total of $6,876 to certain individuals and entities for past consideration. The amount of $6,876 is included in general and administrative expenses.
As of December 31, 2009, the Company has 10,000,000 shares of preferred stock authorized and 10,000,000 issued and outstanding. 9,000,000 shares of the Preferred Stock are subject to the purchase and rescission agreements executed by Mr. Richardson.
For the six months ended June 30, 2010, 4,000,000 shares were issued for note payable conversions, 40,000,000 shares were issued for $200,000 note receivable to be paid to the Company, 5,000,000 for $25,000 of common stock purchased and 5,000,000 for services rendered by officers of the Company Kyle Gotshalk and Cherish Adams.
NOTE 9 REVERSE SPLIT AND SYMBOL CHANGE
On April 29, 2008, the Company increased its authorized common stock from 80,000,000 shares to 175,000,000 shares by filing a Certificate of Change pursuant to NRS 78.209.
On August 27, 2008, the Company changed its name to Mod Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.
Effective September 22, 2008, the Company completed a 1 for 10 reserve split of its common stock and changed its name to Mod Hospitality, Inc. with a new symbol “MODY.”
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On October 21, 2008, pursuant to a written consent, the holders of the majority of our voting stock approved us to enter into a share exchange agreement with FLNU and ECV Holdings. Pursuant to the share exchange agreement, FLNU will transfer all of the issued and outstanding common stock of ECV Holdings in exchange for 50,000,000 shares of our newly issued common shares. A copy of the Share Exchange Agreement was filed as exhibit to the Form 8-K filed on October 27, 2008 and incorporated herewith by reference.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
Effective December 16, 2009 there was a 1:1500 reverse split, approved and accepted by shareholders, along with the fore mentioned rescission.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded, effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
NOTE 10 INCOME TAXES AND CHANGE IN CONTROL
The Company has approximately $892,925 in gross deferred tax assets as of June 30, 2010, 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 June 30, 2010.
As of June 30, 2010, the Company has federal net operating loss carry forwards 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. In February 2008, there was a change in control of the Company wherein Section 382 will apply to the net operating loss carryforward starting with the quarter ended June 30, 2010.
As of June 30, 2010, 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 quarter ended June 30, 2009, the valuation allowance adjustment was zero.
NOTE 11 REVERSE MERGER
Effective December 16, 2009 there was a 1:1500 reverse split, approved and accepted by shareholders, along with the afore mentioned rescission.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
NOTE 12 COMMITMENTS AND CONTINGENCIES
As of June 7, 2010 STKO has entered into a definitive agreement with LinQpay, Inc. STKO will acquire 100% of the stock of LinQpay, Inc. LinQoay has global and mobile platforms for processing transactions around the world. Closing of the transaction is anticipated to be during the nex quarter.
NOTE 13 NOTES PAYABLE
The Company has notes payable with an initial principal balance of $243,474. The notes are due to related parties and have an annual interest rate of 10%. The notes payable continue to accrue interest expenses. The balance as of June 30, 2010 is $279,825.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information contained in Item 2 contains 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. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
Forward-Looking Statements
We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations which follow under the headings “Business and Overview,” “Liquidity and Capital Resources,” and other statements throughout this report preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions.
Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in these forward-looking statements, including the risks and uncertainties described below and other factors we describe from time to time in our periodic filings with the U.S. Securities and Exchange Commission (the “SEC”). We therefore caution you not to rely unduly on any forward-looking statements. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Company Overview
In November 1997, PLR, Inc. changed its name to Integrated Carbonics Corp. and moved its domicile to the State of Nevada. On July 23, 1999, Integrated Carbonics Corp. changed its name to Urbana.ca, Inc. (“URBA”). On April 11, 2003, URBA changed its name to PSPP Holdings, Inc. On August 11, 2008, PSPP Holdings, Inc. changed its name to Cynosure Holdings, Inc. by filing a Certificate of Amendment to Articles of Incorporation with the State of Nevada. Effective September 22, 2008, PSPP Holdings, Inc. changed its company name to Mod Hospitality, Inc. (hereinafter referred to as “Mod Hospitality,” “we,” “us” or the “Company”).
As of December 16, 2009 the company changed its name to Stakool, Inc.
The company will continue to develop Dream Apartments, TV. Dream Apartments TV is a diverse apartment advertising and search engine company for Apartments and properties in California and Nationwide. We have been working on making the intellectual property of Dream Apts. more suited for 2010. We have also been adding many aspects to the core structure enabling us to be able to roll out our technology into apartment searching and finding properties.
As of June 7, 2010 STKO has entered into a definitive agreement with LinQpay Inc. STKO will acquire 100% LinQpay, with it’s global and mobil platforms for processing transactions around the world. Closing of the transaction is anticipated to be before the beginning of next quarter.
Plan of Operations
The company has signed letters of Intent to enhance its existing apartment search engine. The most current proposition the company has entertained is a mobile phone/hand held applications for regional apartment guide search applications..
SIX MONTHS ENDED JUNE 30, 2010
COMPARED TO SIX MONTHS ENDED JUNE 30, 2009
Sales were $-0- for the six month period ended June 30, 2010 and $ -0- for the six month period ended June 30, 2009.
Selling, general and administrative expenses increased by $929 for the six month period ended June 30, 2010 from $16,000 for the six month period ended June 30, 2009 due to costs associated with the operations of the public company.
Net loss increased by $929 for the six month period ended June 30, 2010 from a net loss of $16,000 for the six month period ended June 30, 2009, due to the above analysis of Income and Expenses.
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THREE MONTHS ENDED JUNE 30, 2010
COMPARED TO THREE MONTHS ENDED JUNE 30, 2009
Sales were $-0- for the three month period ended June 30, 2010 and $ -0- for the three month period ended June 30, 2009.
Selling, general and administrative expenses decreased by $2,558 for the three month period ended June 30, 2010 from $8.000 for the three month period ended June 30, 2009 due to costs associated with the operations of the public company.
Net loss decreased by $2,558 for the three month period ended June 30, 2010 from a net loss of $8,000 for the three month period ended June 30, 2009, due to the above analysis of Income and Expenses.
Critical Accounting Policy
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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates. We consider our critical accounting policies to be those that require the most significant judgments and estimates in the preparation of financial statements, including the following:
Basis of Presentation
The accompanying consolidated interim unaudited financial statements as of June 30, 2010, and the three and six months ended June 30, 2010 and 2009 have been prepared in accordance with accounting principles generally accepted for interim unaudited financial statement presentation and in accordance with the instructions to Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statement presentation. In the opinion of management, all adjustments for a fair statement of the results of operations and financial position for the interim period presented have been included. All such adjustments are of a normal recurring nature. This interim financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K as of December 31, 2009.
The summary of significant accounting policies is presented to assist in the understanding of the financial statements. The financial statements and notes are the representation of management. These policies conform to accounting principles generally accepted in the United States of America and have been consistently applied.
Revenue and Expense Recognition: We recognize income from the management of the properties in accordance with the accrual basis of accounting, that is, when the services and products are provided for hotel guests and there is no uncertainty as to cash collections; i.e. upon receipt of cash/check payment or credit card from the hotel guests. We recognize expenses related to the management of the properties in accordance with the accrual basis of accounting, that is, when the expense is incurred.
Advertising, Sales and Marketing Expense: We incur sales and marketing expenses in conjunction with the production of promotional materials, and related travel costs. In accordance with the AICPA’s Statement of Position No. 93-7 “Reporting on Advertising Costs”, companies expense advertising and marketing costs as incurred or as the advertising takes place.
Income Taxes: Income taxes are provided for using the liability method of accounting in accordance with SFAS No. 109 "Accounting for Income Taxes," and clarified by FIN 48, "Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109." A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, 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. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Investment: We account for investments, where we hold 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 our 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 our net income or loss in the period of the adjustment. Any dividends received from the investee reduce the carrying value of the investment.
As of June 30, 2010, 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.
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Off Balance Sheet Transactions
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable because we are a smaller reporting company.
Item 4T. Controls and Procedures
Management's report on internal control over financial reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting under the supervision of the President and Chief Executive Officer and the Chief Financial Officer. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Management evaluated the design and operation of our internal control over financial reporting as of March 31, 2010, based on the framework and criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and has concluded that such internal control over financial reporting is effective. There are no material weaknesses that have been identified by management.
An evaluation was performed, under the supervision of, and with the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-(e) to the Securities and Exchange Act of 1934). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were adequate and effective, as of June 30, 2010, to ensure that information required to be disclosed by us in the reports that it files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the system are met and cannot detect all deviations. Because of the inherent limitations in all control systems, no evaluation of control can provide absolute assurance that all control issues and instances of fraud or deviations, if any, within the Company have been detected.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this report.
Changes in internal control over financial reporting
There were no significant changes in our internal controls over financial reporting that occurred subsequent to our evaluation of our internal control over financial reporting for the three months ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments in this quarter in regard to any litigation pending or threatened by or against us or any of our subsidiaries as detailed in Form 10-K filed on April 15, 2010.
Item 1A. Risk Factors
Not applicable because we are a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For the six months ended June 30, 2010, 4,000,000 shares were issued for note payable conversions,
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None
Item 6. Exhibits.
31.1 Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer
32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 4, 2010
| Stakool, Inc.
|
By: | /s/ Kyle Gotshalk |
| Name: Kyle Gotshalk Title: Chief Executive Officer Principal Executive Officer |
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