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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to________________
Commission file number 333-148801
ESL TEACHERS INC.
(Exact name of registrant as specified in its charter)
Nevada 75-3252264
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2475 Paseo del las Americas, Suite 1135, San Diego, CA 92154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 955-7885
Securities registered under Section 12(b) of the Act:
None N/A
Title of each class Name of each exchange on which registered
Securities registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by checkmark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by checkmark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by checkmark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate by checkmark 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 [ ] Smaller reporting company [X]
(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 Act). Yes [X] No [ ]
The aggregate market value of voting and non-voting common equity held by
non-affiliates as of January 13, 2010 was approximately $48,000 based upon
960,000 shares held by non-affiliates and a closing market price of $0.05 per
share on January 13, 2010.
As of January 13, 2010, there were 2,460,000 shares of common stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits incorporated by reference are referred to in Part IV.
AVAILABLE INFORMATION
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and all amendments to those reports that we file with the Securities
and Exchange Commission, or SEC, are available at the SEC's public reference
room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains
reports, proxy and information statements and other information regarding
reporting companies.
TABLE OF CONTENTS
Page
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PART I
ITEM 1. Business 4
ITEM 1A Risk Factors 10
ITEM 2. Properties 17
ITEM 3. Legal Proceedings 17
ITEM 4. Submission of Matters to a Vote of Security Holders 17
PART II
ITEM 5. Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 17
ITEM 6. Selected Financial Data 18
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
ITEM 8. Financial Statements and Supplementary Data 23
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 34
ITEM 9A. Controls and Procedures 34
ITEM 9B. Other Information 35
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance 36
ITEM 11. Executive Compensation 37
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 38
ITEM 13. Certain Relationships and Related Transactions, and Director
Independence 39
ITEM 14. Principal Accountant Fees and Services 39
PART IV
ITEM 15. Exhibits Financial Statement Schedules 40
Signatures 41
2
PART I
FORWARD LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors" and the risks set out below, any of which may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks include, by way of example and not in
limitation:
* the uncertainty that we will not be able to successfully identify and
evaluate a suitable business opportunity;
* risks related to the large number of established and well-financed
entities that are actively seeking suitable business opportunities;
* risks related to the failure to successfully manage or achieve growth
of a new business opportunity; and
* other risks and uncertainties related to our business strategy.
This list is not an exhaustive list of the factors that may affect any of our
forward-looking statements. These and other factors should be considered
carefully and readers should not place undue reliance on our forward-looking
statements.
Forward looking statements are made based on management's beliefs, estimates and
opinions on the date the statements are made and we undertake no obligation to
update forward-looking statements if these beliefs, estimates and opinions or
other circumstances should change. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Except as
required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward-looking statements to conform
these statements to actual results.
The safe harbors of forward-looking statements provided by Section 21E of the
Exchange Act are unavailable to issuers of penny stock. As we issued securities
at a price below $5.00 per share, our shares are considered penny stock and such
safe harbors set forth under the Private Securities Litigation Reform Act of
1995 are unavailable to us.
Our financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common stock" refer to
the common shares in our capital stock.
As used in this annual report, the terms "we," "us," "our" and "ESL" mean ESL
Teachers Inc., unless otherwise indicated.
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ITEM 1. BUSINESS
COMPANY OVERVIEW
We were incorporated as "ESL Teachers Inc." on August 31, 2007, in the State of
Nevada for the purpose of developing and selling online employment services
specifically for both ESL teachers and the ESL operations seeking to hire them
worldwide.
BUSINESS OF COMPANY
We are engaged in the business of developing and marketing an Internet Site (our
"Product" or our "Web Site" or our "Site") that will provide international
online employment services specifically for both ESL teachers and their
prospective employers. Such a Site will allow ESL teachers and the employers in
search of them to network and meet each other's needs successfully and
efficiently without the ambiguity and consequential high turnover commonly
associated with existing ESL online job boards. We are currently in the process
of designing and developing our Site, and we are continually refining the Site
through research into the successful aspects of online dating and social
networking sites that we intend to emulate. We will continue to refine our Site
by responding to user comments and questionnaires that users will access in the
feedback section of our site. When we are satisfied that our Product will
compete effectively in the ESL marketplace as an online placement and recruiting
company, we will begin the promotion and marketing of our Site to ESL teachers
and ESL operations.
Our offices are located at 2475 Paseo del las Americas, Suite 1135, San Diego,
California 92154.
CHALLENGES FACING ESL TEACHERS AND EMPLOYERS
The high annual turnover rate of ESL staff is a chronic problem in the industry.
Companies that are in the market for ESL teachers usually seek recent university
graduates that are flexible in terms of being able to relocate, often outside
their home country, on short notice to fill ESL vacancies. That same degree of
flexibility is often sought by ESL job applicants who do not typically make
long-term commitments to their employers, and have a tendency to move
frequently. While employment conditions and difficulties in adapting to local
customs are common factors that add to the high turnover of staff. Another major
factor is that ESL job postings are typically promoted on job boards where
applicants are responsible for comparing job assignments with a limited amount
of information. Additionally, many employers contribute to the transient nature
of their employees by hiring ESL staff for short term contracts of less than a
year.
Another issue facing those in the ESL industry is that ESL instructional
facilities are loosely regulated in countries outside of the United States, the
United Kingdom and Canada. Without an international regulatory body to set and
maintain industry standards for accreditation, employment contracts, and a
general code of conduct, ESL employees often become disenchanted with their
treatment in the workplace, salaries, living arrangements, and accreditation
standards. Accreditation in particular, is a source of concern for applicants
because there is no global standard on minimum requirements. This leads to
unclear requirements being conveyed by employers in some countries, and
miscommunication in advertising that can lead to strained relationships between
ESL applicants and employers. In some circumstances the qualifying criteria is
often no more than an undergraduate degree from a university or college and a
willingness to relocate to another city or country.
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ESL INDUSTRY AND THE INTERNET
The marketplace for ESL teachers is currently fractured between thousands of
small operations offering face-to-face ESL courses and a growing number of
companies delivering online ESL training. Without a single governing body, it is
difficult to pin down exact numbers of students and teachers. Teachers are
choosing to work in ESL positions for a variety of reasons, including the pay,
the adventure of working in a foreign country, and tax advantages. According to
the British Council, there were over 750 million English as a Foreign Language
teachers in 2000, plus an additional 375 million English as a Second Language.
Since then, a number of factors have contributed to the ESL Industry's rapid
expansion.
One major factor contributing to this expansion is the widespread use of and
dependency upon the internet and the predominance of the English language in
this medium. According to Internet World Stats, the number of people who are
using the World Wide Web has grown from 16 million users, or 0.4% of the global
population in December of 1995, to a projected 1,215 billion or 18.5% of the
global population in September of 2007. Even in countries where English is not
the native language, people are going online to English language sites in
increasing numbers. With the vast majority of websites written in English, which
is also the language of choice for email communication, more people are
demanding a working knowledge of English as a second language. English has
become not only the language of international commerce face-to-face, but also on
the internet.
Businesses have gone global in an attempt to find more customers. The
international language of the business community is English. China is where most
of this business growth is taking place. One of the sectors that reflect the
economic growth of China is the demand for teachers who can teach English. The
Chinese government has a mandate to employ at least one English speaking teacher
in every school across China. Global populations census numbers point to China
as home to one-fifth or 20% of the more than 6 billion people in the world, or
about 1.25 billion Chinese. China is a country where the annual population
growth is estimated at 12 - 13 million people per year. Countries like China
have begun to use tax incentives to attract workers, including ESL teachers with
a personal tax rate of 15%, which is one-third to one-half of the personal tax
rate in the United States or Canada, two of the largest suppliers of ESL
teachers.
All of these factors point to a global demand for instructors to teach English
as a second language. In some regions of the world this push is being supported
by changes in government policy. In other parts of the world the demand for ESL
teachers has grown at the grassroots level and local entrepreneurs have seized
upon this need by creating businesses to cater to the increased demand.
Based on the number of postings on ESL job boards, the following countries have
shown a strong demand for ESL teachers: United Kingdom, the United States,
China, Canada, South Korea, Japan, Taiwan and Chile. ESL job postings appear to
be grouped into several distinct categories such as: Private Schools, Public
Schools, and International Schools. Along with jobs in the education sector
there are numerous part-time positions in the private sector, where companies
that hire foreign nationals are in need of ESL assistance.
SOCIALIZATION ON THE INTERNET
We plan to model certain features of our website after applicable aspects of
successful online dating and social networking sites. Online dating has become
extremely popular with hundreds of websites in use around the world, while
social networking websites are a more recent invention that have jumped to the
top of the most visited websites list, rating highly in areas such as user
acceptance, information sharing, and portability. Both facilitate matchmaking,
as we intend to do through our Site as well. We plan to focus on the elements
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that make both of these types of websites so popular with their constituents and
blend those into our own site. Some of the top ranked social networking sites
that are serving as business models for our website include:
* Facebook (www.facebook.com/) - 39 million users
* Friendster (www.friendster.com/) - 50 million users
* Orkut (www.orkut.com/) - 67 million users
* My Space (www.myspace.com/) - 200 million users
As of the fall of 2008 there were more than 100 social networking websites and
hundreds of millions of users. The speed with which these websites and this
sector of the internet evolved indicates the acceptance of the internet as a
multidimensional delivery platform. Social networking is not just a phenomenon;
it has become a way of life for the global community.
OUR SITE
The rising demand for ESL teachers worldwide in conjunction with the
simultaneous need for an effectual and comprehensible medium to match ESL
employers and applicants has resulted in what we anticipate will be a highly
receptive potential market for our Site. We intend to develop an online
recruiting and placement Site to match ESL teachers and their potential
employers, in part by building on the emerging trend of social networking on the
internet. We believe that the depth of interactive functions available on our
Site and the ability for employers and applicants to establish personal,
in-depth connections through our site will distinguish us from our competitors.
We are in the process of developing a website that will provide the
infrastructure for applicants and ESL employers alike to share in-depth profiles
in a familiar social networking format. Facebook.com has a Developer's Platform
for those who want to integrate applications into the Facebook.com
infrastructure. We may choose to take advantage of that development option at
some point in time. In the early stages, we plan to borrow a number of the
attributes of the Facebook.com layout to create our Site. We see the
Facebook.com development platform as something worth exploring during our first
few years in business since it would allow access to the growing number of
Facebook.com users. The Facebook.com profiles that we will be modeling allow
users to share a variety of information, such as:
* Basic personal information
* Pictures of themselves, friends, and family
* Mini-Feed where the owner can add 10 personal stories
* Fun Wall - for music videos, slide shows, a sketching and other
postings
* Cross-references within the Facebook.com database to other members
* References to Friends in Facebook.com
* Marketplace to offer things for sale
We plan to develop an online resource that blends together the functionality of
job searching with relocation and international travel. ESL teachers are highly
mobile and flexible in their working arrangements. They count on the internet
for access to information, and our website will be a reliable source of such
valuable information.
We are in the process of refining the format for our Product, which will be
integral to its success.
Our Site will include several sections. A click through icon on the home page of
the website will allow visitors to drill down for more information. Information
will be organized by topic and allow ESL applicants to quickly find what they
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are seeking. Every web page will feature a "Contact Us" link as well as links
back to the home page of the Site for efficient navigation. Google advertising
will bring traffic to our website where the first step is to encourage people to
register with us. For those who do register and find work elsewhere we will
provide an "Opt-In" function that will allow us to keep in touch by periodic
email newsletters. Our Site will include the following pages:
* ESL TEACHERS CENTER - This section will offer a variety of information
including: automated online registration, employment applications, an
online ESL skills test, an ESL accreditation questionnaire,
international accreditation links, a question and answer section about
relocation, international postings by country, work visa application
forms, a video message (1-3 minutes long), travel medical insurance,
and discount airfares.
* ESL EMPLOYERS CENTER - This section will be designed to be especially
easy to navigate and use. It will have a straightforward format in
order to minimize the chances of miscommunication between the
employers and applicants. The content of this section will be
available to all Site visitors, and will include: online registration,
automated job order form, enhanced employer profiles, search
functionality, cross-references to ESL applicants, work visa
requirements, home stay programs, travel arrangements, video streaming
options, and cultural customs and traditions. We will strongly
encourage employers that register with us to provide a detailed
description of the position for applicants, as well as intangibles
such as the quality of the institution, the nature of the teaching
opportunity, and the culture of the country and city where the teacher
will be living and working. The employer may also provide a short
video of themselves and the institution and share information from
previous ESL teachers that may help the applicant in deciding on their
employment choices.
* FEEDBACK SECTION - Here we will ask for ideas and suggestions on what
else visitors would like to find on our site. Registration with us
will include a feedback questionnaire in their monthly newsletter
emailed to them. Topics and information that we will consider
including are: a career services area, understanding foreign customs,
continuing education, understanding payroll deductions, extending the
employment term, and editorial articles about ESL.
* ADMINISTRATIVE MODULE - This will contain the back office functions
necessary to conduct an e-commerce business. This includes running
reports, reviewing the ESL teacher and employer registrations, ability
to revoke registration privileges, newsletter distribution and other
administrative functions. Access to the Administrative Module will be
password protected and available only to directors of the company and
future staff at the discretion of the directors.
The content of our website will be in English only during the first three years.
We may then consider expanding into a multi-lingual format depending on several
factors such as identifying where we are having the most success placing
teachers.
REVENUE
Our primary source of revenue will come from 15% contingency fees charged to
employers that hire the applicants that have been referred and hired by their
company. The 15% contingency fee will be based on the starting salary of the new
employee. Payment by the employers will be made through our PayPal system that
will be featured in the Employer Module. All registered employers will have easy
access to the Employer Module.
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No revenue will come from job postings. We plan to offer job postings as a free
service to registered employers. There will be no other charges to the employers
other than the contingency fees for placement of applicants.
COMPETITION
We compete with a large number of ESL job boards, as well as general job boards
and accreditation courses that include ESL positions in their postings. Many of
these job boards have significantly greater financial, distribution,
advertising, and marketing resources than we do. Listed below are several
competing websites:
* Dave's ESL Cafe (www.eslcafe.com/joblist/) is one of the typical Job
Boards on the internet today. On any given day there are more than 200
job postings listed one right after another in a format that makes
browsing and searching difficult for users.
* TesAll.com (www.tesall.com/jobboard/index.pl) is a job board that
features ESL postings in similar fashion to Dave's ESL Cafe.
Information is available, but the job postings are posted in random
order without codes on jobs or easy-to-use cross references to other
relevant information.
* ESL Teachers Board (www.eslteachersboard.com/) is an example of a
highly ranked website using a Google search for ESL teacher job
postings.
* Footprint Recruiting Inc. (www.footprintsrecruiting.com/) is operated
from Vancouver, BC, Canada. This company focuses on ESL jobs in Korea,
China, Taiwan, Chile, Thailand, Japan and Vietnam. The firm does not
appear to have any interest in placing teachers in positions in the
United States, Canada, the UK, or Europe.
* Protocol Education (www.protocol-education.com/) is a London-based
recruiting firm that touts job opportunities in the United Kingdom and
Australia. The company claims to be the United Kingdom's largest
independent specialist provider of teachers and support workers.
Protocol Education does not have both employers and applicants
visiting the same website. Rather, they run separate sites for
employers and applicants.
* ESL Jobs.com (www.esljobs.com/) features one of the most attractive
looking layouts of the group. However, clicking on the links for
designated regions such as North America, East & Western Europe, Latin
America, Middle East or Asia leads to a group of links to other
websites for jobs in China, the UK and few United States job postings.
This company does not appear to list any job postings directly but
refers website visitors to other internet locations.
* Monster.com (www.monster.com) is the most popular general job search
site on the internet. They do not, however, have as many job listings
for ESL job postings as many independent sites organized specifically
for ESL job postings.
* Mark's ESL World (www.esljob.org/) is a broader in scope than most
other ESL sites, offering a Forum Center, ESL Community, ESL Directory
and The Lounge, along with the usual job postings, applicant and
employer sections.
* ESL Job Project.com (www.esljobproject.com/) is a contemporary job
board with ESL listings, but the layout does not make accessing those
postings simple for users.
* In ESL Jobs (www.inesljobs.com/) has an introduction in the search
results that suggests that an applicant can find ESL jobs around the
world. The site's emphasis, however, is on positions in South Korea
with two other countries given a dedicated link including China and
Japan. Job postings in all other countries are lumped under one link
from the home page of the site.
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We feel that the abundance of competitors indicates a significant acceptance by
the ESL community of the internet to market job opportunities and related
services. The ESL marketplace is dominated by many small operations and job
boards. Research into these job boards suggests that the job listings do not
offer much detail for the prospective applicants about the ESL employer, the
community, travel and visa requirements and related topics. Also, there are very
few direct competitors that rely on placement fees to generate income.
We intend to compete primarily on the basis of the quality of our site, and by
offering services and personal introductions not found on other ESL job sites.
We believe that our success will depend upon our ability to remain competitive
in our service areas. The failure to compete successfully in the future could
result in a material deterioration of customer loyalty and our image and could
have a material adverse effect on our business.
INTELLECTUAL PROPERTY
Once we determine the final layout for our Site, we intend to file a patent on
its unique format. We will file for patent pending status as we design and
develop a format for our Site. We will apply for patent protection and/or
copyright protection in the United States, Mexico, Canada, Europe, Japan, China,
South Korea, and other jurisdictions.
We intend to aggressively assert our rights under trade secret, unfair
competition, trademark and copyright laws to protect our intellectual property,
including product design, proprietary manufacturing processes and technologies,
product research and concepts and recognized trademarks. These rights are
protected through the acquisition of patents and trademark registrations, the
maintenance of trade secrets, the development of trade dress, and, where
appropriate, litigation against those who are, in our opinion, infringing these
rights.
While there can be no assurance that registered trademarks and copyrights will
protect our proprietary information, we intend to assert our intellectual
property rights against any infringer. Although any assertion of our rights can
result in a substantial cost to, and diversion of effort by, our company,
management believes that the protection of our intellectual property rights is a
key component of our operating strategy.
REGULATORY MATTERS
We are unaware of and do not anticipate having to expend significant resources
to comply with any governmental regulations of the ESL Job Posting Industry. We
are subject to the laws and regulations of those jurisdictions in which we plan
to provide our service, which are generally applicable to business operations,
such as business licensing requirements, income taxes and payroll taxes. In
general, the development and promotion of our Site and sale of our services in
the United States, Mexico, Canada, Japan, China, and South Korea are not subject
to special regulatory and/or supervisory requirements.
EMPLOYEES
We have no other employees other than our officers and directors. Mauricio
Beltran is our President, CEO, and a member of the Board of Directors. Maria
Guadalupe Flores N is our Secretary and a Member of the Board. Our officers and
directors oversee all responsibilities in the areas of corporate administration,
business development, and research. We intend to expand our current management
in the future to retain skilled directors, officers, and employees with
experience relevant to our business focus. We plan to hire a full-time sales
support person to assist the directors as our Site nears completion and give
that person 30 days of orientation and training leading up to the official
launch of the website. The Site development will be outsourced to a web
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development contractor. This will lower expenses and eliminate the need for
employees during the first year of operations, though we may hire staff earlier
depending on market reception to the launch of our business.
ENVIRONMENTAL LAWS
We have not incurred and do not anticipate incurring any expenses associated
with environmental laws.
ITEM 1A. RISK FACTORS
Much of the information included in this annual report includes or is based upon
estimates, projections or other "forward looking statements". Such "forward
looking statements" involve various risks and uncertainties as outlined below.
We caution the reader that important factors in some cases have affected, and in
the future could materially affect, actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other "forward looking statements".
RISK FACTORS
RISKS ASSOCIATED WITH OUR FINANCIAL CONDITION
BECAUSE OUR AUDITOR HAS ISSUED A GOING CONCERN OPINION REGARDING OUR COMPANY,
THERE IS AN INCREASED RISK ASSOCIATED WITH AN INVESTMENT IN OUR COMPANY.
We have earned limited revenue since our inception, which makes it difficult to
evaluate whether we will operate profitably. Operating expenses for the year
ended September 30, 2009, totaled $22,552. We have incurred cumulative net
losses of $58,383 since August 31, 2007 to September 30, 2009. We have not
attained profitable operations and are dependent upon obtaining financing or
generating revenue from operations to continue operations for the next twelve
months. As of September 30, 2009, we had cash in the amount of $17,430. Our
future is dependent upon our ability to obtain financing or upon future
profitable operations. We reserve the right to seek additional funds through
private placements of our common stock and/or through debt financing. Our
ability to raise additional financing is unknown. We do not have any formal
commitments or arrangements for the advancement or loan of funds. For these
reasons, our auditors stated in their report that they have substantial doubt we
will be able to continue as a going concern. As a result, there is an increased
risk that you could lose the entire amount of your investment in our company.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT IS DIFFICULT TO EVALUATE YOUR
INVESTMENT IN OUR STOCK.
Evaluation of our business will be difficult because we have a limited operating
history. We are in the development stage of our business and have not yet begun
to offer our products. To date, revenues are not substantial enough to maintain
us without additional capital injection. We face a number of risks encountered
by early-stage companies, including our need to develop infrastructure to
support growth and expansion; our need to obtain long-term sources of financing;
our need to establish our marketing, sales and support organizations; and our
need to manage expanding operations. Our business strategy may not be
successful, and we may not successfully address these risks. If we are unable to
sustain profitable operations, investors may lose their entire investment in us.
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RISKS ASSOCIATED WITH OUR BUSINESS MODEL
BECAUSE WE HAVE NOT ESTABLISHED THE ESL TEACHERS BRAND NAME, AND OUR PRODUCTS
AND NAME HAVE LITTLE, IF ANY, NAME RECOGNITION, WE MAY BE PREVENTED FROM
GENERATING REVENUES, WHICH WILL REDUCE THE VALUE OF YOUR INVESTMENT.
Because we are a new company with new products and we have not conducted
advertising, there is little or no recognition of our ESL Teachers brand name.
As a result, consumers may utilize sites other than ours that have brand
recognition in the market and we may be unable to generate sufficient revenues
to meet our expenses or meet our business plan objectives, which will reduce the
value of your investment.
BECAUSE WE ARE DEPENDENT ON THIRD PARTIES, SHOULD THOSE SERVICES BE INTERRUPTED
OR BECOME MORE COSTLY, WE MAY EXPERIENCE A MATERIAL ADVERSE EFFECT ON THE
ACCEPTANCE OF OUR BRAND AND ON OUR BUSINESS, FINANCIAL CONDITION, AND OPERATING
RESULTS.
Because we are dependent on third parties, especially employers, applicants, and
site developers, we face potential losses if any of these parties fail to
perform as anticipated or agreed. Our operations and services are dependent on
the protections of our equipment from fire, earthquakes, power loss,
telecommunications failures and similar events. A significant portion of our
equipment, including all critical "server" equipment dedicated to our Internet
Web Portal site, will be located at a single facility operated by an independent
third-party. Despite precautions taken by us and our third-party "server park"
operator, the occurrence of a natural disaster or other unanticipated problems
at our corporate offices or those of the server park operator, could cause
interruptions in our services. We will be relying upon our server park operator
to provide redundant or backup equipment and telecommunications facilities. Any
accident, incident or system failure that causes interruptions in our operations
could have a material adverse affect on our ability to provide Internet services
to our customers. Extensive or multiple interruptions in providing customers
with site access are a known primary reason for customer decisions to abandon
the use of Internet sites/services. Accordingly, any disruption of our services
due to system failures could have a material adverse affect on our business,
financial condition and results of operations.
BECAUSE WE RELY HEAVILY UPON THIRD-PARTY TELECOMMUNICATIONS PROVIDERS, ANY
DISRUPTION IN THAT TELECOMMUNICATION WILL HAVE ADVERSE EFFECTS ON OUR BUSINESS
OPERATIONS.
If telecommunications providers lose service to their customers, our customers
will not be able to access our service. We will be relying on our web hosting
company to provide the telecommunications links for our customers to access our
web site. In the Internet marketplace it is not unusual for telecommunications
providers to lose service in a market area, although these problems are usually
cured within 24 hours. Any accident, incident, system failure or discontinuance
of operations involving a third-party telecommunications provider that causes
our members or visitors to be unable to access our site could have a material
adverse affect on our ability to provide services to our customers and, in turn,
on our business, financial condition, and results of operations.
IF THERE ARE EVENTS OR CIRCUMSTANCES AFFECTING THE RELIABILITY AND SECURITY OF
THE INTERNET, ACCESS TO OUR PRODUCT AND/OR THE ABILITY TO SAFEGUARD CONFIDENTIAL
INFORMATION COULD BE IMPAIRED CAUSING A NEGATIVE EFFECT ON THE FINANCIAL RESULTS
OF OUR BUSINESS OPERATIONS.
11
Despite the implementation of security measures, our web site infrastructure may
be vulnerable to computer viruses, hacking or similar disruptive problems caused
by members, other Internet users, other connected Internet sites, and the
interconnecting telecommunications networks. Such problems caused by
third-parties could lead to interruptions, delays or cessation of service to our
customers. Inappropriate use of the Internet by third-parties could also
potentially jeopardize the security of confidential information stored in our
computer system, which may deter individuals from becoming customers. Such
inappropriate use of the Internet includes attempting to gain unauthorized
access to information or systems, which is commonly known as "cracking" or
"hacking." Although we intend to implement security measures, such measures have
been circumvented in the past, and there can be no assurance that any measures
we implement would not be circumvented in future. Dealing with problems caused
by computer viruses or other inappropriate uses or security breaches may require
interruptions, delays or cessation of service to our customers, which could have
a material adverse affect on our business, financial condition and results of
operations.
IF WE CANNOT DEVELOP OR EXPAND OUR SITE INFRASTRUCTURE REASONABLY, EFFECTIVELY,
OR IN A TIMELY MANNER, WE MAY SUFFER A LOSS IN BUSINESS.
The future success of our business will depend to a large extent on the
capacity, reliability and security of our Site infrastructure. As consumer
visitation increases, we will be required to expand and adapt our Site
infrastructure. Such expansion and adaptation will require substantial
financial, operational and management resources. We believe that we will have
the necessary funds for capital expenditures on Site software and hardware
infrastructure during the next twelve months. In the event that we grow very
rapidly, there can be no assurance that we will be able to keep up or expand or
adapt our Site infrastructure to meet evolving consumer demand on a timely basis
and at a commercially reasonable cost, or at all. If we are unable to expand and
adapt our Site infrastructure to accommodate visitors to our Site, customers
could stop using our service, resulting in a loss of business.
BECAUSE THE INDUSTRY IS DEPENDENT UPON GENERAL ECONOMIC CONDITIONS AND
UNCERTAINTIES, FUTURE DEVELOPMENTS COULD RESULT IN A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS.
US trade & industry is subject to economic changes and periodical fluctuations.
Prolonged declines in the economy and/or a recession could have a material
adverse effect on our business. The national economy is affected by numerous
factors and conditions, all of which are beyond our control, including (a)
Interest rates; (b) Inflation; (c) Employment levels; (d) Changes in disposable
income; (e) Financing availability; (f) Federal and state income tax policies;
and (g) Consumer confidence.
IN THE EVENT THAT WE ARE UNABLE TO SUCCESSFULLY COMPETE WITHIN THE ONLINE ESL
EMPLOYMENT BUSINESS, WE MAY NOT BE ABLE TO ACHIEVE PROFITABLE OPERATIONS.
We face substantial competition in the industry. Due to our small size, it can
be assumed that many of our competitors have significantly greater financial,
technical, marketing and other competitive resources. These competitors may have
completed development of their sites and are presently marketing these to
potential customers. Accordingly, these competitors may have already begun to
establish brand-recognition with consumers. We will attempt to compete against
these competitors by developing our Site with features and quality that exceed
the features offered by competing companies. However, we cannot assure you that
our Site will outperform competing sites or those competitors will not develop
new sites that exceed what we provide. In addition, we may face competition
based on price. If our competitors lower the prices on their services, then it
may not be possible for us to market our services at prices that are
economically viable. Increased competition could result in:
* Lower than projected revenues;
* Price reductions and lower profit margins;
* The inability to develop and maintain our Site with features and
usability sought by potential customers.
12
Any one of these results could adversely affect our business, financial
condition and results of operations. In addition, our competitors may develop
competing sites that achieve greater market acceptance. It is also possible that
new competitors may emerge and acquire significant market share. Our inability
to achieve sales and revenue due to competition will have an adverse effect on
our business, financial condition and results of operations.
THE COMPLEXITY OF OUR SITE MAY LEAD TO ERRORS, DEFECTS, AND BUGS, WHICH COULD
SUBJECT US TO SIGNIFICANT COSTS OR DAMAGES AND ADVERSELY AFFECT MARKET
ACCEPTANCE OF OUR SITE.
We have not undertaken significant testing of our Site and it may contain
undetected errors, weaknesses, defects or bugs when first introduced or as new
versions are released. If our Site contains defects, reliability, quality or
compatibility problems that are significant to our customers, our reputation may
be damaged and customers may be reluctant to continue to buy our services, which
could adversely affect our ability to attract and retain customers. In addition,
these defects or bugs could interrupt or delay sales of affected services, which
could adversely affect our results of operations.
If defects or bugs are discovered after commencement of commercial operation of
our Site, we may be required to make significant expenditures of capital and
other resources to resolve the problems. This could result in significant
additional development costs and the diversion of technical and other resources
from our other development efforts. We could also incur significant costs to
repair or replace the defective Site. These costs or damages could have a
material adverse effect on our financial condition and results of operations.
IF WE DO NOT EFFECTIVELY IMPLEMENT MEASURES TO SELL OUR PRODUCT, WE MAY NEVER
ACHIEVE REVENUES AND YOU WILL LOSE YOUR ENTIRE INVESTMENT.
We are currently developing, testing, and refining our Site. When we are
satisfied that our Site provides the highest quality and most effective means
for ESL teachers and employers to connect and establish positive working
relationships, we will put our Site on the Internet for public access. We have
not achieved revenues, or taken active steps to develop a sales force to attain
revenues. We have no experience in providing direct sales and service, nor do we
have salespeople to promote our Site. Moreover, our sales and marketing efforts
may not achieve intended results and therefore may not generate the revenue we
hope to achieve. As a result of our corporate strategies, we have decided to
initially focus our resources on English speaking Internet users. There can be
no assurance that our focus or our near term plans will be successful. If we are
not able to successfully address markets for our services, we may not be able to
grow our business, compete effectively or achieve profitability.
IF WE ARE UNABLE TO SUCCESSFULLY MANAGE GROWTH, OUR OPERATIONS COULD BE
ADVERSELY AFFECTED.
Our progress is expected to require the full utilization of our management,
financial and other resources, which to date has occurred with limited working
capital. Our ability to manage growth effectively will depend on our ability to
improve and expand operations, including our financial and management
information systems, and to recruit, train and manage sales personnel. There can
be no absolute assurance that management will be able to manage growth
effectively.
13
If we do not properly manage the growth of our business, we may experience
significant strains on our management and operations and disruptions in our
business. Various risks arise when companies and industries grow quickly. If our
business or industry grows too quickly, our ability to meet customer demand in a
timely and efficient manner could be challenged. We may also experience
development or production delays as we seek to meet increased demand for our
services. Our failure to properly manage the growth that we or our industry
might experience could negatively impact our ability to execute on our operating
plan and, accordingly, could have an adverse impact on our business, our cash
flow and results of operations, and our reputation with our current or potential
customers.
BECAUSE WE INTEND TO OFFER OUR SERVICES IN COUNTRIES OUTSIDE THE UNITED STATES,
WE ARE SUBJECT TO RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
Although we have not launched our Site, we anticipate that many of our ESL
teachers and employers will be outside the United States. Foreign operations
subject us to a number of risks associated with conducting business outside of
the United States, including the following:
* Unexpected changes in, or impositions of, legislative or regulatory
requirements;
* Delays resulting from difficulty in obtaining export licenses for
certain technology, tariffs, quotas and other trade barriers and
restrictions;
* Imposition of additional taxes and penalties;
* The burdens of complying with a variety of foreign laws; and
* Other factors beyond our control, including acts of terrorism, which
may impair our ability to travel or our ability to communicate with
foreign locations.
In addition, the laws of certain foreign countries in which our Site may be
utilized may not protect our Site or intellectual property rights to the same
extent as the laws of the United States. This increases the possibility of
piracy of our technology and services.
RISKS ASSOCIATED WITH MANAGEMENT AND CONTROL PERSONS
BECAUSE OUR MANAGEMENT IS INEXPERIENCED IN OPERATING AN ONLINE ESL EMPLOYMENT
BUSINESS, OUR BUSINESS PLAN MAY FAIL.
Our management does not have any specific training in running an online ESL
employment business. With no direct training or experience in this area, our
management may not be fully aware of many of the specific requirements related
to working within this industry. As a result, our management may lack certain
skills that are advantageous in managing our company. Consequently, our
operations, earnings, and ultimate financial success could suffer irreparable
harm due to management's lack of experience in this industry.
BECAUSE OUR MANAGEMENT HAS ONLY AGREED TO PROVIDE THEIR SERVICES ON A PART-TIME
BASIS, THEY MAY NOT BE ABLE OR WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO
OUR BUSINESS OPERATIONS, CAUSING OUR BUSINESS TO FAIL.
Mr. Mauricio Beltran, our president and director, and Ms. Maria Guadalupe Flores
N, our Secretary and director, devote 10 to 15 hours per week to our business
affairs. We do not have an employment agreement with Mr. Beltran or Ms. Flores
14
N, nor do we maintain key life insurance for them. Currently, we do not have any
full or part-time employees. If the demands of our business require the full
business time of our management, it is possible that they may not be able to
devote sufficient time to the management of our business, as and when needed. If
our management is unable to devote a sufficient amount of time to manage our
operations, our business will fail.
IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL, WE MAY NOT BE ABLE TO
IMPLEMENT OUR BUSINESS PLAN.
Due to the specified nature of our business, having certain key personnel is
essential to the development and marketing of the services we plan to sell and
thus to the entire business itself. Consequently, the loss of any of those
individuals may have a substantial effect on our future success or failure. We
may have to recruit qualified personnel with competitive compensation packages,
equity participation, and other benefits that may affect the working capital
available for our operations. Management may have to seek to obtain outside
independent professionals to assist them in assessing the merits and risks of
any business proposals as well as assisting in the development and operation of
many company projects. No assurance can be given that we will be able to obtain
such needed assistance on terms acceptable to us. Our failure to attract
additional qualified employees or to retain the services of key personnel could
have a material adverse effect on our operating results and financial condition.
BECAUSE OUR PRESIDENT AND DIRECTOR, MR. MAURICIO BELTRAN, AND OUR SECRETARY AND
DIRECTOR, MS. MARIA GUADALUPE FLORES N, OWN AN AGGREGATE OF 60.96% OF OUR
OUTSTANDING COMMON STOCK, INVESTORS MAY FIND THAT CORPORATE DECISIONS INFLUENCED
BY MR. BELTRAN AND MS. FLORES N ARE INCONSISTENT WITH THE BEST INTERESTS OF
OTHER STOCKHOLDERS.
Mr. Mauricio Beltran is our president and director. Ms. Maria Guadalupe Flores N
is our Secretary and director. Together, they own 60.96% of the outstanding
shares of our common stock. Accordingly, they will have an overwhelming
influence in determining the outcome of all corporate transactions or other
matters, including mergers, consolidations and the sale of all or substantially
all of our assets, and also the power to prevent or cause a change in control.
While we have no current plans with regard to any merger, consolidation or sale
of substantially all of our assets, the interests of Mr. Beltran and Ms. Flores
N may still differ from the interests of the other stockholders.
BECAUSE OUR PRESIDENT AND DIRECTOR, MR. MAURICIO BELTRAN, AND OUR SECRETARY AND
DIRECTOR, MS. MARIA GUADALUPE FLORES N, OWN AN AGGREGATE OF 60.96% OF OUR
OUTSTANDING COMMON STOCK, THE MARKET PRICE OF OUR SHARES WOULD MOST LIKELY
DECLINE IF THEY WERE TO SELL A SUBSTANTIAL NUMBER OF SHARES ALL AT ONCE OR IN
LARGE BLOCKS.
Our president and director, Mr. Mauricio Beltran owns 750,000 shares of our
common stock, which equates to 30.48% of our outstanding common stock. Our
Secretary and director, Ms. Maria Guadalupe Flores N owns 750,000 shares of our
common stock, which equates to 30.48% of our outstanding common stock. There is
presently no public market for our common stock although we plan to apply for
quotation of our common stock on the NASD over-the-counter bulletin board upon
the effectiveness of the registration statement of which this prospectus forms a
part. If our shares are publicly traded on the over-the-counter bulletin board,
Mr. Beltran and Ms. Flores N will be eligible to sell their shares publicly
subject to the volume limitations in Rule 144. The offer or sale of a large
number of shares at any price may cause the market price to fall. Sales of
substantial amounts of common stock or the perception that such transactions
could occur may materially and adversely affect prevailing markets prices for
our common stock.
15
RISKS RELATED TO LEGAL UNCERTAINTY
IF OUR INDIVIDUALS ARE HARMED THROUGH AN EMPLOYMENT RELATIONSHIP BROKERED
THROUGH OUR SITE, WE WILL INCUR SUBSTANTIAL LITIGATION AND JUDGMENT COSTS, WHICH
WILL INCREASE OUR LOSSES AND NEGATIVELY AFFECT OUR BRAND NAME REPUTATION AND
PRODUCT SALES.
Because our Site is intended to establish employment relationships, we may be
subject to liability for any incidents that may occur in connection with these
relationships. We do not currently maintain liability insurance coverage for
such claims. If we are unable to obtain such insurance, liability claims could
adversely affect our brand name reputation, revenues and ultimately lead to
losses. A significant lawsuit could result in the removal of our Site from the
Internet. The occurrence of any claims or judgments will negatively affect our
brand name image and sales, as well as lead to additional costs.
EVEN THOUGH WE ARE NOT DEVELOPING THE SITE OURSELVES, IF OUR SITE INFRINGES ON
THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WE MAY FIND OURSELVES INVOLVED IN
COSTLY LITIGATION, WHICH WILL NEGATIVELY AFFECT THE FINANCIAL RESULTS OF OUR
BUSINESS OPERATIONS.
Although we have not received notices of any alleged infringement, we cannot be
certain that our Site will not infringe on issued trademarks and/or copyright
rights of others. We may be subject to legal proceedings and claims from time to
time in our ordinary course of business arising out of intellectual property
rights of others. These legal proceedings can be very costly, and thus can
negatively affect the results of our operations.
NEW LEGISLATION, INCLUDING THE SARBANES-OXLEY ACT OF 2002, MAY MAKE IT MORE
DIFFICULT FOR US TO RETAIN OR ATTRACT OFFICERS AND DIRECTORS.
The Sarbanes-Oxley Act of 2002 was enacted in response to public concerns
regarding corporate accountability in connection with recent accounting
scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate
responsibility, to provide for enhanced penalties for accounting and auditing
improprieties at publicly traded companies, and to protect investors by
improving the accuracy and reliability of corporate disclosures pursuant to the
securities laws. The Sarbanes-Oxley Act generally applies to all companies that
file or are required to file periodic reports with the SEC, under the Securities
Exchange Act of 1934. Upon becoming a public company, we will be required to
comply with the Sarbanes-Oxley Act. The enactment of the Sarbanes-Oxley Act of
2002 has resulted in a series of rules and regulations by the SEC that increase
responsibilities and liabilities of directors and executive officers. The
perceived increased personal risk associated with these recent changes may deter
qualified individuals from accepting these roles. As a result, it may be more
difficult for us to attract and retain qualified persons to serve on our board
of directors or as executive officers. We continue to evaluate and monitor
developments with respect to these rules, and we cannot predict or estimate the
amount of additional costs we may incur or the timing of such costs.
16
ITEM 2. PROPERTIES
EXECUTIVE OFFICES
We maintain our corporate office at 2475 Paseo del las Americas, Suite 1135, San
Diego, California 92154.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the fourth
quarter of fiscal year 2009.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR SECURITIES
Our Common Stock is traded on the over-the-counter market and quoted on the
OTCBB under the symbol "ESLS." On September 30, 2009, the closing price for our
Common Stock as reported on the OTCBB was unavailable as our Common Stock has
not traded.
The high and the low bid prices for our Common Stock is based on inter-dealer
prices, without retail mark-up, markdown or commission, and may not represent
actual transactions.
The table below sets forth the range of high and low bid information for our
Common Shares as quoted on the OTCBB for each of the quarters during the fiscal
year ended September 30, 2009 (no quotes are available for the previous fiscal
year as our stock has not traded ):
For the Fiscal Year Ended September 30, 2009
For the Quarter ended High Low
--------------------- ---- ---
October 31 N/A N/A
January 31 N/A N/A
April 30 N/A N/A
July 31 N/A N/A
HOLDERS OF OUR COMMON STOCK
On January 13, 2010, the shareholders' list of our common stock showed 34
registered shareholder and 2,460,000 shares outstanding.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock and have no present
intention of paying any dividends on the shares of our common stock. Our future
dividend policy will be determined from time to time by our board of directors.
17
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
As of September 30, 2009, we had not adopted an equity compensation plan and had
not granted any stock options.
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal year ended September 30, 2009 we have not sold any equity
securities not registered under the Securities Act.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES
During each month within the fourth quarter of the fiscal year ended September
30, 2009, neither we nor any "affiliated purchaser," as that term is defined in
Rule 10b-18(a)(3) under the Exchange Act, repurchased any of our Common Stock or
other securities.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
We are a development stage company with limited operations to date, including no
revenue sources, limited financial backing, and few assets. Our plan of
operation is to develop an industry leading online resource for ESL teachers and
ESL operations. Our web-based service will support both job inquiries and job
postings. Our business objectives include becoming a leading provider of ESL
candidates for placement into full time jobs in the United States, Mexico,
Canada, Japan, China and South Korea by developing an interactive web service
that will generate income from multiple revenue streams and create value for our
shareholders.
We intend to continue the development and refinement of our Product over the
coming months. Our goals over the next twelve months are to develop our Site and
services to the point that we can begin taking job orders, start to develop our
inventory of job applicants, prepare to begin employer interviews of our
applicants, and begin discussions with 75 prospective employers about their
needs. We will also focus on our research and user feedback to improve the
quality of our Product to increase its appeal to ESL teachers and ESL
operations.
During our development stage, our officers and directors will provide their time
to the business at no charge. This includes all administrative duties along with
overseeing the development of the website, developing the sales and marketing
information material, researching background on potential job listings from
employers, and networking with ESL accreditation schools. As we have limited
financial resources, each member of the management team has agreed to dedicate
approximately 15-20 hours a week in order to attend to needs of the business.
Our management has developed our information website, acquired a domain name on
the web located at www.esl-teachers.com, and uploaded the informational website,
which simply provides information about the services we will provide to Internet
users.
We plan to develop a beta-test version of the website and involve three ESL
employers during the test period. We have identified several prospective
companies to approach and plan to begin negotiations to find our three test
employers shortly. Our plan is to allow the members of the beta-test group
special consideration regarding job postings, enhanced services and other
benefits in appreciation for being involved in the test period.
We feel our final Product will compete effectively in the marketplace due to its
unique design, which will allow employers and applicants to exchange vital
information while forming a personal connection that they may build upon as a
18
foundation for their future working relationship. We intend to provide a high
quality of service and refer qualified applicants to our clients in order to
enhance our company reputation and attract new and repeat business.
PLAN OF OPERATION
LOCATE SUITABLE WEBSITE DEVELOPER
We intend to contract out the development of the Site to an accomplished web
developer who is familiar with online databases, streaming video, and content
management systems within our first three months of operation. The web
development contractor will produce the main website including all aspects
relating to secured portals for both the ESL applicants and employers. Once the
web development contractor has been selected, we will immediately begin work on
the high level design specifications for the Site. The web development
contractor will be responsible for the database of back office administrative
functions as well as the secure web portals for ESL applicants and employers.
All parties that we work with will be under a strict Non-Disclosure Agreement.
The administrative side of the website will support our own contact management
information system with upload capabilities for incremental changes. We
anticipate that developing the interactive database and administrative sections
to the website will begin in our fourth month of operation. This will be
contracted out to an offshore contractor to reduce costs. While the web
development is underway, management will be working to build their international
network of contacts in the ESL community. Hosting of the website will be
contracted out to an internet company that can provide turn-key operations and a
high level of service and support.
SALES AND DISTRIBUTION STRATEGY
Our goal is for our online ESL employment services website to become a leading
website in the ESL Industry. In order to achieve our goal, we intend to increase
awareness of our Product with potential customers, who we anticipate will be ESL
teachers and the ESL operations that employ these teachers. We intend to do this
by engaging in the following:
* We will use the Google Adwords program
(adwords.google.com/select/Login) as the center of our marketing
strategy for the first three years. Google has a strong brand name
around the world and is the number one ranked website for online
searches by internet users. This fits the demographic of our ESL
candidates who travel and use the internet to find information. The
Google Adwords program allows us the flexibility to develop our own
advertisements, control the frequency of the ads as well as the start
and end date for each ad, and accurately track the click through
activity from the online ads to our website. This combination of
features gives us the ability to control our costs and make
adjustments swiftly if needed. The Google Adwords program is built
around the use of keywords. When someone uses one of our designated
keywords, such as "ESL," our ad will appear on the search page results
giving us visibility in the ESL marketplace for both applicants and
employers.
* Our online marketing efforts will involve Search Engine Optimization,
a process by which an online company can improve the volume and
quality of the traffic to their website by using keywords. The index
page will include the use of strategic meta-tags to help flag a web
page for search engines inquiries. During the first six months of
operation, we will probe the use of various search phrases and
keywords that ESL applicants use when job hunting. Management will
generate a summary report of this survey and share this data with our
contract website designer.
* We plan to focus our sales efforts around our website by promoting its
use to ESL applicants and employers alike. The unique features we are
borrowing from social networking and online dating websites will
encourage web visitors to register with us and become a part of our
online community. Our approach will be to not only attract but to
retain ESL applicants for long term relationships with us. Sales calls
will begin discussions with employers about short term and long term
needs for qualified ESL teachers.
* From our office in San Diego, California, we plan to begin promoting
our services in Mexico and Southern California and gradually expand
across the United States into Canada, Europe and the Far East. During
the early phase of our sales efforts we will monitor the response from
employers in various countries to determine where we should focus our
efforts. As immigration rates in the United States continue to rise
along with the demand for foreign workers, both skilled and unskilled,
the demand or ESL teachers in the United States is expected to grow in
19
the coming years. Countries like China that offer substantial personal
tax incentives for ESL teachers may be a prominent market for us. Our
approach is to take an aggressive pricing position in the marketplace
that traditionally has charged placement fees ranging from 25% to 30%
or more of the first year starting salary.
* We plan to write and publish information-style articles on ESL
opportunities, overseas job searching and related topics. The
directors of the company plan to submit at least one article per
quarter to national and international media for publication.
* We will examine advertising opportunities within trade journals and
international periodicals available in both hard copy and online
formats. All media contact through press releases or advertising
material will contain the website address, email and telephone number.
* Our home page will feature links to strategic partnerships that we
develop over time. Hyperlinks from one web page to the next will help
to raise the search engine visibility for prospective web visitors.
* During the first year we will investigate the effectiveness of email
marketing campaigns. We plan to approach vendors that specialize in
email marketing to assist in designing an email brochure, our
newsletter, and to acquire email marketing lists. We will conduct
several test email marketing campaigns and measure the results. The
long term benefit to this marketing tactic depends on the quality of
the email lists available. With that in mind, we plan to offer an
opt-in feature throughout our website to encourage web visitors to
submit their own email addresses. These new contacts will receive our
online newsletter and have the choice of continuing to remain on our
email broadcast network.
* We plan to develop a series of free online workshops that discuss
trends in ESL job opportunities. We plan to initially promote these as
quarterly workshops and gauge the response from attendees. The online
workshops will be delivered in PowerPoint format using an online web
conference provider. Topics will include emerging trends, hot job
markets, 10 things to know when relocating to another country, and
related material.
* According to our research there is a continuing demand for education
services, so we plan to explore the possibilities of aligning
ourselves with several companies that offer these kinds of services in
exchange for visibility on each others' websites. Our visitors may
need or want to upgrade their ESL credentials and their customers will
be looking for jobs once their training has been completed. We view
these types of discussions as an integral part of becoming involved in
the international ESL community.
* To increase the number of return customers and visitors to our site,
we will provide a constant turnover of current and interesting content
about what's happening in the ESL job market including featured
employers, countries, and ESL teachers.
* We will conduct monthly follow-ups with each newly placed applicant
and their employer in order to improve the quality of our service and
increase repeat applicants and employers.
* By the second year we will examine the potential of attracting paid
sponsors to our website. Sponsorship opportunities may arise as we
develop relationships with companies such as ESL training firms that
do not compete directly with us. By year three we hope to see a modest
amount of sponsorships develop that will bring a new revenue stream
into the business.
EXPENSES
We estimate the costs to implement our business strategy over the following
twelve months to be:
* General, Travel, and Related expenses. We anticipate that this expense
category will be used to cover our anticipated general and
administrative expenses, including hiring sales and marketing
personnel, technology specialists, mid-level management, project
manager, and administrative personnel, office space and related
overhead, insurance, marketing and sales expenses, legal and
accounting fees, printing costs, blue sky fees, transfer agent fees
and all other general expenses. Travel expenses will consist primarily
of our executive officers and directors visiting ESL Training
facilities and ESL Employers in their sales efforts. We estimate
general and travel expenses for the next twelve months will be between
approximately $30,000 and $35,000;
20
* Initial Marketing, which will consist of the marketing efforts
discussed above, including direct marketing and attendance at trade
shows. We estimate initial marketing expenses for the next twelve
months will be between approximately $5,000 and $12,000;
* Research and Development costs consist of developing and testing our
Site. We estimate that research and development costs for the next
twelve months will be between approximately $5,000 and $13,000.
We intend to obtain business capital through the use of private equity
fundraising or shareholders loans. We anticipate that, in time, the primary
source of revenues for our business model will be the sale of our Product.
SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment for the next twelve
months.
RESULTS OF OPERATIONS
REVENUES
We had no revenues for the period from August 31, 2007 (date of inception),
through September 30, 2009.
EXPENSES
Our expenses for the twelve month periods ended September 30, 2009 and 2008,
were $22,552 and $31,673. During the period from August 31, 2007 (date of
inception), through September 30, 2009, we incurred expenses of $58,383. These
expenses were comprised primarily of general and administrative, and legal and
accounting expenses, as well as banking fees.
NET INCOME (LOSS)
Our net loss for the twelve-month periods ended September 30, 2009 and 2008,
were $22,552 and $31,673. During the period from August 31, 2007 (date of
inception), through September 30, 2009, we incurred a net loss of $58,383. This
loss consisted primarily of incorporation costs, legal and accounting fees,
consulting fees, website hosting costs, and administrative expenses. Since
inception, we have sold 2,460,000 shares of common stock.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of September 30, 2009 reflects assets of $17,875 in the
form of cash and cash equivalents and prepaid expenses. Since inception, we have
sold 2,460,000 shares of common stock with gross proceeds of $63,000. However,
cash resources provided from our capital formation activities have, from
inception, been insufficient to provide the working capital necessary to operate
our Company.
We anticipate generating losses in the near term, and therefore, may be unable
to continue operations in the future. If we require additional capital, we would
have to issue debt or equity or enter into a strategic arrangement with a third
party. There can be no assurance that additional capital will be available to
us. We currently have no agreements, arrangements, or understandings with any
person to obtain funds through bank loans, lines of credit, or any other
sources.
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on the accompanying financial statements regarding concerns about our
ability to continue as a going concern. Our financial statements contain
additional note disclosures describing the circumstances that lead to this
disclosure by our registered independent auditors.
Due to this doubt about our ability to continue as a going concern, management
is open to new business opportunities which may prove more profitable to the
shareholders of ESL Teachers Inc. Historically, we have been able to raise a
limited amount of capital through private placements of our equity stock, but we
are uncertain about our continued ability to raise funds privately. Further, we
believe that our company may have difficulties raising capital until we locate a
21
prospective business opportunity through which we can pursue our plan of
operation. If we are unable to secure adequate capital to continue our
acquisition efforts, our business may fail and our stockholders may lose some or
all of their investment.
Should our original business plan fail, we anticipate that the selection of a
business opportunity in which to participate will be complex and without
certainty of success. Management believes that there are numerous firms in
various industries seeking the perceived benefits of being a publicly registered
corporation. Business opportunities may be available in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We can provide no assurance that we will be
able to locate compatible business opportunities.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ESL Teachers Inc.
(A Development Stage Company)
Financial Statements
September 30, 2009
Table of Contents
Report of Independent Registered Public Accounting Firm 24
Balance Sheets as of September 30, 2009 and 2008 25
Statements of Operations for the Years Ended
September 30, 2009 and 2008 and the Period from
August 31, 2007 (inception) to September 30, 2009 26
Statement of Stockholders' Equity as of
September 30, 2009 27
Statements of Cash Flows for the Years Ended
September 30, 2009 and 2008 and the Period from
August 31, 2007 (inception) to September 30, 2009 28
Notes to Financial Statements 29
23
Maddox Ungar Silberstein, PLLC CPAs and Business Advisors
--------------------------------------------------------------------------------
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.maddoxungar.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
ESL Teachers Inc.
Reno, Nevada
We have audited the accompanying balance sheets of ESL Teachers Inc. as of
September 30, 2009 and 2008, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended and the period
from August 31, 2007 (date of inception) to September 30, 2009. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company has
determined that it is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ESL Teachers, Inc. as of
September 30, 2009 and 2008, and the results of its operations and cash flows
for the periods then ended and the period from August 31, 2007 (date of
inception) to September 30, 2009, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has limited working capital, has not yet
received revenue from sales of its products, and has incurred losses from
operations. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans with regard to these matters are
described in Note 7. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Maddox Ungar Silberstein, PLLC
----------------------------------------
Maddox Ungar Silberstein, PLLC
Bingham Farms, Michigan
January 11, 2010
24
ESL Teachers Inc.
(A Development Stage Company)
Balance Sheets
As of September 30, 2009 and 2008
September 30, September 30,
2009 2008
-------- --------
ASSETS
Current Assets
Cash $ 17,430 $ 40,604
Prepaid expenses 445 0
-------- --------
TOTAL ASSETS $ 17,875 $ 40,604
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 7,200 $ 7,377
Due to shareholder 6,058 6,058
-------- --------
Total Liabilities 13,258 13,435
-------- --------
Stockholders' Equity
Common stock, 50,000,000 shares authorized, par value $0.001;
2,460,000 shares issued and outstanding 2,460 2,460
Additional paid in capital 60,540 60,540
Deficit accumulated during the development stage (58,383) (35,831)
-------- --------
Total Stockholders' Equity 4,617 27,169
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,875 $ 40,604
======== ========
The accompanying notes are an integral part of these financial statements
25
ESL Teachers Inc.
(A Development Stage Company)
Statements of Operations
For the Years Ended September 30, 2009 and 2008
Period from August 31, 2007 (Inception) to September 30, 2009
From August 31, 2007
Year ended Year ended (Inception) to
September 30, September 30, September 30,
2009 2008 2009
---------- ---------- ----------
REVENUE $ -- $ -- $ --
---------- ---------- ----------
OPERATING EXPENSES
Professional fees 9,610 28,311 41,421
Office and administrative 2,187 1,656 4,106
Incorporation costs 10,755 1,706 12,856
---------- ---------- ----------
LOSS BEFORE INCOME TAXES (22,552) (31,673) (58,388)
PROVISION FOR INCOME TAXES -- -- --
---------- ---------- ----------
NET LOSS $ (22,552) $ (31,673) $ (58,383)
========== ========== ==========
NET LOSS PER SHARE: BASIC AND DILUTED $ (0.01) $ (0.02)
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 2,460,000 1,820,877
========== ==========
The accompanying notes are an integral part of these financial statements
26
ESL Teachers Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
For the Period from August 31, 2007 (Inception) to September 30, 2009
Deficit
Accumulated
Common Stock Additional during the
-------------------- Paid in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance, August 31, 2007 (Inception) -- $ -- $ -- $ -- $ --
Private placement on August 31, 2007
at $0.01 per share 1,500,000 1,500 13,500 -- 15,000
Net loss for the period ended
September 30, 2007 -- -- -- (4,158) (4,158)
--------- ------- -------- --------- --------
Balance, September 30, 2007 1,500,000 1,500 13,500 (4,158) 10,842
Private placement on May 31, 2008
at $0.05 per share 960,000 960 47,040 -- 48,000
Net loss for the year ended
September 30, 2008 -- -- -- (31,673) (31,673)
--------- ------- -------- --------- --------
Balance, September 30, 2008 2,460,000 2,460 60,540 (35,831) 27,169
Net loss for the year ended
September 30, 2009 -- -- -- (22,552) (22,552)
--------- ------- -------- --------- --------
Balance, September 30, 2009 2,460,000 $ 2,460 $ 60,540 $ (58,383) $ 4,617
========= ======= ======== ========= ========
The accompanying notes are an integral part of these financial statements
27
ESL Teachers Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Years Ended September 30, 2009 and 2008
Period from August 31, 2007 (inception) to September 30, 2009
From August 31, 2007
Year ended Year ended (Inception) to
September 30, September 30, September 30,
2009 2008 2009
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $(22,552) $(31,673) $(58,383)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
(Increase) in prepaid expenses (445) -- (445)
Increase (Decrease) in accounts payable (177) 3,877 7,200
Increase in due to stockholder 0 5,000 6,058
-------- -------- --------
Net cash used in operating activities (23,174) (22,796) (45,570)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 48,000 63,000
-------- -------- --------
Net cash provided by financing activities -- 48,000 63,000
-------- -------- --------
Change in cash during the period (23,174) 25,204 17,430
Cash, beginning of the period 40,604 15,400 --
-------- -------- --------
Cash, end of the period $ 17,430 $ 40,604 $ 17,430
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ -- $ --
======== ======== ========
Cash paid for interest $ -- $ -- $ --
======== ======== ========
The accompanying notes are an integral part of these financial statements
28
ESL Teachers Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2009
NOTE 1 - NATURE OF OPERATIONS
ESL Teachers Inc. (the "Company"), incorporated in the state of Nevada on August
31, 2007, and is developing business activities in teacher recruiting.
The Company has not yet commenced significant business operations and in
accordance with SFAS#7 is considered to be in the development stage.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
These financial statements are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of
America.
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and amounts due to the
Company's stockholder. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or interest rates that
approximate prevailing market rates unless otherwise disclosed in these
financial statements. It is management's opinion that the Company is not exposed
to significant interest, currency or credit risks arising from its other
financial instruments and that their fair values approximate their carrying
values except where separately disclosed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
29
ESL Teachers Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2009
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
NOTE 3 - DUE TO STOCKHOLDER
The $6,058 due to a stockholder at September 30, 209 is unsecured, non-interest
bearing and has no specific terms of repayment.
NOTE 4 - CAPITAL STOCK
The Company has 50,000,000 common shares authorized at a par value of $0.001 per
share. During the year ended September 30, 2008, the Company issued 960,000
common shares for total proceeds of $48,000. During the period ended September
30, 2007, the Company issued 1,500,000 common shares for total proceeds of
$15,000. At September 30, 2009, the Company has no warrants or options
outstanding. There were no additional shares issued in the year ended September
30, 2009. Total shares issued and outstanding at September 30, 2009 were
2,460,000.
NOTE 5 - INCOME TAXES
The Company provides for income using an asset and liability approach. Deferred
tax assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect currently.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In the Company's opinion, it is
uncertain whether they will generate sufficient taxable income in the future to
fully utilize the net deferred tax asset. Accordingly, a valuation allowance
equal to the deferred tax asset has been recorded.
30
ESL Teachers Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2009
NOTE 5 - INCOME TAXES (CONTINUED)
The cumulative net operating loss carry-forward is approximately $58,000 at
September 30, 2009, and will begin to expire in the year 2028.
The cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
2009 2008
-------- --------
Deferred tax asset attributable to:
Net operating loss carryover $ 19,720 $ 12,100
Valuation allowance (19,720) (12,100)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
NOTE 6 - RELATED PARTY TRANSACTION
As at September 30, 2009, there is a balance owing to a stockholder of the
Company in the amount of $6,058.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has limited working capital, has no
established source of revenue, and has incurred losses since inception. This
raises substantial doubt about the Company's ability to continue as a going
concern. Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. The financial statements do not include
any adjustments that might result from this uncertainty.
The Company's activities to date have been supported by equity financing. It has
sustained losses in all previous reporting periods with an inception to date
loss of $58,383 as of September 30, 2009. Management continues to seek funding
from its shareholders and other qualified investors to pursue its business plan.
In the alternative, the Company may be amenable to a sale, merger or other
acquisition in the event such transaction is deemed by management to be in the
best interests of the shareholders.
NOTE 8 - SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to September 30, 2009 and has
determined that it does not have any material subsequent events to disclose in
these financial statements.
31
ESL Teachers Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2009
NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS
Below is a listing of the most recent accounting standards SFAS 150-154 and
their effect on the Company.
STATEMENT NO. 150 - ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY (ISSUED 5/03)
This Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity.
STATEMENT NO. 151- INVENTORY COSTS-AN AMENDMENT OF ARB NO. 43, CHAPTER 4 (ISSUED
11/04)
This statement amends the guidance in ARB No. 43, Chapter 4, INVENTORY PRICING,
to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43,
Chapter 4, previously stated that "...under some circumstances, items such as
idle facility expense, excessive spoilage, double freight and re-handling costs
may be so abnormal ass to require treatment as current period charges...." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities.
STATEMENT NO. 152 - ACCOUNTING FOR REAL ESTATE TIME-SHARING TRANSACTIONS (AN
AMENDMENT OF FASB STATEMENTS NO. 66 AND 67)
This Statement amends FASB Statement No. 66, ACCOUNTING FOR SALES OF REAL
ESTATE, to reference the financial accounting and reporting guidance for real
estate time-sharing transactions that is provided in AICPA Statement of Position
(SOP) 04-2, ACCOUNTING FOR REAL ESTATE TIME-SHARING TRANSACTIONS.
This Statement also amends FASB Statement No. 67, Accounting FOR COSTS AND
INITIAL RENTAL OPERATIONS OF REAL ESTATE PROJECTS, states that the guidance for
(a) incidental operations and (b) costs incurred to sell real estate projects
does not apply to real estate time-sharing transactions. The accounting for
those operations and costs is subject to the guidance in SOP 04-2.
32
ESL Teachers Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2009
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
STATEMENT NO. 153- EXCHANGES OF NON-MONETARY ASSETS (AN AMENDMENT OF APB OPINION
NO. 29)
The guidance in APB Opinion No. 29, ACCOUNTING FOR NON-MONETARY TRANSACTIONS, is
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, includes certain exceptions to the principle. This Statement amends
Opinion 29 to eliminate the exception for non-monetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
STATEMENT NO. 154 - ACCOUNTING CHANGES AND ERROR CORRECTIONS (A REPLACEMENT OF
APB OPINION NO. 20 AND FASB STATEMENT NO. 3)
This Statement replaces APB Opinion No. 20, ACCOUNTING CHANGES, and FASB
Statement No. 3, REPORTING ACCOUNTING CHANGES IN INTERIM FINANCIAL STATEMENTS,
and changes the requirements for the accounting for and reporting of a change in
accounting principle. This Statement applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed.
The adoption of these and other new Statements is not expected to have a
material effect on the Company's current financial position, results or
operations, or cash flows.
33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE 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. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange
Act of 1934 as a process designed by, or under the supervision of, the company's
principal executive and principal financial officers and effected by the
company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America and
includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and
directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. 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. Because of the
inherent limitations of internal control, 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 safeguards to reduce, though not eliminate, this risk.
As of September 30, 2009, our principal executive officer and principal
financial officer assessed the effectiveness of our internal control over
financial reporting based on the criteria for effective internal control over
financial reporting established in Internal Control--Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
and SEC guidance on conducting such assessments. Based on that evaluation, he
concluded that, during the period covered by this report, such internal controls
and procedures were not effective to detect the inappropriate application of US
GAAP rules as more fully described below. This was due to deficiencies that
existed in the design or operation of our internal controls over financial
reporting that adversely affected our internal controls and that may be
considered to be material weaknesses.
The matters involving internal controls and procedures that our principal
executive officer and principal financial officer considered to be material
weaknesses under the standards of the Public Company Accounting Oversight Board
were: (1) lack of a functioning audit committee due to a lack of a majority of
34
independent members and a lack of a majority of outside directors on our board
of directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; and (3) ineffective
controls over period end financial disclosure and reporting processes. The
aforementioned material weaknesses were identified by our principal executive
officer and principal financial officer in connection with the audit of our
financial statements as of September 30, 2009.
Our principal executive officer and principal financial officer believes that
the material weaknesses set forth in items (2) and (3) above did not have an
effect on our financial results. However, our principal executive officer and
principal financial officer believes that the lack of a functioning audit
committee and the lack of a majority of outside directors on our board of
directors result in ineffective oversight in the establishment and monitoring of
required internal controls and procedures, which could result in a material
misstatement in our financial statements in future periods.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the SEC that
permit the Company to provide only the management's report in this annual
report.
MANAGEMENT'S REMEDIATION INITIATIVES
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives
and will increase our personnel resources and technical accounting expertise
within the accounting function when funds are available to us. And, we plan to
appoint one or more outside directors to our board of directors who shall be
appointed to an audit committee resulting in a fully functioning audit committee
who will undertake the oversight in the establishment and monitoring of required
internal controls and procedures such as reviewing and approving estimates and
assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by March 31, 2010. Additionally, we plan to test our updated
controls and remediate our deficiencies by September 30, 2010.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
35
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE EXECUTIVE
OFFICER AND DIRECTORS
Our officers and directors and their ages and positions are as follows:
Name Age Position
---- --- --------
Mauricio Beltran 42 President, CEO, Treasurer, CFO, and Director
Maria Guadalupe Flores N. 35 Secretary
MR. MAURICIO BELTRAN is our President, Chief Executive Officer, Principal
Executive Officer, Chief Financial Officer, Principal Financial Officer,
Principal Accounting and director. Mr. Mauricio Beltran works in the Customs
Department of the Secretaria de Hacienda y Credito Publico in Tijuana,
Baja-California. In this position he is in charge of notifying companies and
individuals regarding non-compliance with the Mexican Importer's Registry code.
This position is in the legal department of the Secretaria de Hacienda y Credito
Publico, a position he has held since 2004.
Prior to that Mr. Beltran worked as a Purchasing Manager for Promociones El
Floro, S.A., a show and entertainment company also in Tijuana, Baja-California.
In this role he was responsible for sourcing of material, packaging, printing
and promotional material; he developed and maintained the international vendor
network; he was responsible for budget management and cost control practices;
coordinated all day-to-day office functions; supervised and evaluated support
staff in the Purchasing Department; solicited bids, quotes and negotiated terms
of contracts with vendors as well as making the purchasing decisions; and
trained other staff members to be able to make the same type of decisions.
From 1998 to 2003 Mr. Beltran worked as an Assistant Purchasing Manager at
Belmont, S.A. de C.V. in Tijuana, Baja-California. In his role there Mr. Beltran
worked with suppliers, the distribution team and the merchant team to ensure the
timely delivery of merchandise. He also managed the markdown process and
communicated with buyers; analyzed the advertising performance and made
recommendations for future ads; and assisted in the preparation of pre-market
analysis. Mr. Beltran managed the performance of purchasing clerical functions,
including routine correspondence, vendor list preparations, vendor applications
and updates, bid and specification preparation, compilation of surplus equipment
lists, and contract and records files maintenance. He was responsible for
communication from the purchasing department both orally and in writing with
vendors, other employees and the public in order to maintain effective business
relationships.
MS. MARIA GUADALUPE FLORES N is our Secretary and director. Ms. Flores N has a
background in translation in business and legal environments. Currently she
works as the administrator for a billboard and advertising company, Publicar,
S.A. de C.V. in Tijuana, Baja-California where she has been since 2005. She is
responsible for filings before government agencies of diverse documents related
to the billboards of the company, translations of all documents, plus other
administrative and accounting duties. Prior to that Ms. Flores worked as the
Office Manager / Administrator for Film Mexico from 2003 to 2005, a financing
company for the motion picture industry serving studios in the USA and Mexico.
Ms. Flores reported directly to the President where she was responsible for
managing day-to-day operations, including working with clients, conducting
company meetings, and other administrative functions. Ms. Flores was also
responsible for filing reports with the National Registry of Foreign Investment,
and handled travel arrangements, expense reports and basic bookkeeping duties.
From 2001 to 2003, Ms. Flores worked as an Administrative / Legal Assistant at
the law offices of Sergio Fillad Fahme in Tijuana, Baja-California. Here she
managed all administrative tasks relating to legal documents, correspondence,
depositions and court filings and related administrative tasks.
36
AUDIT COMMITTEE
We do not have an audit committee at this time.
COMMITTEES OF THE BOARD OF DIRECTORS
To date, our Board of Directors has not established a nominating and governance
committee, a compensation committee, nor an audit committee.
CODE OF ETHICS
We currently do not have a Code of Ethics.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers, and stockholders holding more than 10% of our
outstanding common stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in beneficial ownership of
our common stock. Executive officers, directors and greater-than-10%
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file. To our knowledge, based solely on review of the
copies of such reports furnished to us for the period ended March 31, 2009, no
Section 16(a) reports required to be filed by our executive officers, directors
and greater-than-10% stockholders were not filed on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of compensation paid to the following persons during the fiscal
period ended September 30, 2009 are set out in the summary compensation table
below:
* our Chief Executive Officer (Principal Executive Officer);
* our Chief Financial Officer (Principal Financial Officer);
* each of our three most highly compensated executive officers, other
than the Principal Executive Officer and the Principal Financial
Officer, who were serving as executive officers at the end of the
fiscal year ended September 30, 2009; and
* up to two additional individuals for whom disclosure would have been
provided under the item above but for the fact that the individual was
not serving as our executive officer at the end of the fiscal year
ended September 30, 2009;
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Fiscal Year Non-Equity Nonqualified
Name and Ended Incentive Deferred
Principal Sept. 30, Stock Option Plan Compensation All Other
Position 2009 Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
Mauricio 2009 0 0 0 0 0 0 0 0
Beltran 2008 0 0 0 0 0 0 0 0
Maria Guadalupe 2009 0 0 0 0 0 0 0 0
Flores N. 2008 0 0 0 0 0 0 0 0
37
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
Option Awards Stock Awards
----------------------------------------------------------------- ------------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options Options Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable(#) Unexercisable(#) Options(#) Price($) Date Vested(#) Vested($) Vested(#) Vested(#)
---- -------------- ---------------- ---------- -------- ---- --------- --------- --------- ---------
Mauricio
Beltran -- -- -- -- -- -- -- -- --
Maria
Guadalupe
Flores N. -- -- -- -- -- -- -- -- --
OPTION GRANTS AND EXERCISES
There were no option grants or exercises by any of the executive officers named
in the Summary Compensation Table above.
EMPLOYMENT AGREEMENTS
We have not entered into employment and/or consultant agreements with our
Directors and officers.
COMPENSATION OF DIRECTORS
All directors receive reimbursement for reasonable out-of-pocket expenses in
attending board of directors meetings and for promoting our business. From time
to time we may engage certain members of the board of directors to perform
services on our behalf. In such cases, we compensate the members for their
services at rates no more favorable than could be obtained from unaffiliated
parties. Our directors have not received any compensation for the fiscal year
ended September 30, 2009.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
BENEFICIAL OWNERSHIP OF HOLDINGS
The table below sets forth the number and percentage of shares of our common
stock owned as of October 26, 2009, by the following persons: (i) stockholders
known to us who own 5% or more of our outstanding shares, (ii) each of our
Directors, and (iii) our officers and Directors as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned.
38
Name and Address Amount and Nature Percentage of
Title of Class of Beneficial Owner (2) of Beneficial Ownership Class (1)
-------------- ----------------------- ----------------------- ---------
Common Stock Mauricio Beltran 750,000 30.48%
Common Stock Maria Guadalupe Flores N. 750,000 30.48%
all officers
as a Group 1,500,000 60.96%
----------
(1) Based on 2,460,000 shares of our common stock outstanding.
CHANGES IN CONTROL
There are no existing arrangements that may result in a change in control of the
Company.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
The following table sets forth information regarding our equity compensation
plans.
Number of Securities to be Number of Securities
Issued Upon Exercise of Weighted-Average Exercise Remaining Available for
Outstanding Options, Price of Outstanding Options, Future Issuance Under
Warrants and Rights Warrants and Rights Equity Compensation Plans
Plan Category (a) (b) (excluding column (a))
------------- ------------------- ------------------- -------------------------
Equity compensation plans -- -- --
approved by security
holders
Equity compensation plans -- -- --
not approved by security
holders
Total -- -- --
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Other than the transactions discussed below, we have not entered into any
transaction nor are there any proposed transactions in which any of our
Directors, executive officers, stockholders or any member of the immediate
family of any of the foregoing had or is to have a direct or indirect material
interest.
As of September 30, 2009, there is a balance owing to one of our stockholders in
the amount of $6,058. This balance is unsecured, non-interest bearing and has no
specific terms of repayment.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
For the year ended September 30, 2009, Maddox Ungar Silberstein PLLC billed us
for $4,300 (2008: $4,300) in audit fees.
39
REVIEW FEES
Maddox Ungar Silberstein PLLC, billed us $3,000 (2008: $4,500) for reviews of
our quarterly financial statements in 2009 and are not reported under Audit Fees
above.
TAX AND ALL OTHER FEES
We did not pay any fees to Maddox Ungar Silberstein PLLC for tax compliance, tax
advice, tax planning or other work during our fiscal year ended September 30,
2009.
PRE-APPROVAL POLICIES AND PROCEDURES
We have implemented pre-approval policies and procedures related to the
provision of audit and non-audit services. Under these procedures, our board of
directors pre-approves all services to be provided by Maddox Ungar Silberstein
PLLC and the estimated fees related to these services.
With respect to the audit of our financial statements as of September 30, 2009
and for the years then ended, none of the hours expended on Maddox Ungar
Silberstein PLLC engagement to audit those financial statements were attributed
to work by persons other than Maddox Ungar Silberstein PLLC's full-time,
permanent employees.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit Description
------- -----------
3.1 Articles of Incorporation. (Attached as an exhibit to our Registration
Statement on Form SB-2 originally filed with the SEC on January 23,
2008 and incorporated herein by reference.)
3.2 Bylaws. (Attached as an exhibit to our Registration Statement on Form
S-1/A originally filed with the SEC on February 27, 2008 and
incorporated herein by reference.)
31.1 Certification of Mauricio Beltran pursuant to Rule 13a-14(a).
32.1 Certification of Mauricio Beltran pursuant to 18 U.S.C Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
40
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ESL TEACHERS INC.
January 13, 2010 By: /s/ Mauricio Beltran
---------------------------------------------
Mauricio Beltran
President, CEO, Treasurer, CFO and Director
(President, CEO, Treasurer, CFO and Director)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
Signatures Title Date
---------- ----- ----
/s/ Mauricio Beltran President, CEO, Treasurer, CFO and Director January 13, 2010
---------------------------- (President, CEO, Treasurer, CFO and Director)
Mauricio Beltran
4
