Attached files
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended November 30, 2009.
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period to .
------------- ------------
Commission File Number 333-150061
INNOCENT, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0585268
------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2000 NE 22nd ST
Wilton Manors, FL 33305
-----------------------
(Address of principal executive offices) (zip code)
(828) 489-9408
--------------
(Registrant's telephone number, including area code)
None
----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by 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 [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of February 12 2010, there were
30,000,000 shares of common stock, par value $0.001, outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INNOCENT, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
November 30, 2009 and 2008
(Unaudited)
BALANCE SHEET
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
INNOCENT, INC.
(A Development Stage Company)
Balance Sheets
November 30, August 31,
2009 2009
------------- -------------
(Unaudited)
ASSETS
Current assets
Cash $ 22,764 $ -
-------------- -------------
Total current assets 22,764 -
-------------- -------------
Investment in gold mine (Note 5) 2,000,000 -
-------------- -------------
Total assets $ 2,022,764 $ -
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued liabilities $ 43,270 $ 42,970
Loan payable - related party 34,269 13,843
Due on gold mine (Note 5) 1,500,000 -
-------------- -------------
Total current liabilities 1,577,539 56,813
-------------- -------------
Stockholders' Equity (Deficit)
Common stock, $.001 par value; 75,000,000 shares authorized; 30,000,000 and
7,000,000 issued and outstanding at November 30, 2009 and August 31, 2009,
resp. 30,000 7,000
Additional paid in capital 517,000 27,000
Deficit accumulated during the development stage (101,775) (90,813)
-------------- -------------
Total stockholders' equity (deficit) 445,225 (56,813)
-------------- -------------
Total liabilities and stockholders' equity (deficit) $ 2,022,764 $ -
============== =============
See accompanying notes to financial statements
F-2
INNOCENT, INC.
(A Development Stage Company)
Statements of Operations
September 27, 2006
Three months ended November 30, (inception) to
2009 2008 November 30, 2009
------------------ ------------------ --------------------
Revenues $ - $ - $ -
------------------ ------------------ --------------------
Operating expenses
Professional fees 6,636 5,700 63,505
Travel and promotion 3,880 263 11,845
Other general & administrative - 1,736 27,887
------------------ ------------------ --------------------
Total operating expenses 10,516 7,699 103,237
------------------ ------------------ --------------------
Loss from operations (10,516) (7,699) (103,237)
Other expense
Interest expense (446) (134) (1,390)
------------------ ------------------ --------------------
Total other expense (446) (134) (1,390)
------------------ ------------------ --------------------
Loss from continuing operations (10,962) (7,833) (104,627)
Income from discontinued operations - 1,224 2,852
Net loss $ (10,962) $ (6,609) $ (101,775)
================== ================== ====================
Basic and diluted loss per common share $ (0.00) $ (0.00)
================== ==================
Weighted average shares outstanding 19,747,253 7,000,000
================== ==================
See accompanying notes to financial statements
F-3
INNOCENT, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
September 27,
2006 (inception)
Three months ended November 30, to November 30,
2009 2008 2009
----------------- ------------- -----------------
Cash flows from operating activities
Net loss $ (10,962) $ (6,609) $ (101,775)
Adjustments to reconcile net loss to net cash
used in operating activities
Common stock issued for services 3,000 - 3,000
Changes in operating assets and liabilities:
Accounts receivable - 2,656 -
Accounts payable and accrued liabilities 300 4,716 43,270
----------------- ------------- -----------------
Net cash provided by (used in) operating activities (7,662) 763 (55,505)
----------------- ------------- -----------------
Cash flows from investing activities
Investment in gold mine (2,000,000) - (2,000,000)
----------------- ------------- -----------------
Cash flows used in investing activities (2,000,000) - (2,000,000)
----------------- ------------- -----------------
Cash flows from financing activities
Loan payable - related party 20,426 134 34,269
Due on gold mine 1,500,000 - 1,500,000
Common stock issued for gold mine obligation 500,000 - 500,000
Common stock issued for conversion of note 10,000 - 10,000
Proceeds from sale of stock - - 34,000
----------------- ------------- -----------------
Net cash provided by financing activities 2,030,426 134 2,078,269
----------------- ------------- -----------------
Net change in cash 22,764 897 22,764
Cash at beginning of period - 34 -
----------------- ------------- -----------------
Cash at end of period $ 22,764 $ 931 $ 22,764
================= ============= =================
Supplemental cash flow Information:
Cash paid for interest $ - $ - $ -
================= ============= =================
Cash paid for income taxes $ - $ - $ -
================= ============= =================
See accompanying notes to financial statements
F-4
INNOCENT, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2009 and 2008
(Unaudited)
Note 1 Nature and Continuance of Operations
Organization
------------
The Company was incorporated in the State of Nevada, United States of America on
September 27, 2006 and its fiscal year end is August 31. The Company was engaged
in sales of new food products produced or developed by North American companies
to foreign markets and discontinued that business in August 2009. The Company
currently owns a minority interest in an operating Ecuador Gold Mine and rights
to a mineral property not currently operating.
Going Concern
-------------
These financial statements have been prepared on a going concern basis. The
Company has a working capital deficiency of $1,554,775, and has accumulated
deficit of $101,775 since inception. Its ability to continue as a going concern
is dependent upon the ability of the Company to generate profitable operations
in the future and/or to obtain the necessary financing to meet its obligations
and repay its liabilities arising from normal business operations when they come
due. The outcome of these matters cannot be predicted with any certainty at this
time. These factors raise substantial doubt that the company will be able to
continue as a going concern. Management plans to continue to provide for its
capital needs by the issuance of common stock and related party advances. These
financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary should the
Company be unable to continue as a going concern.
Unaudited Interim Financial Statements
--------------------------------------
The accompanying unaudited interim financial statements have been prepared in
accordance with United States generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q of
Regulation S-B. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations. However, except as disclosed
herein, there have been no material changes in the information disclosed in the
notes to the financial statements for the year ended August 31, 2009, included
in the Company's annual report on the From 10-K filed with the Securities and
Exchange Commission. The interim unaudited financial statements should be read
in conjunction with those financial statements included in the Form 10-K. In the
opinion of Management, all adjustments considered necessary for a fair
presentation, consisting solely of normal recurring adjustments, have been made.
Operating results for the three months ended November 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
August 31, 2010.
Note 2 Summary of Significant Accounting Policies
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful judgement.
Actual results may vary from these estimates.
Development Stage Company
-------------------------
The Company complies with Financial Accounting Standard Board Statement ("FAS")
No. 7 and The Securities and Exchange Commission Act Guide 7 for its
characterization of the Company as development stage.
F-5
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2009 and 2008
(Unaudited)
Note 2 Summary of Significant Accounting Policies - (cont'd)
Revenue Recognition
-------------------
Sales are recognized when revenue is realized or realizable and has been earned.
The Company's policy is to recognize revenue when risk of loss and title to the
product transfers to the customer. Net sales is comprised of gross revenues less
expected returns, trade discounts and customer allowances, which include costs
associated with off-invoice mark-downs and other price reductions, as well as
trade promotions and coupons. These incentive costs are recognized at the later
of the date on which the Company recognizes the related revenue or the date on
which the Company offers the incentive.
Impairment of Long-lived Assets
-------------------------------
Capital assets are reviewed for impairment in accordance with FAS No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets", which was
adopted effective January 1, 2002. Under FAS No. 144, these assets are tested
for recoverability whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable. An impairment charge is
recognized for the amount, if any, which the carrying value of the asset exceeds
the fair value.
Advertising and Promotion
-------------------------
The Company's expenses all advertising and promotion costs as incurred.
Advertising and promotion costs for the periods ended November 30, 2009 and 2008
were $0.
Research and Development
------------------------
Research and development expenditures are expensed as incurred. No such expenses
have been incurred during the three months ended November 30, 2009 or 2008.
Foreign Currency Translation
----------------------------
The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", since the functional currency of the Company is U.S. dollars, the
foreign currency financial statements of the Company's subsidiaries are
re-measured into U.S. dollars. Monetary assets and liabilities are re-measured
using the foreign exchange rate that prevailed at the balance sheet date.
Revenue and expenses are translated at weighted average rates of exchange during
the year and stockholders' equity accounts and furniture and equipment are
translated by using historical exchange rates. Any re-measurement gain or loss
incurred is reported in the income statement.
F-6
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2009 and 2008
(Unaudited)
Note 2 Summary of Significant Accounting Policies - (cont'd)
Net Loss per Share
------------------
Basic loss per share includes no dilution and is computed by dividing loss
available to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive losses per share reflects the potential
dilution of securities that could share in the losses of the Company. Because
the Company does not have any potentially dilutive securities, the accompanying
presentation is only of basic loss per share.
Stock-based Compensation
------------------------
The Company has not adopted a stock option plan and has not granted any stock
options. During the three months ended November 30, 2009, the Company issued
3,000,000 to its president valued at $.001 per share for total consideration of
$3,000 of management services. As of November 30, 2009 these services have been
performed in full and as such the entire amount is recognized as an expense.
Income Taxes
------------
The Company uses the asset and liability method of accounting for income taxes
in accordance with FAS No. 109 "Accounting for Income Taxes". Under this method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statements carrying amounts of existing assets and liabilities and loss
carryforwards and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of the Company's financial instruments consisting of cash,
accounts payable and accrued liabilities, agreement payable and due to related
party approximate their carrying value due to the short-term maturity of such
instruments. Unless otherwise noted, it is management's opinion that the Company
is not exposed to significant interest, currency or credit risks arising from
these financial instruments.
Recent Accounting Pronouncements
--------------------------------
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No.60".SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No.163 is effective for fiscal years beginning on or after December
15,2008, and interim periods within those years. SFAS No.163 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
F-7
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2009 and 2008
(Unaudited)
Note 2 Summary of Significant Accounting Policies - (cont'd)
Recent Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162
sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB's amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities--an
amendment of FASB Statement No. 133. This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of SFAS No. 161, but does not expect it to have a
material impact on its consolidated financial position, results of operations or
cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for "plain vanilla" share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements.
F-8
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2009 and 2008
(Unaudited)
Note 2 Summary of Significant Accounting Policies - (cont'd)
Recent Accounting Pronouncements
--------------------------------
Before this statement was issued, limited guidance existed for reporting
non-controlling interests. As a result, considerable diversity in practice
existed. So-called minority interests were reported in the consolidated
statement of financial position as liabilities or in the mezzanine section
between liabilities and equity. This statement improves comparability by
eliminating that diversity. This statement is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier
adoption is prohibited. The effective date of this statement is the same as that
of the related Statement 141 (revised 2007). The Company will adopt this
Statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company's consolidated financial position, results of operations
or cash flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations.' This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141. This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, Non-controlling Interests in Consolidated Financial
Statements. The Company will adopt this statement beginning March 1, 2009. It is
not believed that this will have an impact on the Company's consolidated
financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities--Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial
instruments and certain other items at fair value. This option is available to
all entities. Most of the provisions in FAS 159 are elective; however, an
amendment to FAS 115 Accounting for Certain Investments in Debt and Equity
Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not report
net income. SFAS No. 159 is effective as of the beginning of an entities first
fiscal year that begins after November 15, 2007. Early adoption is permitted as
of the beginning of the previous fiscal year provided that the entity makes that
choice in the first 120 days of that fiscal year and also elects to apply the
provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS
No. 159 beginning March 1, 2008 and is currently evaluating the potential impact
the adoption of this pronouncement will have on its consolidated financial
statements.
F-9
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2009 and 2008
(Unaudited)
Note 2 Summary of Significant Accounting Policies - (cont'd)
Recent Accounting Pronouncements
--------------------------------
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this statement does not require any
new fair value measurements. However, for some entities, the application of this
statement will change current practice. This statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including financial statements for an interim
period within that fiscal year. The Company will adopt this statement March 1,
2008, and it is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
Note 3 Stockholders' Equity The total number of common shares authorized that
may be issued by the Company is 75,000,000 shares with a par value of one tenth
of one cent ($0.001) per share and no other class of shares is authorized.
During the period from September 27, 2006 (inception) to November 30, 2008, the
Company issued 4,000,000 shares of common stock at $0.001 per share to its
directors for total proceeds of $4,000 and 3,000,000 shares of common stock at
$0.010 per share for total proceeds of $30,000.
During the three months ended November 30, 2009, the Company also issued
3,000,000 shares of its common stock to its president for consideration of
services provided. These shares were valued at $.001 per share for total
consideration of $3,000. Further during the three months ended November 30,
2009, the Company issued 10,000,000 shares valued at $.001 for the conversion of
a $10,000 note payable. Also during the three months ended November 30, 2009,
the Company issued 10,000,000 shares of its common stock for the purchase of
minority interest in a gold mine. These shares were valued at $.50 per share
resulting in total consideration of $500,000.
To November 30, 2009, the Company has not granted any stock options.
Note 4 Related Party Transactions
The President of the Company provides management services to the Company. During
the three months ended November 30, 2009 management services of $3,000 (November
30, 2008 - 0) were charged to operations.
Note 5 Investment in Gold Mine
The Company has entered into an agreement to purchase a gold mine located in
Ecuador in exchange for common stock and cash. As of November 30, 2009, the
Company had issued 10,000,000 shares of its common stock valued at $.50 per
share for a total payment of $500,000, leaving $1,500,000 remaining due to
complete the purchase of the mine. The Company anticipates to use its share of
the profits generated to fulfill this obligation.
F-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Forward Looking Statements
This quarterly report contains forward-looking statements. Forward-looking
statements are projections of events, revenues, income, future economic
performance or management's plans and objectives for our future operations. In
some cases, you can identify forward-looking statements by terminology such as
"may", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors" and the risks set out below, any of which may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks include, by way of example and not in
limitation:
- the uncertainty of profitability based upon our history of losses;
- risks related to failure to obtain adequate financing on a timely basis and on
acceptable terms to continue as going concern;
- risks related to our international operations and currency exchange
fluctuations;
- risks related to product liability claims;
- other risks and uncertainties related to our business plan and business
strategy.
This list is not an exhaustive list of the factors that may affect any of our
forward-looking statements. These and other factors should be considered
carefully and readers should not place undue reliance on our forward-looking
statements.
Forward looking statements are made based on management's beliefs, estimates and
opinions on the date the statements are made and we undertake no obligation to
update forward-looking statements if these beliefs, estimates and opinions or
other circumstances should change. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Except as
required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward-looking statements to conform
these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common stock" refer to
the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", the "Company" and
"Innocent" mean Innocent, Inc., unless otherwise indicated.
Our Current Business
--------------------
Innocent, Inc. ("Company") was organized September 27, 2006 under the laws of
the State of Nevada for the purpose of selling new food products produced or
developed by North American companies to foreign markets. On August 31, 2009,
the Company discontinued its involvement in the sales of tea due to a strategic
change in business focus by the acquisition of mineral rights as disclosed in
the Company's 8-K filed with the SEC on September 2, 2009. The Company currently
has limited operations or realized revenues from its planned principle business
purpose and, in accordance with Statement of Financial Accounting Standard
(SFAS) No. 7, "Accounting and Reporting by Development Stage Enterprises," is
considered a Development Stage Enterprise.
On September 1, 2009 the company acquired mining operations in an active working
gold mine. The Board of Directors approved the Purchase Agreement from Global
Finishing, Inc. (Frankfurt:G8BA) a Nevada Corporation, to purchase its interest
in the Maria Olivia Concessions and Miranda PLSA, located in Ecuador, within the
prospective gold and silver bearing vein systems. Global Finishing Inc. acquired
the concessions from Companis Minera Monte-Verde S.A. Comimontsa in a 100% share
exchange for 6,000,000 Global Finishing Inc., Regulation S common shares which
represented 22.8% of its shares. Global Finishing Inc. also acquired interest in
Miranda PLSA in April 2009 which will result in 100% ownership following the
payment of $2,000,000. The initial payment of $500,000 was paid resulting in a
20% interest in the profit from the site. Global Finishing, Inc. spent $385,000
for the mill upgrades which resulted in an increase from 60t per day to 130t per
day. This increase in output is expected to cover the balance of the payments to
be made for 100% of the profits. Global Finishing Inc. at the time was using
contract labor for the mineral extraction; this practice will continue through
the end of the year and starting next year the current miners will become
employees of the company. The company will provide additional information on the
mining business in the first quarter report after meeting with the holder of the
rights that were transferred to Global Finishing and Ecuador mining officials
concerning the company obligations and new mining laws and procedures.
Company management will meet with officials in Ecuador the second week of
January 2010 to finalize the methods of operations and insure we are in
compliance with new laws and procedures that go into effect on January 1, 2010.
At this time the Ecuador year end summary of operations and financial
information will be available. We expect that from the management estimates
submitted by Global Finishing Inc concerning the profit percent earned (20%)
during the period Innocent Inc., was the transferee of the Global agreement,
said profits earned should be sufficient to cover the second payment of 500,000
due under the assumed terms and conditions of the Global Finishing Inc.
agreement.
As of the issue date of this report the company is still waiting for the audit
report for the mining operations in Miranda PLSA to be released. We made a trip
to Ecuador prior to the issuance of this report but were unable to obtain the
data necessary to include in this report to reflect the pay down (credit of
profit earned applied against the outstanding note). We have not received
official documentation of the credit earned or shortfall toward the note payable
if any. We have decided to await the filing of the audited report and at that
time will make an official claim of our position in the mining operation based
upon the terms of the agreement. We have retained thru Global Finishing (since
they have the first hand contact with the parties) Ecuadorian Professionals to
speed the process. We are in talks with the mine operator and expect to bring
this issue to a conclusion and reflect the results in the second quarter filing.
We have taken a worst case position in the financial report for the quarter by
reporting the entire note payable of $1,500,000 due and have not applied any
estimated reduction in said note against the profit earned from the 20%
entitlement. Additionally, Global Finishing paid the first 500,000, which the
company issued stock, we have reflected that cost in the financials at year end
but have recorded no asset interest or value in the mining operation at this
time.
RESULTS OF OPERATIONS
The following is a discussion and analysis of our results of operation for the
three-month period ended November 30, 2009, and the factors that could affect
our future financial condition. This discussion and analysis should be read in
conjunction with our unaudited financial statements and the notes thereto
included elsewhere in this quarterly report. Our financial statements are
prepared in accordance with United States generally accepted accounting
principles. All references to dollar amounts in this section are in United
States dollars unless expressly stated otherwise.
Financial Data Summary
Three months ended November 30,
2009 2008
---------------- -----------------
Revenue $ - $ -
Operating expenses (10,962) (7,833)
Income from discontinued operations - 1,224
---------------- -----------------
Net loss $ (10,962) $ (6,609)
================ =================
Revenue
-------
Our gross revenue for the three-month period ended November 30, 2009, was $0,
compared to $0 for the same period in fiscal 2008. Prior revenues and cost of
sales have been included in income from discontinued operations.
Operating Costs and Expenses
----------------------------
The major components of our expenses for the three-month period ended November
30, 2009, and 2008, are outlined in the table below:
Three months ended November 30
2009 2008
--------------- ---------------
Professional fees $ 6,636 $ 5,700
General and administrative - 1,736
Travel and promotion 3,880 263
Interest 446 134
--------------- ---------------
Operating expenses $ 10,962 $ 7,833
=============== ===============
The increase in operating expenses was mainly due to the increase of $3,617 in
travel and promotion expenditures resulting from travel expenses incurred to
meet with the parties involved in the acquisition of the gold mine, a $936
increase in professional fees and a $312 increase in interest expense. These
increases were offset by a decrease in general and administrative expenses of
$1,736. All these increases are associated to the increase in our corporate
activities and increase in expenses related to implementation of our business
plan.
Liquidity and Capital Resources
Three months ended November 30
2009 2008
-------------------------- -------------------
Current assets $ 22,764 $ 1,565
Current liabilities (1,577,539) (37,434)
-------------------------- -------------------
Working capital deficiency $ (1,554,775) $ (35,869)
========================== ===================
Cash Flows
Three months ended November 30
2009 2008
--------------------- --------------
Cash provided by (used in) operating
activities $ (7,662) $ 763
Cash flows used in investing activities (2,000,000) -
Cash provided by financing activities 2,030,426 134
--------------------- --------------
Net increase in cash $ 22,764 $ 897
===================== ==============
We had cash of $22,764, accounts payable and accrued liabilities of $43,270, a
loan payable to related party of $34,269 and an amount due on the gold mine of
$1,500,000 for a working capital deficiency of $1,554,775 as of November 30,
2009.
Cash Used In Operating Activities
---------------------------------
Our cash balance of $22,764 as of November 30, 2009, has increased by
$22,764during the three months ended November 30, 2009 compared to the cash
balance of $0 as of August 31, 2009, primarily due to the increase in the
shareholder loan.
Cash From Investing Activities
------------------------------
Two million ($2,000,000.00) cash was used by investing activities during the
three-month period ended November 30, 2009 as a result of an investment in a
gold mine. Due to the "start up" nature of our business, we expect to incur
losses as it expands. To date, our cash flow requirements have been primarily
met by equity financings. Management expects to keep operating costs to a
minimum until cash is available through financing or operating activities.
Management plans to continue to seek other sources of financing on favorable
terms; however, there are no assurances that any such financing can be obtained
on favorable terms, if at all. If we are unable to generate sufficient profits
or unable to obtain additional funds for our working capital needs, we may need
to cease or curtail operations. Furthermore, there is no assurance the net
proceeds from any successful financing arrangement will be sufficient to cover
cash requirements during the initial stages of the Company's operations. For
these reasons, our independent registered auditors believe that there is
substantial doubt that we will be able to continue as a going concern.
Going Concern
-------------
The audited financial statements for the year ended August 31, 2009, included
in our annual report on the Form 10-K filed with Securities and Exchange
Commission, have been prepared on a going concern basis, which implies that our
company will continue to realize its assets and discharge its liabilities and
commitments in the normal course of business. Our company has generated $0 in
revenues since inception and has never paid any dividends and is unlikely to pay
dividends or generate substantial earnings in the immediate or foreseeable
future. The continuation of our company as a going concern is dependent upon the
continued financial support from our shareholders, the ability of our company to
obtain necessary equity financing to achieve our operating objectives, and the
attainment of profitable operations. As at November 30, 2009, our company has
accumulated losses of $101,775 since inception. As we do not have sufficient
funds for our planned operations, we will be required to raise additional funds
for operations.
Due to the uncertainty of our ability to meet our current operating expenses and
the capital expenses noted above, in their report on the annual financial
statements for the year ended August 31,2009,our independent registered auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure by our
independent registered auditors.
The continuation of our business is dependent upon us raising additional
financial support. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
Future Financings
-----------------
We anticipate that additional funding will be required in the form of equity
financing from the sale of our common stock. However, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock to fund our marketing plan and operations. At
this time, we cannot provide investors with any assurance that we will be able
to raise sufficient funding from the sale of our common stock or through a loan
from our directors to meet our obligations over the next twelve months. We do
not have any arrangements in place for any future equity financing.
Off-Balance Sheet Arrangements
------------------------------
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
Risks and Uncertainties
-----------------------
WE FACE RISKS ASSOCIATED WITH OPERATE IN A FOREIGN COUNTRY
We are subject to the risks generally associated with doing business abroad.
These risks include foreign laws and regulations, foreign consumer preferences,
political unrest, disruptions or delays in shipments and changes in economic
conditions in countries to which we sell products.
WE MAY BE ADVERSELY AFFECTED BY VALUE OF OUR PRODUCT GIVEN IT IS SET BY WORLD
DEMAND AND BEYOND OUR CONTROL
We face risks of losses in inventory value given the nature of the valuation of
precious metals. The value of such metals is determined by the demand for them
on a global scale and is beyond our control. While we do not anticipate there to
be a significant decrease in the value of precious metals, we cannot guarantee
any such change in value.
THERE IS SUBSTANTIAL UNCERTAINTY AS TO WHETHER WE WILL CONTINUE OPERATIONS. If
we discontinue operations, you could lose your investment. Our auditors have
discussed their uncertainty regarding our business operations in their audit
report dated December 22,, 2009. This means that there is substantial doubt that
we can continue as an ongoing business for the next 12 months. The financial
statements do not include any adjustments that might result from the uncertainty
about our ability to continue in business. As such, we may have to cease
operations and you could lose your entire investment.
WE LACK AN OPERATING HISTORY
There is no assurance that our future operations will result in continued
profitable revenues. If we cannot generate sufficient revenues to operate
profitably, our business will fail. We have very little operating history upon
which an evaluation of our future success. We cannot guarantee that we will be
successful in generating revenues in the future. Failure to generate revenues
will cause us to go out of business.
BECAUSE OUR MANAGEMENT DOES NOT HAVE PRIOR EXPERIENCE IN MINING, OUR BUSINESS
HAS A HIGHER RISK OF FAILURE.
Our current directors do not have experience in the mining industry. As a
result, we may not be able to recognize and take advantage of opportunities
without the aid of qualified marketing and business development consultants. Our
directors' decisions and choices may not be well thought out and our operations,
earnings and ultimate financial success may suffer irreparable harm as a result.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND THE FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY
LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, the Financial Industry Regulatory Authority has adopted
rules that require that in recommending an investment to a customer, a broker-
dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the National Association of Securities Dealers believes that
there is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The National Association of Securities
Dealers' requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 4T. Controls and Procedures.
As required by Rule 13a-15 under the Exchange Act, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures at November 30, 2009, which is the end of the period covered by this
report. This evaluation was carried out by our principal executive officer and
our principal financial officer. Based on this evaluation, our principal
executive officer and our principal financial officer have concluded that the
design and operation of our disclosure controls and procedures are effective as
at the end of the period covered by this report.
There were no changes in our internal control over financial reporting during
the fiscal period ended November 30, 2009 that have materially affected or are
reasonably likely to materially affect, our internal control over financial
reporting. Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed by our
company in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by our company in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS.
Not Applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
Exhibit
Number Title of Document
------- -----------------
31.1 Sec.302 Certification of CEO/CFO
32.1 Sec.906 Certification of CEO/CFO
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.
Innocent, Inc.
/s/ Wayne A Doss
-----------------------------
Wayne A. Doss
President, Chief Executive
Officer, and Director
Dated: February 12, 2010
