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EX-31 - 302 CERTIFICATION - THOMAS MORROW - Home School Holdings, Inc. | ex311.htm |
EX-32 - 906 CERTIFICATION - THOMAS MORROW - Home School Holdings, Inc. | ex321.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
OR
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission file number 0-53133
HOME SCHOOL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Florida |
|
26-1983716 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification Number) |
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2700 South River Road, Suite 106 Des Plaines, Illinois |
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60018 |
(Address of principal executive offices) |
|
(Zip Code) |
(847) 391-5079
(Issuers telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
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o |
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Accelerated filer |
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o |
Non-accelerated filer |
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o (Do not check if a smaller reporting company) |
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Smaller reporting company |
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x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date.
Class |
|
Outstanding at June 30, 2009 |
Common Stock, no par value per share |
|
300,790,382 shares |
EXPLANATORY NOTE
We filed our Quarterly Report on Form 10-Q for the six months ended June 30, 2009 with the Securities and Exchange Commission (the SEC) on August 13, 2009. We are filing this Amendment No. 1 on the Form 10-Q/A on January 26, 2010 to amend and restate our unaudited financial statements for the six months ended June 30, 2009 and the related footnote disclosures to reflect the correction of errors, all as more fully described in the following paragraph.
For the convenience of the reader, this Amended Form 10-Q amends and restates in its entirety the Quarterly Report on Form 10-Q for the three months ended June 30, 2009 and June 30, 2008 and the six months ended June 30, 2009 and June 30, 2008. However, this Amended 10-Q amends only items referred to below, in each case as a result of and to reflect the adjustments discussed below and more fully in Note 7 of the accompanying Unaudited Financial Statements and related disclosures, which includes a summary of the effects of these changes on our unaudited balance sheet as of June 30, 2009 and our unaudited statements of operations and cash flows for the six months ended June 30, 2009.
On December 15, 2009, while preparing our responses to certain comments raised by the Securities and Exchange Commission pertaining to our pending Registration Statement on Form S-1, we identified errors in the preparation of our financial statements in the recording of revenue, costs of revenue, development expenses, amortization expense, interest expense, and general and administrative expenses. As it affects the June 30, 2009 filing, it was determined that, revenue was overstated by $1,472 and costs of revenue were understated by$526 for the 6 months ended June 30, 2009. For the 6 months ended June 30, 2009 total operating expenses were understated by $152,823 primarily consisting of amortization expense and employee compensation expense. For the 6 months ended June 30, 2008 total operating expense was overstated by $37,099 consisting of amortization expense and development expense. For the six months ended June 30, 2009 interest expense was overstated by $141,332.
This amendment No. 1 to our Quarterly Report on Form 10-Q/A for the six months ended June 30, 2009 amends only the following items:
PART I, Item 1 Unaudited Interim Financial Statements and Notes to the Financial Statements
PART I, Item 2 Managements Discussion and Analysis or Plan of Operation was amended to reflect the corrections to the Companys reported operating results, cash flows and statement of financial position.
HOME SCHOOL HOLDINGS, INC.
TABLE OF CONTENTS
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PAGE |
Part I Financial Information |
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1 |
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Item 1. Financial Statements (unaudited) |
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1 |
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Consolidated Balance Sheet |
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1 |
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Consolidated Statements of Operations |
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2 |
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Consolidated Statements of Cash Flows |
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3 |
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Notes to Consolidated Financial Statements |
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4 |
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |
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16 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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22 |
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Item 4. Controls and Procedures |
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22 |
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Part II Other Information |
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23 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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23 |
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Item 6. Exhibits |
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24 |
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Signatures |
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24 |
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Exhibit 31.1 |
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Exhibit 32.1 |
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i
PART I FINANCIAL INFORMATION
Item 1. |
Financial Statements |
Home School Holdings, Inc.
(a development stage company)
Consolidated Balance Sheet
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(Unaudited) |
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(Audited) |
| ||
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June 30, |
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December 31, |
| ||
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2009 |
|
2008 |
| ||
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RESTATED |
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RESTATED |
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ASSETS |
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Current Assets |
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Cash |
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$ |
3,606 |
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$ |
958 |
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Inventory |
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473 |
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|
473 |
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Prepaid Expenses |
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|
13,847 |
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6,302 |
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TOTAL CURRENT ASSETS |
|
|
17,926 |
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|
7,733 |
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|
|
|
|
|
|
|
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Equipment, net of accumulated depreciation of $4,502 and $3,742 respectively |
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|
4,886 |
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5,646 |
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Website, net of accumulated amortization of $ 586,300 and $424,629 respectively |
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345,638 |
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507,309 |
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Other Assets |
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Deposits |
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2,780 |
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2,780 |
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|
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TOTAL ASSETS |
|
$ |
371,230 |
|
$ |
523,468 |
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) |
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CURRENT LIABILITIES |
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|
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Accounts Payable |
|
$ |
136,408 |
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$ |
131,673 |
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Accounts Payable--Related Party |
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|
74,413 |
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39,984 |
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Accrued Payroll |
|
|
235,325 |
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86,972 |
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Accrued Interest--Convertible Note Stockholder |
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|
271,761 |
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172,742 |
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Deferred Revenue |
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|
375 |
|
|
375 |
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Prepaid Advertising |
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6,402 |
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2,700 |
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Note Payable |
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40,000 |
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40,000 |
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Convertible Notes Payable--Stockholder |
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|
300,000 |
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300,000 |
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Loans Payable - Related Party |
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171,971 |
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70,499 |
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|
|
|
|
|
|
|
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TOTAL CURRENT LIABILITIES |
|
|
1,236,655 |
|
|
844,945 |
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STOCKHOLDERS' EQUITY / (DEFICIT) |
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Common Stock - Par value $0.001; |
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Authorized: 500,000,000 |
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Issued and Outstanding: 300,790,382 and 289,300,685 in June 30, 2009 and |
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300,790 |
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289,301 |
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Additional Paid-In Capital |
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4,032,900 |
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3,772,702 |
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Shareholder Receivable |
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(1,000 |
) |
|
(1,000 |
) |
Deficit accumulated during development stage |
|
|
(5,198,115 |
) |
|
(4,382,480 |
) |
|
|
|
|
|
|
|
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Total Stockholders' Equity / (Deficit) |
|
|
(865,426 |
) |
|
(321,477 |
) |
|
|
|
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|
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY / (DEFICIT) |
|
$ |
371,230 |
|
$ |
523,468 |
|
The accompanying notes are integral parts of these financial statements.
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Operations
(Unaudited)
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For the period |
| ||||
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October 17, 2005 |
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For the Three Months Ended June 30 |
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For the Six Months Ended June 30 |
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(inception) to |
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2009 |
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2008 |
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2009 |
|
2008 |
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June 30, 2009 |
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RESTATED |
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RESTATED |
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RESTATED |
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RESTATED |
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RESTATED |
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Revenue - Product Sales, net |
|
$ |
8,480 |
|
$ |
9,700 |
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$ |
14,755 |
|
13,359 |
|
$ |
89,759 |
|
Revenue - Advertising |
|
|
7,533 |
|
|
2,017 |
|
|
12,681 |
|
4,689 |
|
|
28,079 |
|
Total Revenue |
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|
16,013 |
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|
11,718 |
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|
27,436 |
|
18,048 |
|
|
117,838 |
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|
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Cost of Revenue - Product Sales |
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|
8,942 |
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|
8,612 |
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|
15,328 |
|
10,506 |
|
|
67,821 |
|
Cost of Revenue - Advertising |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenue |
|
|
8,942 |
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|
8,612 |
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|
15,328 |
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10,506 |
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|
67,821 |
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|
|
|
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|
|
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Gross Profit |
|
|
7,071 |
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|
3,105 |
|
|
12,108 |
|
7,542 |
|
|
50,017 |
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|
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|
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|
|
|
|
|
|
|
|
|
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Professional Fees |
|
|
75,777 |
|
|
20,393 |
|
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124,344 |
|
59,824 |
|
|
494,819 |
|
Board Compensation |
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|
13,500 |
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|
19,500 |
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|
27,000 |
|
543,000 |
|
|
893,348 |
|
Development Expenses |
|
|
|
|
|
|
|
|
|
|
2,610 |
|
|
67,656 |
|
Depreciation and Amortization |
|
|
80,174 |
|
|
89,497 |
|
|
162,431 |
|
159,676 |
|
|
590,802 |
|
Marketing |
|
|
9,549 |
|
|
24,003 |
|
|
34,411 |
|
60,272 |
|
|
232,128 |
|
Employee Compensation |
|
|
166,047 |
|
|
120,824 |
|
|
332,520 |
|
247,386 |
|
|
2,255,639 |
|
General and Administrative |
|
|
25,858 |
|
|
37,543 |
|
|
42,198 |
|
52,273 |
|
|
360,230 |
|
|
|
|
|
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|
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|
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|
Total Operating Expenses |
|
|
370,906 |
|
|
311,761 |
|
|
722,904 |
|
1,125,043 |
|
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4,894,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
(363,834 |
) |
|
(308,655 |
) |
|
(710,796 |
) |
(1,117,500 |
) |
|
(4,844,604 |
) |
|
|
|
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Extinguishment of Debt |
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|
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|
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|
|
|
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|
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Interest Income |
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0 |
|
|
14 |
|
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0 |
|
153 |
|
|
282 |
|
Interest Expense |
|
|
(54,840 |
) |
|
(64,197 |
) |
|
(104,840 |
) |
(119,939 |
) |
|
(353,793 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/Expense |
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|
(54,840 |
) |
|
(64,183 |
) |
|
(104,840 |
) |
(119,786 |
) |
|
(353,511 |
) |
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|
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Provision for Income Taxes |
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Net Loss |
|
$ |
(418,674 |
) |
$ |
(372,838 |
) |
$ |
(815,636 |
) |
(1,237,286 |
) |
$ |
(5,198,115 |
) |
|
|
|
|
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|
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Net Loss Per Share - basic and diluted |
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|
** |
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** |
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** |
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** |
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|
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|
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Weighted average number of shares |
|
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288,876,698 |
|
|
281,192,229 |
|
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288,876,698 |
|
281,192,229 |
|
|
|
|
** less than $0.01
The accompanying notes are an integral part of these financial statements.
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Cash Flows
(Unaudited)
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For the period |
|
|
|
|
|
|
|
10/17/2005 |
|
|
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For the Period Ended June 30, |
|
(inception) to |
| ||
|
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2009 |
|
2008 |
|
6/30/2009 |
|
|
|
RESTATED |
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RESTATED |
|
RESTATED |
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|
|
|
|
|
|
|
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Cash Flows Used in Operating Activities: |
|
|
|
|
|
|
|
Net Loss |
|
(815,636 |
) |
(1,237,286 |
) |
(5,198,116 |
) |
Adjustments to reconcile net loss to net cash used in operations |
|
|
|
|
|
|
|
Depreciation/Amortization |
|
162,431 |
|
1,237 |
|
590,802 |
|
Extinguishment of Debt |
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|
|
|
|
|
|
In-kind contribution of interest |
|
2,461 |
|
|
|
8,022 |
|
Start-up expenses |
|
|
|
|
|
100,000 |
|
Shares issued for services |
|
11,880 |
|
|
|
284,998 |
|
Shares issued for interest |
|
|
|
|
|
72,000 |
|
Stock options issued for services |
|
107,647 |
|
693,700 |
|
1,661,573 |
|
Shares issued for board comp |
|
27,000 |
|
|
|
220,500 |
|
(Increase) Decrease in: |
|
|
|
|
|
|
|
Prepaid Expenses |
|
(3,843 |
) |
(752 |
) |
(10,145 |
) |
Inventory |
|
|
|
(2,408 |
) |
(473 |
) |
Deferred Revenue |
|
|
|
468 |
|
(2,082 |
) |
Deposits |
|
|
|
|
|
(2,780 |
) |
Accrued interest |
|
99,019 |
|
39,019 |
|
271,761 |
|
Accrued payroll |
|
148,353 |
|
(161,905 |
) |
392,824 |
|
Accounts Payable |
|
4,735 |
|
45,715 |
|
136,408 |
|
Accounts Payable--Related Party |
|
34,429 |
|
14,541 |
|
74,413 |
|
|
|
|
|
|
|
|
|
Net Cash Used In Operating Activities |
|
(221,524 |
) |
(607,672 |
) |
(1,400,295 |
) |
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
Payments for Equipment & Website Development |
|
|
|
(144,174 |
) |
(753,493 |
) |
|
|
|
|
|
|
|
|
Net Cash Used In Investing Activities |
|
|
|
(144,174 |
) |
(753,493 |
) |
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
Proceeds from Sale of Stock |
|
122,700 |
|
335,320 |
|
1,555,422 |
|
Proceeds from Notes Payable - Stockholder |
|
|
|
300,000 |
|
300,000 |
|
Proceeds from Convertible Note Payable - Related Party |
|
101,472 |
|
125,438 |
|
552,972 |
|
Repayment of Notes Payable - Related Party |
|
|
|
|
|
(211,000 |
) |
Repayment of Notes Payable |
|
|
|
|
|
(40,000 |
) |
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities |
|
224,172 |
|
760,758 |
|
2,157,394 |
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash |
|
2,648 |
|
8,912 |
|
3,606 |
|
|
|
|
|
|
|
|
|
Cash at Beginning of Period |
|
958 |
|
1,526 |
|
|
|
|
|
|
|
|
|
|
|
Cash at End of Period |
|
3,606 |
|
10,436 |
|
3,606 |
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
|
|
550 |
|
550 |
|
|
|
|
|
|
|
|
|
Cash paid for taxes |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
HOME SCHOOL HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2009
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information, but do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The audited financial statements for the period October 17, 2005 (Inception) through December 31, 2008 are contained in the Report on Form 8-K for the fiscal year ended December 31, 2008 filed on May 11, 2009 with the Securities and Exchange Commission and are hereby referenced. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended June 30, 2009 and for the cumulative period from February 18, 2008 (Inception) through June 30, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.
NOTE 2 - ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
On May 8, 2009, Home School Holdings, Inc., a Florida corporation (the Company, we, our, and us), consummated a Share Exchange Agreement with Home School, Inc. a Delaware corporation (HSI), that was dated as of April 29, 2009. As a result of the transactions contemplated by the Share Exchange Agreement, on May 8, 2009, we acquired 100% of the outstanding shares of capital stock of HSI and HSI became a wholly-owned subsidiary of the Company, and the Company changed its name to Home School Holdings, Inc. The Company was formerly known as Narayan Capital Corp. HSI was incorporated in the State of Delaware on October 17, 2005. HSI is engaged in e-commerce and online K-12 instruction for home educating families world-wide, and is a development stage company.
Pursuant to the Share Exchange Agreement, the Company issued 289,959,665 shares of its common stock to shareholders of HSI and the Company reserved for future issuance 73,949,760 shares of common stock subject to HSIs outstanding stock options and warrants and 22,402,121 shares of common stock subject to HSIs outstanding convertible debt (the Share Exchange).
Development Stage Risk
Since its inception, the Company has been dependent upon the receipt of capital investment to fund its continuing activities. In addition to the normal risks associated with a new business venture, there can be no assurance that the Companys business plan will be successfully executed. Our ability to execute our business plan will depend on our ability to obtain additional financing and achieve a profitable level of operations. There can be no assurance that sufficient financing will be obtained. Further, we cannot give any assurance that we will generate substantial revenues or that our business operations will prove to be profitable.
Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those results.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements and No. 104, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales taxes. Amounts received in advance for subscription services, are deferred and recognized as revenue over the subscription term.
The Company recognizes advertising revenue as earned on a per-impression basis. As traffic moves through websites and pages are served, the contract amount is recognized as revenue. Impressions are defined as the number of times a user requests a page on our websites.
Shipping and Handling Costs
Amounts billed to customers in sales transactions related to shipping and handling represent revenues earned for the goods provided and are included in sales. Costs of shipping and handling are included in the cost of goods sold.
Equipment
Equipment is stated at cost, less accumulated depreciation. Expenditures for website maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful life of five years.
Website
Website assets acquired or developed for online delivery are amortized using the straight-line method over three years. Costs incurred in the planning stage and to operate the site are expensed as incurred while costs of developing applications and infrastructure are capitalized.
Prepaid Expenses
Prepaid expenses include prepayments for insurance coverage and advertising that occurred after the balance sheet date.
Advertising Costs
Advertising costs are expensed as incurred.
Inventories
The Companys inventories consist of finished goods. Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis
Stock Compensation
The Company adopted SFAS No. 123R, Share-Based Payment (SFAS 123R), which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The Company accounts for stock-based compensation arrangements with nonemployees in accordance with the Emerging Issues Task Force Abstract No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services. The Company records the expense of such services to employees and non employees based on the estimated fair value of the equity instrument using the Black-Scholes pricing model. The measurement date of the fair value of equity instruments issued to non-employees is the earlier of the date on which the counter-partys performance is complete or the date on which it is probable that performance will occur.
Fair Value of Financial Instruments
The carrying amounts of the Companys financial instruments including accounts payable and loans and notes payable approximate fair value due to the relatively short period to maturity for these instruments.
Loss Per Share
Basic loss per share is computed by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding for the period as required by the Financial Accounting Standards Board (FASB) under Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Shares.
Stock Splits
During 2006, the Companys stockholders approved a forward stock split of ten thousand for one, in which each stockholder of record received ten thousand common shares in exchange for each share of their currently issued common stock. Subsequently, On April 4, 2008, the Companys stockholders approved a forward stock split of one hundred eighty for one, in which each stockholder of record received one hundred eighty common shares in exchange for each share of their currently issued common stock. The financial statements have been retroactively adjusted to reflect the stock splits.
NOTE 3 - STOCKHOLDERS DEFICIT
During the months of January to March, 2009, the company issued 464,220 shares of common stock for board compensation with a fair market value of $15,500.
During the months of January to March, 2009, the company issued 360,000 shares of common stock as a gift for employee services.
During the months of April to June, 2009, the company issued 4,027,500 shares of common stock for cash $122,700.
During the months of April to June, 2009, the company issued 134,820 shares of common stock for board compensation with a fair market value of $4,500.
During the months of April to June, 2009, the company issued 100,000 shares of common stock as a gift for employee services.
NOTE 4 - CONVERTIBLE NOTES PAYABLE - STOCKHOLDER
On February 6, 2009, the Company entered into short-term lending arrangements with its shareholders. The loan provides $50,000 for six months. The loan pays an APR of 10% and provides for convertibility at $0.05 per share. On June 5, 2009, this loan was converted to 1,000,000 shares common stock at $0.05 per share.
On April 3, 2009, the Company entered into short-term lending arrangements with its shareholders. The loan provides $10,000 for six months. The loan pays an APR of 10% and provides for convertibility at $0.06 per share. On June 5, 2009, this loan was converted to 200,000 shares common stock at $0.05 per share.
NOTE 5 - RELATED PARTY TRANSACTIONS
During the months of January to June, 2009, the Companys three principal stockholders loaned an additional $61,470 to the Company in exchange for a note payable. The note is unsecured, due on demand. The balance outstanding at June 30, 2009 was $181,971.
NOTE 6 - GOING CONCERN
Going Concern
Our financial statements have been prepared on the basis of accounting principles applicable to a going concern. As a result, they do not include adjustments that would be necessary if we were unable to continue as a going concern and would therefore be obligated to realize assets and discharge our liabilities other than in the normal course of operations. As reflected in the accompanying financial statements, the Company is in the development stage with limited revenues, has used cash flows in operations of $1,410,296 from inception of October 17, 2005 to June 30, 2009 and has an accumulated deficit of $5,186,362 through June 30, 2009. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Companys ability to raise additional capital and implement its business plan.
The Company intends to overcome the circumstances that impact its ability to remain a going concern through a combination of the commencement of revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing. The Company anticipates raising additional funds through public or private financing, strategic relationships or other arrangements in the near future to support its business operations; however, the Company may not have commitments from third parties for a sufficient amount of additional capital. The Company cannot be certain that any such financing will be available on acceptable terms, or at all, and its failure to raise capital when needed could limit our ability to continue operations. Our ability to obtain additional funding will determine our ability to continue as a going concern. Failure to secure additional financing in a timely manner and on favorable terms would have a material adverse effect on our financial performance, results of operations and stock price and require it to curtail or cease operations, sell off its assets, seek protection from its creditors through bankruptcy proceedings, or otherwise. Furthermore, additional equity financing may be dilutive to the holders of the Companys common stock, and debt financing, if available, may involve restrictive covenants, and strategic relationships, if necessary to raise additional funds, and may require that the Company relinquish valuable rights.
Management believes that actions presently being taken to raise funds provide the opportunity for the Company to continue as a going concern. Once the Company can access the capital available through the public markets, we believe that this capital and any capital the Company raises through other private placements of our common stock will be adequate to continue as a going concern for the next 12 months. We currently do not have enough cash to operate for the next twelve months without this additional capital.
NOTE 7 - RESTATEMENT
On December 15, 2009, while preparing our responses to certain comments raised by the Securities and Exchange Commission pertaining to our pending Registration Statement on Form S-1, we identified errors in the preparation of our financial statements in the recording of revenue, costs of revenue, development expenses, amortization expense, interest expense, and general and administrative expenses. It was determined that a restatement of our unaudited interim financial statements for the three months ended June 30, 2009 and the six months ended June 30, 2009 was necessary to correct errors in the previously issued financial statements. Corrections to the unaudited interim financial statements have been made in various accounts as follows:
Total revenue was recorded incorrectly as the amounts for Revenue Product Sales included transactions which were double counted. Revenue Product Sales was overstated by $1,861 and $5,167 for the 3 months ended June 30, 2009 and the six months ended June 30, 2009 respectively. Revenue Advertising did not include revenue for all ad contracts for the period and was understated by $3,395 and $3,695 for the 3 months ended June 30, 2009 and the six months ended June 30, 2009 respectively. The Total Cost of Revenue was understated by $526 for both the 3 months ended June 30, 2009 and the six months ended June 30, 2009 due to the costs of all product sold during the period not being included.
Development expense has been restated for the 6 months ended June 30, 2008 in order to properly capitalize and amortize these costs in accordance with the ASC 985-20 Software Cost of Software to be Sold, Leased or Marketed, formerly Statement of Financial Accounting Standards No. 86. This adjustment was included in the audited financial statements for the year ended December 31, 2008 but was not reflected within the interim periods when these expenses were incurred for the development of the website thus requiring the website, amortization expense and development expense to be corrected for this interim period. Development expense for the six months ended June 30, 2008 was decreased by $177,456 and this amount was capitalized to the website.
Depreciation and amortization expense has been restated for the 3 months and 6 months ended June 30, 2008 by $70,179 and $140,357 respectively. Amortization expense pertaining to the website for the year ended December 31, 2008 was properly recorded at year end but the correct balance was not reflected in the interim periods during that fiscal year. The restated amounts correct the errors for the interim period shown.
The depreciation and amortization expense was understated for the 3 months and 6 months ended June 30, 2009 and was restated by $69,794 and $141,672 respectively to due to errors in the calculation of amortization expense on the website for these interim periods.
Marketing expense for the 6 months ended June 30, 2009 has been restated by $1,300 to correct for transactions which were incorrectly charged against income within this interim period.
Employee Compensation expense for the 6 months ended June 30, 2009 has been restated by $11.880 to correct for stock compensation which was not charged against income within this interim period.
General and Administrative expense for the 3 months and 6 months ended June 30, 2009 has been restated to correct for transactions which were not charged against income within these interim periods.
General and Administrative expense for the 6 months ended June 30, 2008 was restated to correct for transactions that were incorrectly categorized as G&A expense. Development costs incurred between January 1, 2008 and June 30, 2008 were charged to General and Administrative expense and an adjustment was made in order to properly capitalize and amortize these costs in accordance with the ASC 985-20 Software Cost of Software to be Sold, Leased or Marketed, formerly Statement of Financial Accounting Standards No. 86. This adjustment was included in the audited financial statements for the year ended December 31, 2008 but was not reflected in the interim periods when these expenses were incurred for the development of the website thus requiring the website, amortization expense and general and administrative expense to be corrected for this interim period. General and administrative expense for the six months ended June 30, 2008 was decreased by $150,652 and this amount was capitalized to the website.
Accrued Interest- Convertible Note Stockholder as of June 30, 2009 has been restated by $141,332 and Interest Expense for the 3 months and 6 months ended June 30, 2009 has been restated by $79,786 and $141,332 respectively to correct errors in the original calculation and recording of interest expense on the Convertible Notes Payable Stockholder and Loan Payable Related Party.
The effect of these restatements on the Companys previously issued interim financial statements dated June 30, 2009 and June 30, 2008 is detailed below:
Home School Holdings, Inc.
(a development stage company)
Consolidated Balance Sheet
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
| |||
|
|
June 30, |
|
June 30, |
|
June 30, |
| |||
|
|
2009 |
|
2009 |
|
2009 |
| |||
|
|
Previously |
|
Adjustment |
|
RESTATED |
| |||
ASSETS |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
3,606 |
|
$ |
|
|
$ |
3,606 |
|
Inventory |
|
|
473 |
|
|
|
|
|
473 |
|
Prepaid Expenses |
|
|
10,791 |
|
|
3,056 |
|
|
13,847 |
|
TOTAL CURRENT ASSETS |
|
|
14,870 |
|
|
3,056 |
|
|
17,926 |
|
|
|
|
|
|
|
|
|
|
|
|
Equipment, net of accumulated depreciation of $4,881 |
|
|
4,886 |
|
|
|
|
|
4,886 |
|
Website, net of accumulated amortization of $ 586,300 |
|
|
487,309 |
|
|
(141,672 |
) |
|
345,638 |
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
2,841 |
|
|
(61 |
) |
|
2,780 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
509,907 |
|
$ |
(138,677 |
) |
$ |
371,230 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable |
|
$ |
137,313 |
|
$ |
(905 |
) |
$ |
136,408 |
|
Accounts Payable--Related Party |
|
|
72,493 |
|
|
1,920 |
|
|
74,413 |
|
Accrued Payroll |
|
|
235,325 |
|
|
|
|
|
235,325 |
|
Accrued Interest--Convertible Note Stockholder |
|
|
414,830 |
|
|
(143,069 |
) |
|
271,761 |
|
Deferred Revenue |
|
|
375 |
|
|
|
|
|
375 |
|
Prepaid Advertising |
|
|
6,207 |
|
|
195 |
|
|
6,402 |
|
Note Payable |
|
|
40,000 |
|
|
|
|
|
40,000 |
|
Convertible Notes Payable--Stockholder |
|
|
300,000 |
|
|
|
|
|
300,000 |
|
Loans Payable - Related Party |
|
|
181,971 |
|
|
(10,000 |
) |
|
171,971 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES |
|
|
1,388,514 |
|
|
(151,859 |
) |
|
1,236,655 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY / (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock - Par value $0.001; |
|
|
|
|
|
|
|
|
|
|
Authorized: 500,000,000 |
|
|
|
|
|
|
|
|
|
|
Issued and Outstanding: 300,790,382 as of June 30, 2009 |
|
|
294,387 |
|
|
6,403 |
|
|
300,790 |
|
Additional Paid-In Capital |
|
|
4,014,368 |
|
|
18,532 |
|
|
4,032,900 |
|
Shareholder Receivable |
|
|
(1,000 |
) |
|
|
|
|
(1,000 |
) |
Deficit accumulated during development stage |
|
|
(5,186,362 |
) |
|
(11,753 |
) |
|
(5,198,115 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity / (Deficit) |
|
|
(878,607 |
) |
|
13,182 |
|
|
(865,426 |
) |
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' |
|
$ |
509,907 |
|
$ |
(138,677 |
) |
$ |
371,230 |
|
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Operations
(Unaudited)
|
|
For the Three Months Ended June 30, 2009 |
| |||||||
|
|
Previously |
|
Adjustment |
|
RESTATED |
| |||
|
|
|
|
|
|
|
|
|
|
|
Revenue - Product Sales, net |
|
$ |
10,341 |
|
$ |
(1,861 |
) |
$ |
8,480 |
|
Revenue - Advertising |
|
|
4,138 |
|
|
3,395 |
|
|
7,533 |
|
Total Revenue |
|
|
14,479 |
|
|
1,534 |
|
|
16,013 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue - Product Sales |
|
|
8,415 |
|
|
526 |
|
|
8,942 |
|
Cost of Revenue - Advertising |
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenue |
|
|
8,415 |
|
|
526 |
|
|
8,942 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
6,064 |
|
|
1,008 |
|
|
7,071 |
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
75,777 |
|
|
|
|
|
75,777 |
|
Board Compensation |
|
|
13,500 |
|
|
|
|
|
13,500 |
|
Development Expenses |
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
10,380 |
|
|
69,794 |
|
|
80,174 |
|
Marketing |
|
|
10,849 |
|
|
(1,300 |
) |
|
9,549 |
|
Employee Compensation |
|
|
166,047 |
|
|
|
|
|
166,047 |
|
General and Administrative |
|
|
25,369 |
|
|
489 |
|
|
25,858 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
301,922 |
|
|
68,984 |
|
|
370,906 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
(295,858 |
) |
|
(67,976 |
) |
|
(363,834 |
) |
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of Debt |
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
(106,337 |
) |
|
51,497 |
|
|
(54,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/Expense |
|
|
(106,337 |
) |
|
51,497 |
|
|
(54,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(402,195 |
) |
$ |
(16,479 |
) |
$ |
(418,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share - basic and diluted |
|
|
** |
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding |
|
|
288,876,698 |
|
|
|
|
|
288,876,698 |
|
** Less than $0.01
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Operations
(Unaudited)
|
|
For the Three Months Ended June 30, 2008 |
| |||||||
|
|
Previously |
|
Adjustment |
|
RESTATED |
| |||
|
|
|
|
|
|
|
|
|
|
|
Revenue - Product Sales, net |
|
$ |
9,700 |
|
$ |
|
|
$ |
9,700 |
|
Revenue - Advertising |
|
|
2,017 |
|
|
|
|
|
2,017 |
|
Total Revenue |
|
|
11,718 |
|
|
|
|
|
11,718 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue - Product Sales |
|
|
8,612 |
|
|
|
|
|
8,612 |
|
Cost of Revenue - Advertising |
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenue |
|
|
8,612 |
|
|
|
|
|
8,612 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
3,105 |
|
|
|
|
|
3,105 |
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
20,393 |
|
|
|
|
|
20,393 |
|
Board Compensation |
|
|
19,500 |
|
|
|
|
|
19,500 |
|
Development Expenses |
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
19,319 |
|
|
70,179 |
|
|
89,497 |
|
Marketing |
|
|
24,003 |
|
|
|
|
|
24,003 |
|
Employee Compensation |
|
|
120,824 |
|
|
|
|
|
120,824 |
|
General and Administrative |
|
|
(68,109 |
) |
|
105,652 |
|
|
37,543 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
135,930 |
|
|
175,830 |
|
|
311,761 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
(132,825 |
) |
|
(175,830 |
) |
|
(308,655 |
) |
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of Debt |
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
14 |
|
|
|
|
|
14 |
|
Interest Expense |
|
|
(129,654 |
) |
|
65,457 |
|
|
(64,197 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/Expense |
|
|
(129,640 |
) |
|
65,457 |
|
|
(64,183 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(262,465 |
) |
$ |
(110,373 |
) |
$ |
(372,838 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share - basic and diluted |
|
|
** |
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding |
|
|
281,192,229 |
|
|
|
|
|
281,192,229 |
|
** Less than $0.01
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Operations
(Unaudited)
|
|
For the Six Months Ended June 30, 2009 |
| |||||||
|
|
Previously |
|
Adjustment |
|
RESTATED |
| |||
|
|
|
|
|
|
|
|
|
|
|
Revenue - Product Sales, net |
|
$ |
19,922 |
|
$ |
(5,167 |
) |
$ |
14,755 |
|
Revenue - Advertising |
|
|
8,986 |
|
|
3,695 |
|
|
12,681 |
|
Total Revenue |
|
|
28,908 |
|
|
(1,472 |
) |
|
27,436 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue - Product Sales |
|
|
14,802 |
|
|
526 |
|
|
15,328 |
|
Cost of Revenue - Advertising |
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenue |
|
|
14,802 |
|
|
526 |
|
|
15,328 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
14,106 |
|
|
(1,998 |
) |
|
12,108 |
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
124,344 |
|
|
|
|
|
124,344 |
|
Board Compensation |
|
|
27,000 |
|
|
|
|
|
27,000 |
|
Development Expenses |
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
20,759 |
|
|
141,672 |
|
|
162,431 |
|
Marketing |
|
|
35,711 |
|
|
(1,300 |
) |
|
34,411 |
|
Employee Compensation |
|
|
320,640 |
|
|
11,880 |
|
|
332,520 |
|
General and Administrative |
|
|
41,626 |
|
|
571 |
|
|
42,198 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
570,080 |
|
|
152,824 |
|
|
722,904 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
(555,974 |
) |
|
(154,822 |
) |
|
(710,796 |
) |
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of Debt |
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
(194,721 |
) |
|
89,881 |
|
|
(104,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/Expense |
|
|
(194,721 |
) |
|
89,882 |
|
|
(104,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(750,695 |
) |
$ |
(64,941 |
) |
$ |
(815,636 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share - basic and diluted |
|
|
** |
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding |
|
|
288,876,698 |
|
|
|
|
|
288,876,698 |
|
** Less than $0.01
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Operations
(Unaudited)
|
|
For the Six Months Ended June 30, 2008 |
| |||||||
|
|
Previously |
|
Adjustment |
|
RESTATED |
| |||
|
|
|
|
|
|
|
|
|
|
|
Revenue - Product Sales, net |
|
$ |
13,359 |
|
$ |
|
|
$ |
13,359 |
|
Revenue - Advertising |
|
|
4,689 |
|
|
|
|
|
4,689 |
|
Total Revenue |
|
|
18,048 |
|
|
|
|
|
18,048 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue - Product Sales |
|
|
10,506 |
|
|
|
|
|
10,506 |
|
Cost of Revenue - Advertising |
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenue |
|
|
10,506 |
|
|
|
|
|
10,506 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
7,542 |
|
|
|
|
|
7,542 |
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
59,824 |
|
|
|
|
|
59,824 |
|
Board Compensation |
|
|
543,000 |
|
|
|
|
|
543,000 |
|
Development Expenses |
|
|
180,067 |
|
|
(177,456 |
) |
|
2,610 |
|
Depreciation and Amortization |
|
|
19,319 |
|
|
140,357 |
|
|
159,676 |
|
Marketing |
|
|
60,272 |
|
|
|
|
|
60,272 |
|
Employee Compensation |
|
|
247,386 |
|
|
|
|
|
247,386 |
|
General and Administrative |
|
|
52,273 |
|
|
|
|
|
52,273 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
1,162,141 |
|
|
(37,098 |
) |
|
1,125,043 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
(1,154,599 |
) |
|
37,098 |
|
|
(1,117,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of Debt |
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
153 |
|
|
|
|
|
153 |
|
Interest Expense |
|
|
(129,654 |
) |
|
9,715 |
|
|
(119,939 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/Expense |
|
|
(129,501 |
) |
|
9,715 |
|
|
(119,786 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(1,284,100 |
) |
$ |
46,813 |
|
$ |
(1,237,286 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share - basic and diluted |
|
|
** |
|
|
|
|
|
** |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding |
|
|
281,192,229 |
|
|
|
|
|
281,192,229 |
|
** Less than $0.01
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Cash Flows
(Unaudited)
|
|
For the Six Months Ended June 30, 2009 |
| |||||||
|
|
As Previously |
|
Adjustment |
|
RESTATED |
| |||
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Used in Operating Activities: |
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(750,695 |
) |
$ |
64,941 |
|
$ |
(815,636 |
) |
Adjustments to reconcile net loss to net cash used in operations |
|
|
|
|
|
|
|
|
|
|
Depreciation/Amortization |
|
|
20,759 |
|
|
(141,671 |
) |
|
162,431 |
|
Extinguishment of Debt |
|
|
|
|
|
|
|
|
|
|
In-kind contribution of interest |
|
|
|
|
|
(2,461 |
) |
|
2,461 |
|
Start-up expenses |
|
|
|
|
|
|
|
|
|
|
Shares issued for services |
|
|
|
|
|
(11,880 |
) |
|
11,880 |
|
Shares issued for interest |
|
|
|
|
|
|
|
|
|
|
Stock options issued for services |
|
|
104,051 |
|
|
(3,596 |
) |
|
107,647 |
|
Shares issued for board comp |
|
|
20,000 |
|
|
(7,000 |
) |
|
27,000 |
|
(Increase) Decrease in: |
|
|
|
|
|
|
|
|
|
|
Prepaid Expenses |
|
|
(982 |
) |
|
2,861 |
|
|
(3,843 |
) |
Inventory |
|
|
|
|
|
|
|
|
|
|
Deferred Revenue |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
(61 |
) |
|
(61 |
) |
|
|
|
Accrued interest |
|
|
188,901 |
|
|
89,882 |
|
|
99,019 |
|
Accrued payroll |
|
|
148,353 |
|
|
|
|
|
148,353 |
|
Accounts Payable |
|
|
5,640 |
|
|
905 |
|
|
4,735 |
|
Accounts PayableRelated Party |
|
|
32,509 |
|
|
(1,920 |
) |
|
34,429 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used In Operating Activities |
|
|
(231,525 |
) |
|
(10,001 |
) |
|
(221,524 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
Payments for Equipment & Website Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used In Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
Proceeds from Sale of Stock |
|
|
122,700 |
|
|
|
|
|
122,700 |
|
Proceeds from Notes Payable - Stockholder |
|
|
|
|
|
|
|
|
|
|
Proceeds from Convertible Note Payable - Related Party |
|
|
111,472 |
|
|
10,000 |
|
|
101,472 |
|
Repayment of Notes Payable - Related Party |
|
|
|
|
|
|
|
|
|
|
Repayment of Notes Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities |
|
|
234,172 |
|
|
10,000 |
|
|
224,172 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash |
|
|
2,648 |
|
|
|
|
|
2,648 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash at Beginning of Period |
|
|
958 |
|
|
|
|
|
958 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash at End of Period |
|
$ |
3,606 |
|
$ |
|
|
$ |
3,606 |
|
Home School Holdings, Inc.
(a development stage company)
Consolidated Statement of Cash Flows
(Unaudited)
|
|
For the Six Months Ended June 30, 2008 |
| |||||||
|
|
As Previously |
|
Adjustment |
|
RESTATED |
| |||
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Used in Operating Activities: |
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(1,284,100 |
) |
$ |
(46,813 |
) |
$ |
(1,237,286 |
) |
Adjustments to reconcile net loss to net cash used in operations |
|
|
|
|
|
|
|
|
|
|
Depreciation/Amortization |
|
|
1,237 |
|
|
|
|
|
1,237 |
|
Extinguishment of Debt |
|
|
|
|
|
|
|
|
|
|
In-kind contribution of interest |
|
|
|
|
|
|
|
|
|
|
Start-up expenses |
|
|
|
|
|
|
|
|
|
|
Shares issued for services |
|
|
|
|
|
|
|
|
|
|
Shares issued for interest |
|
|
|
|
|
|
|
|
|
|
Stock options issued for services |
|
|
693,700 |
|
|
|
|
|
693,700 |
|
Shares issued for board comp |
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease in: |
|
|
|
|
|
|
|
|
|
|
Prepaid Expenses |
|
|
(752 |
) |
|
|
|
|
(752 |
) |
Inventory |
|
|
(2,408 |
) |
|
|
|
|
(2,408 |
) |
Deferred Revenue |
|
|
468 |
|
|
|
|
|
468 |
|
Deposits |
|
|
|
|
|
|
|
|
|
|
Accrued interest |
|
|
39,019 |
|
|
|
|
|
39,019 |
|
Accrued payroll |
|
|
(161,905 |
) |
|
|
|
|
(161,905 |
) |
Accounts Payable |
|
|
47,635 |
|
|
1,920 |
|
|
45,715 |
|
Accounts Payable--Related Party |
|
|
12,621 |
|
|
(1,920 |
) |
|
14,541 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used In Operating Activities |
|
|
(654,485 |
) |
|
(46,813 |
) |
|
(607,672 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
Payments for Equipment & Website Development |
|
|
(107,075 |
) |
|
37,099 |
|
|
(144,174 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used In Investing Activities |
|
|
(107,075 |
) |
|
37,099 |
|
|
(144,174 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
Proceeds from Sale of Stock |
|
|
335,320 |
|
|
|
|
|
335,320 |
|
Proceeds from Notes Payable - Stockholder |
|
|
300,000 |
|
|
|
|
|
300,000 |
|
Proceeds from Convertible Note Payable - Related Party |
|
|
125,438 |
|
|
|
|
|
125,438 |
|
Repayment of Notes Payable - Related Party |
|
|
|
|
|
|
|
|
|
|
Repayment of Notes Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities |
|
|
760,758 |
|
|
|
|
|
760,758 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash |
|
|
(802 |
) |
|
|
|
|
8,912 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash at Beginning of Period |
|
|
1,526 |
|
|
|
|
|
1,526 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash at End of Period |
|
$ |
722 |
|
$ |
|
|
$ |
10,436 |
|
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in this Form 10-Q and in our Report on Form 8-K for the fiscal year ended December 31, 2008 filed on May 11, 2009 with the Securities and Exchange Commission and are hereby referenced.
The statements in this report include forward-looking statements. These forward-looking statements are based on our managements current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify a forward-looking statement by the use of the forward-terminology, including words such as may, will, believes, anticipates, estimates, expects, continues, should, seeks, intends, plans, and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers; and, our ability to maintain a level of investment that is required to remain competitive. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates and conditions in the gaming/entertainment industry in particular; and, the continued employment of our key personnel and other risks associated with competition.
For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements see the Liquidity and Capital Resources section under Managements Discussion and Analysis of Financial Condition and Results of Operations in this item of this report and the other risks and uncertainties that are set forth elsewhere in this report or detailed in our other Securities and Exchange Commission reports and filings. We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
Home School Holdings, Inc., a Florida corporation (the Company, we, our, and us), is an Internet-based, fully-interactive home schooling community website, providing products, services, support and guidance to over 54,000 families that are educating their children within the home. More and more families are electing to educate their children within the home for a number of reasons. These families require curriculum, books, school supplies, learning supplements and study aids, support and guidance on the most effective and efficient ways to educate themselves and their children within their home. Our focus is to become the preferred resource to families seeking to educate their children within the home. Our goal is to provide home schooling families with all of the high caliber products and services necessary to enable them to effectively home educate their children.
Going Concern
Our financial statements have been prepared on the basis of accounting principles applicable to a going concern. As a result, they do not include adjustments that would be necessary if we were unable to continue as a going concern and would therefore be obligated to realize assets and discharge our liabilities other than in the normal course of operations. As reflected in the accompanying financial statements, the Company is in the development stage with limited revenues, has used cash flows in operations of $1,400,295 from inception of October 17, 2005 to June 30, 2009 and has an accumulated deficit of $5,198,116 through June 30, 2009. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Companys ability to raise additional capital and implement its business plan.
The Company intends to overcome the circumstances that impact its ability to remain a going concern through a combination of the commencement of revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing. The Company anticipates raising additional funds through public or private financing, strategic relationships or other arrangements in the near future to support its business operations; however, the Company may not have commitments from third parties for a sufficient amount of additional capital. The Company cannot be certain that any such financing will be available on acceptable terms, or at all, and its failure to raise capital when needed could limit our ability to continue operations. Our ability to obtain additional funding will
determine our ability to continue as a going concern. Failure to secure additional financing in a timely manner and on favorable terms would have a material adverse effect on our financial performance, results of operations and stock price and require it to curtail or cease operations, sell off its assets, seek protection from its creditors through bankruptcy proceedings, or otherwise. Furthermore, additional equity financing may be dilutive to the holders of the Companys common stock, and debt financing, if available, may involve restrictive covenants, and strategic relationships, if necessary to raise additional funds, and may require that the Company relinquish valuable rights.
Management believes that actions presently being taken to raise funds provide the opportunity for the Company to continue as a going concern. Once the Company can access the capital available through the public markets, we believe that this capital and any capital the Company raises through other private placements of our common stock will be adequate to continue as a going concern for the next 12 months. We currently do not have enough cash to operate for the next twelve months without this additional capital.
Critical Accounting Policies
The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going basis, management evaluates these estimates and assumptions, including but not limited to those related to revenue recognition and the impairment of long-lived assets, goodwill and other intangible assets. Management bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Stock Compensation
The Company adopted SFAS No. 123R, Share-Based Payment (SFAS 123R), which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The Company accounts for stock-based compensation arrangements with nonemployees in accordance with the Emerging Issues Task Force Abstract No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services. The Company records the expense of such services to employees and non employees based on the estimated fair value of the equity instrument using the Black-Scholes pricing model.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements and No. 104, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales taxes. Amounts received in advance for subscription services, are deferred and recognized as revenue over the subscription term.
The Company recognizes advertising revenue as earned on a per-impression basis. As traffic moves through websites and pages are served, the contract amount is recognized as revenue. impressions are defined as the number of times a user requests a page on our websites.
Outlook
The most important metric by which we judge the Companys performance now and in the near term is top line sales growth. Our current commitment to develop and deliver quality products and services means that, for the near future, bottom line profitability will be a poor indicator of our success. We do not expect our development investment rate to decline meaningfully in the near future. Since investors are certain to be the primary, near term source of liquidity to support our development and marketing efforts, our liquidity will be driven by our ability to attract repeat investments from current shareholders and to find new ones. This in turn may be materially impacted by the general investment climate.
Since K-12 education must continue without regard to economic cycle, we do not expect the current decrease in level of economic activity to have a significant negative impact on sales and earnings. At the margins, home education grows somewhat more quickly in difficult times due to parents of children attending private schools sometimes find the burden of tuition too much to bear in difficult times. This increase in growth is quite small and can only be seen anecdotally. For the most part, K-12 education, both institutional and home-based, continues at a pace determined by age cohort size rather than economic outlook.
Our primary marketing challenge for the coming 12 months is to achieve greater and greater market awareness through our targeted marketing campaign. Our primary developmental and operational challenge is to increase the amount of material we can offer by download for our non-U.S. based users and the amount of material we have both in hard copy and by download for US customers.
Revenues
As our revenues increase, we plan to continue to invest heavily in marketing and sales by increasing the number of national account sales associates and channel management personnel in order to add new customers and increase penetration within our existing customer base, expanding our domestic and international selling and marketing activities, building brand awareness and sponsoring additional marketing events. We expect that in the future, marketing and sales expenses will increase in absolute dollars and continue to be our largest cost. We do not expect our revenues to increase significantly until next year.
General and Administrative Expenses
We expect that general and administrative expenses associated with executive compensation will increase in the future. Although the current executives have foregone full salary payment during the initial stages of the business, during 2007 the team began to receive compensation. In addition, we believe over the next fiscal year that the compensation packages required to attract the senior executives the Company requires to execute against its business plan will increase our total general and administrative expenses.
Research and Development
Research and development expenses consist primarily of salaries and related expenses, and allocated overhead. We have historically focused our research and development efforts on increasing the functionality and enhancing the ease of use of our convergence platform and applications. Because of our open, scalable and secure component-based architecture, we are able to provide our customers with a solution based on a single version of our software application platform. As a result, we do not have to maintain multiple versions, which enables us to have relatively low research and development expenses as compared to traditional enterprise software business models. We expect that in the future, research and development expenses will increase in absolute dollars as we support additional IP telephony platforms, extend our solution offerings and develop new technologies.
Summary of Consolidated Condensed Results of Operations
Any measurement and comparison of revenues and expenses from continuing operations should not be considered necessarily indicative or interpolated as the trend to forecast our future revenues and results of operations.
Results for the Six Months Ended June 30, 2009 Compared to June 30, 2008
Revenues. Sales revenues for the six months ended June 30, 2009 were $27,436. This is a $9,388 increase from the Companys revenues generated for the six months ended June 30, 2008 of $18,048. Our revenues for the six months ended June 30, 2009 were generated primarily from the sales of curriculum and other educational materials which resulted in revenues of $14,755 and secondarily from the sale of advertising which resulted in revenues of $12,681. No increase in revenues occurred as a result of any price increase in the Companys products. The Company experienced an increase in its volume of product sales of more than 10% and advertising sales revenue experienced an increase of 270% compared to the six months ended June 30, 2008. Management believes revenue growth will accelerate significantly in the fiscal year 2010 as capital is applied to completing and upgrading the online store and with additional advertising sales headcount.
Cost of Revenues. Cost of revenues for the six months ended June 30, 2009 increased to $15,328 as compared to $10,506 for the six months ended June 30, 2008. This increase in cost of revenues is related to the Companys sales operations. The Company purchased certain educational materials and incurred shipping and handling fees related to the sale of its products.
Gross Profit/Loss. For the six months ended June 30, 2009, we experienced a gross profit from operations of $12,108 after continuous operation. Management believes this gross profit will increase with sales and as a percentage of sales as new, proprietary products and services come on line. Management believes that it will experience an increase in gross profits during the fiscal year 2010 as it continues to establish a market for its products and services. The expectation for 2009 gross profit margin runs from 32% to 40%, depending on the mix of advertising to product sales.
Executive, Board, Payroll, Marketing and Promotion Expenses. For the six months ended June 30, 2009, the Company had incurred expenses of $518,275 related to marketing and promotions, board compensation and payroll and development. Marketing and promotional expenses consist primarily of salaries, commissions, participation in our customers marketing efforts and related personnel expenses for those engaged in the sale and marketing of our products, travel, as well as related trade shows and promotional and public relations expenses. Our sales and marketing team is expected to grow in the future as we expand our sales and marketing activities nationally. We expect our selling and marketing expenses to increase in the future due to an increase in direct expenses related to sales and marketing, including increases to salaries to personnel in marketing and business development, as well as increased bonus payments and sales commissions on our revenues. In addition, as our customer base grows, we will need to participate in additional marketing efforts. We expect our Board Compensation to decline in second half of the fiscal year 2009 as compared to second half of the fiscal year 2008 because many fewer options are likely to be granted. The Board is currently compensated entirely with shares of common stock, with the Chairman receiving $4,500 worth of stock each quarter and each director receiving $3,000 worth of stock. Additionally, most of our Chief Executive Officers compensation is paid in stock options.
General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2009 were $42,198 compared to $52,273 for the six months ended June 30, 2008. General and administrative expenses consisted mainly of rent, utilities and other overhead costs associated with the operation of the Companys corporate operations. Management believes these expenses will increase as business continues to grow and as more personnel and larger facilities are required for the operation of the business.
Amortization/Depreciation expense for the continuing operation was $162,431 for the six months ended June 30, 2009 as compared to $159,676 for the six months ended June 30, 2008.
Net Loss. Net loss for the six months ended June 30, 2009 was $815,636 as compared to $1,237,286 for the six months ended June 30, 2008. The net loss for the six months ended June 30, 2009 was primarily related to personnel costs, of which option expensing was the single largest contributor, amortization expense and professional fees. The net loss for the six months ended June 30, 2008 was mainly due to the cost of developing the Companys online services. Management believes it can reduce these losses going forward as the Company begins to generate more revenue. As we continue to expand our user base and our sales of products and services we will reduce these losses.
As of six months ended June 30, 2009, we had an accumulated deficit of $865,426.
Results for the Quarter Ended June 30, 2009 Compared to June 30, 2008
Revenues. Sales revenues for the three months ended June 30, 2009 were $8,480. This is a $1,220 decrease from the Companys revenues generated for the three months ended June 30, 2008 of $9,700. Our revenues for the three months ended June 30, 2009 were generated primarily from the sales of curriculum and other educational materials which resulted in revenues of $10,341 and secondarily from the sale of advertising which resulted in revenues of $4,138. No increase in revenues occurred as a result of any price increase in the Companys products. The Company experienced an increase in its advertising sales revenue of 105% compared to the three months ended June 30, 2008.
Cost of Revenues. Cost of revenues for the three months ended June 30, 2009 increased to $8,942 as compared to $8,612 for the three months ended June 30, 2008. This increase in cost of revenues is related to the Companys sales operations. The Company purchased certain educational materials and incurred shipping and handling fees related to the sale of its products.
Gross Profit/Loss. For the three months ended June 30, 2009, we experienced a gross profit from operations of $8,942 after continuous operation. Management believes this gross profit will increase with sales and as a percentage of sales as new, proprietary products and services come on line.
Executive, Board, Payroll, Marketing and Promotion Expenses. For the three months ended June 30, 2009, the Company had incurred expenses of $264,873 related to marketing and promotions, board compensation and payroll and development. Marketing and promotional expenses consist primarily of salaries, commissions, participation in our customers marketing efforts and related personnel expenses for those engaged in the sale and marketing of our products, travel, as well as related trade shows and promotional and public relations expenses. Our sales and marketing team is expected to grow in the future as we expand our sales and marketing activities nationally. We expect our selling and marketing expenses to increase in the future due to an increase in direct expenses related to sales and marketing, including increases to salaries to personnel in marketing and business development, as well as increased bonus payments and sales commissions on our revenues. In addition, as our customer base grows, we will need to participate in additional marketing efforts.
General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2009 were $25,858 compared to $37543 for the three months ended June 30, 2008. General and administrative expenses consisted mainly of rent, utilities and other overhead costs associated with the operation of the Companys corporate operations. Management believes these expenses will increase as business continues to grow and as more personnel and larger facilities are required for the operation of the business.
Amortization/Depreciation expense for the continuing operation was $80,174 for the three months ended June 30, 2009 as compared to $89,479 for the three months ended June 30, 2008.
Net Loss. Net loss for the three months ended June 30, 2009 was $418,674 as compared to $372,838 for the three months ended June 30, 2008. The net loss for the three months ended June 30, 2009 was primarily related to personnel costs, of which option expensing was the single largest contributor, amortization expense and professional fees. The net loss for the three months ended June 30, 2008 was mainly due to the cost of developing the Companys online services. Management believes it can reduce these losses going forward as the Company begins to generate more revenue. As we continue to expand our user base and our sales of products and services we will reduce these losses.
Impact of Inflation
We believe that the rate of inflation has had negligible effect on our operations. We have the flexibility to offset inflationary increases of various expenses such as the cost of labor and direct payroll taxes. We can arbitrarily increase our sales prices to offset these anticipated increases, all the while trying to increase our subscriber base and continue the improvement of our overall operating procedures and systems. We believe we can absorb most, if not all, increased non-controlled operating costs by increasing sales prices, whenever deemed necessary, and, by operating our Company in the most efficient manner possible.
Liquidity and Capital Resources
The ability of the Company to continue as a going concern is dependent on the Companys ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by its founders, Board members, employees and persons related to or acquainted with these.
As of June 30, 2009, total current assets were $17,926 which consisted of $3,606 of cash, $473 of inventory and $13,847 of prepaid expenses. As of December 31, 2008, total current assets were $7,733 which consisted of $958 of cash, $473 of inventory and $6,302 of prepaid expenses.
As of June 30, 2009, total current liabilities were $1,236,655, which consisted of $210,821 of accounts payable expenses, $271,761 of accrued interest expenses, loan payable obligations of $511,971, and $242,102 of other miscellaneous current liabilities. As of December 31, 2008, total current liabilities were $844,945, which consisted of $171,657 of accounts payable expenses, $86,972 of accrued payroll expenses, and loan payable obligations of $410,499.
We had negative net working capital of $1,218,729 as of June 30, 2009, compared to negative net working capital of $837,212 as of December 31, 2008.
During the six months ended June 30, 2009, operating activities used cash of $221,524 as compared to the six months ended June 30, 2008, where we used cash of $607,672 in operating activities. The cash used by operating activities for the six months ended June 30, 2009 was due primarily to compensation expense. The cash used in operating activities for the six months ended June 30, 2008 was also primarily related to compensation expense.
We had a net increase in cash of $2,648 for the six months ended June 30, 2009. Cash flows from financing activities represented the Companys principal source of cash for the six month period ended June 30, 2009. Cash flows from financing activities during the six month ended June 30, 2009 were $224,172 consisting of proceeds in the amount of $122,700 from the issuance of stock and $101,472 of proceeds from notes payable. During the six months ended June 30, 2008, we received $760,758 from financing activities from the issuance of common stock, options and notes payable.
We acquired certain online assets during the six month period ended June 30, 2008 of $125,157 and assumed liabilities of $80,000. We paid $40,000 in cash and issued a note payable of $80,000. Capital expenditures in the past were incurred primarily for computers and software used for the Companys operations (See note 3 of financial statements).
During 2009, 5 promissory notes totaling $190,000 were issued. $54,987 in interest expense was accrued during the period. On June 5, 2009 two promissory notes totaling $60,000 were converted to equity at a rate of $.025 per share. At June 30, 2009, $150,000 was owed on the three remaining notes and $6,219 had been recorded in interest expense on these notes.
Off-Balance Sheet Arrangements
None
Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 . This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require; the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parents ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.
SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Companys financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entitys derivative instruments and hedging activities and their effects on the entitys financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The adoption of FASB 162 is not expected to have a material impact on the Companys financial position.
In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60. Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. This results in inconsistencies in the recognition and measurement of claim liabilities. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. The adoption of FASB 163 is not expected to have a material impact on the Companys financial position.
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
We have not utilized any derivative financial instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. We believe that adequate controls are in place to monitor any hedging activities. We do not currently have any sales or own assets and operate facilities in countries outside the United States and, consequently, we are not effected by foreign currency fluctuations or exchange rate changes. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material to our financial condition or results of operations.
Item 4. |
Controls and Procedures |
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including our President and Treasurer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our first fiscal quarter covered by this report. Based on the foregoing, our President and Treasurer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
There has been no change in our internal controls over financial reporting during our first fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Managements Report on Internal Control over Financial Reporting
The management of the Company 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 Companys principal executive and financial officers and effected by the Companys 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 generally accepted accounting principles and includes those policies and procedures that:
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys 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.
The Companys management assessed the effectiveness of the Companys internal control over financial reporting as of June 30, 2009. In making this assessment, the Companys management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.
Based on the assessment performed, management has concluded that the Companys internal control over financial reporting is effective and provides reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements as of June 30, 2009 in accordance with generally accepted accounting principles. Further, management has not identified any material weaknesses in internal control over financial reporting as of June 30, 2009.
This quarterly report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.
/s/ Thomas Morrow
Chairman and Chief Executive Officer
PART II OTHER INFORMATION
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
Unregistered Sales of Equity Securities
The following is a summary of transactions by us involving sales of our securities that were not registered under the Securities Act of 1933, as amended (the Securities Act), during the three months ended June 30, 2009. Each offer and sale was made in reliance on Section 4(2) of the Securities Act, or Regulation D promulgated under Section 4(2) of the Securities Act, as transactions by an issuer not involving any public offering. The purchasers were accredited investors, officers, directors or employees of the registrant or known to the Company and its management through pre-existing business relationships, family, friends and employees. All purchasers were provided access to all material information which they requested, and all information necessary to verify such information and were afforded access to management of the Company in connection with their purchases. All holders of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to the registrant. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration under the Securities Act, in any further resale or disposition.
During the quarter ended June 30, 2009, we issued 4,027,500 shares of common stock to investors for cash in the amount of $122,700.
During the quarter ended June 30, 2009, we issued 134,820 shares of common stock for board compensation with a fair market value of $4,500.
During the quarter ended June 30, 2009, we issued 100,000 shares of common stock as a gift for employee services with a fair market value of $5,000.
On February 6, 2009, the Company entered into short-term lending arrangements with certain of its shareholders. The loan provided for $50,000 for six months. The loan paid an APR of 10% and provided for convertibility at $0.05 per share. On June 5, 2009, this loan was converted to 1,000,000 shares common stock at $0.05 per share with a fair market value of $50,000.
On April 3, 2009, the Company entered into short-term lending arrangements with certain of its shareholders. The loan provided for $10,000 for six months. The loan paid an APR of 10% and provided for convertibility at $0.06 per share. On June 5, 2009, this loan was converted to 200,000 shares common stock at $0.05 per share with a fair market value of $10,000.
On May 8, 2009, we consummated a Share Exchange Agreement with Home School, Inc. a Delaware corporation (HSI), that was dated as of April 29, 2009. As a result of the transactions contemplated by the Share Exchange Agreement, on May 8, 2009, we acquired 100% of the outstanding shares of capital stock of HSI and HSI became a wholly-owned subsidiary of the Company, and the Company changed its name to Home School Holdings, Inc. Pursuant to the Share Exchange Agreement, the Company issued 289,959,665 shares of its common stock to shareholders of HSI and the Company reserved for future issuance 73,949,760 shares of common stock subject to HSIs outstanding stock options and warrants and 22,402,121 shares of common stock subject to HSIs outstanding convertible debt (the Share Exchange). HSI also paid $50,000 to the Companys two existing shareholders as purchase price consideration for the Share Exchange and such shareholders shall own an aggregate of 5,882,917 shares, or 1.5% of the outstanding shares of Common Stock of the Company on a fully diluted basis upon the consummation of the Share Exchange.
During May 2009, the Company issued 2,594,625 and 288,292 shares of its common stock to Tangiers Investors, LP and Willowhuasca Wellness, Inc., respectively, as purchase price consideration pursuant to the Share Exchange.
Item 6. |
Exhibits |
(a) |
Exhibits |
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Exhibit 31.1 |
302 Certification Thomas Morrow |
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Exhibit 32.1 |
906 Certification Thomas Morrow |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HOME SCHOOL HOLDINGS, INC.
DATE: January 26, 2010 |
By: |
/s/ Thomas Morrow |
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Thomas Morrow |
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Chairman and Chief Executive Officer |
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(Principal Authorized Officer and Principal Accounting Officer) |
Home School Holdings, Inc.
Index to Exhibits
Exhibit Number |
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Description |
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302 Certification Thomas Morrow | |
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906 Certification Thomas Morrow |