Attached files
file | filename |
---|---|
EX-32.1 - NanoTech Entertainment, Inc. | v186453_ex32-1.htm |
EX-31.1 - NanoTech Entertainment, Inc. | v186453_ex31-1.htm |
EX-31.2 - NanoTech Entertainment, Inc. | v186453_ex31-2.htm |
EX-32.2 - NanoTech Entertainment, Inc. | v186453_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended September 30, 2009
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For the
transition period from _________________ to _________________
Commission
file number 333-149184
NanoTech
Entertainment, Inc.
|
(Exact
name of registrant as specified in its
charter)
|
Nevada
|
20-1379559
|
(State
or jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
3887
Pacific Street
|
Las Vegas, Nevada 89121
|
(Address
of principal executive offices)
|
702 518 7410
|
(Issuer's
telephone number)
|
(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 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. x Yes
¨
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No ¨
Indicate
by a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨
|
Accelerated filer ¨
|
Non-accelerated
filer ¨
|
Smaller reporting company
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. ¨ Yes x No
As of the
date of this filing, the registrant had 15,910,000 shares of common stock, $.001
par value, issued and outstanding.
TABLE OF
CONTENTS
PART
I — FINANCIAL INFORMATION
|
3
|
ITEM
1. FINANCIAL STATEMENTS
|
3
|
ITEM
2. MANAGEMENT’S DISCUSSON AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|
18
|
ITEM
3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
21
|
ITEM
4T. CONTROLS AND PROCEDURES
|
21
|
PART
II — OTHER INFORMATION
|
22
|
ITEM
1. LEGAL PROCEEDINGS
|
22
|
ITEM
1A. RISK FACTORS
|
22
|
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
22
|
ITEMS
3. DEFAULTS UPON SENIOR SECURITIES
|
23
|
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
23
|
ITEM
5. OTHER INFORMATION
|
23
|
ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K
|
23
|
SIGNATURES
|
24
|
2
PART
I — FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission ("SEC"), and should be
read in conjunction with the audited financial statements and notes thereto
contained in the Company's June 30, 2009 Form 10-K. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the periods presented have been reflected herein. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
3
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Balance
Sheets
September 30,
|
June 30,
|
|||||||
2009
|
2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 29,049 | $ | 35,536 | ||||
Inventory
(Note B)
|
11,050 | 8,800 | ||||||
Prepaid
expenses
|
- | 2,500 | ||||||
Prepaid
royalties (Note I)
|
102,500 | 55,000 | ||||||
Total
current assets
|
142,599 | 101,836 | ||||||
Property
and equipment (Note B)
|
3,945 | 3,071 | ||||||
Less:
accumulated depreciation
|
(1,853 | ) | (1,524 | ) | ||||
Net
property and equipment
|
2,092 | 1,547 | ||||||
Total
assets
|
$ | 144,691 | $ | 103,383 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
LIABILITIES
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 89,573 | $ | 81,553 | ||||
Cash
drawn in excess of bank balance
|
12,476 | 5,174 | ||||||
Common
stock payable
|
6,000 | - | ||||||
Accrued
liabilities – related parties (Note C)
|
1,145,762 | 981,906 | ||||||
Royalties
payable (Note I)
|
78,646 | 31,771 | ||||||
Accrued
interest, convertible debentures (Note F)
|
911 | 458 | ||||||
Accrued
interest, notes payable (Note D)
|
23,919 | 17,586 | ||||||
Accrued
interest, notes payable – related party (Note C)
|
12,311 | 9,223 | ||||||
Convertible
debentures, net (Note F)
|
17,841 | 15,778 | ||||||
Notes
payable – current (Note D)
|
30,000 | 30,000 | ||||||
Notes
payable – current, related party (Note C)
|
80,500 | 80,500 | ||||||
Total
current liabilities
|
1,497,939 | 1,253,949 | ||||||
Long-Term
Liabilities
|
||||||||
Notes
payable – noncurrent (Note D)
|
250,000 | 250,000 | ||||||
Total
liabilities
|
1,747,939 | 1,503,949 | ||||||
STOCKHOLDERS’
DEFICIT (Note E)
|
||||||||
Common
stock, $.001 par value, 75,000,000 shares authorized, 15,346,000 and
14,437,000 shares issued and outstanding as of September 30, 2009
and June 30, 2009, respectively
|
15,346 | 14,437 | ||||||
Additional
paid-in capital
|
450,493 | 360,502 | ||||||
Services
prepaid with common stock
|
(10,417 | ) | - | |||||
Deficit
accumulated during the development stage
|
(2,058,670 | ) | (1,775,505 | ) | ||||
Total
stockholders’ deficit
|
(1,603,248 | ) | (1,400,566 | ) | ||||
Total
liabilities and stockholders’ deficit
|
$ | 144,691 | $ | 103,383 |
The
accompanying notes are an integral part of these financial
statements
4
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Statements
of Operations
(unaudited)
November 13,
|
||||||||||||
Three Months Ended
|
2007 (Inception) to
|
|||||||||||
September 30,
|
September 30,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
Revenues:
|
||||||||||||
Sales,
net
|
$ | 6,791 | $ | 5,530 | $ | 62,642 | ||||||
Less:
costs of goods sold
|
(973 | ) | (60 | ) | (11,303 | ) | ||||||
Gross
profit
|
5,818 | 5,470 | 51,339 | |||||||||
Operating
Expenses:
|
||||||||||||
Selling,
general and administrative
|
275,631 | 222,385 | 1,869,651 | |||||||||
Other
Income (Expenses)
|
||||||||||||
Interest
expense
|
(13,352 | ) | (10,016 | ) | (225,746 | ) | ||||||
Net
loss before income taxes
|
(283,165 | ) | (226,931 | ) | (2,044,058 | ) | ||||||
Provision
for income taxes
|
- | - | - | |||||||||
Net
loss before discontinued operations
|
(283,165 | ) | (226,931 | ) | (2,044,058 | ) | ||||||
Discontinued
operations:
|
||||||||||||
Loss
from discontinued operations, net
|
- | - | (14,612 | ) | ||||||||
Net
loss available to common stockholders
|
$ | (283,165 | ) | $ | (226,931 | ) | $ | (2,058,670 | ) | |||
Continuing
operations
|
||||||||||||
Basic
|
$ | (.02 | ) | $ | (.04 | ) | ||||||
Diluted
|
$ | (.02 | ) | $ | (.04 | ) | ||||||
Discontinued
operations
|
||||||||||||
Basic
|
$ | (.00 | ) | $ | (.00 | ) | ||||||
Diluted
|
$ | (.00 | ) | $ | (.00 | ) | ||||||
Total
net loss per share
|
||||||||||||
Basic
|
$ | (.02 | ) | $ | (.04 | ) | ||||||
Diluted
|
$ | (.02 | ) | $ | (.04 | ) | ||||||
Weighted
average shares outstanding
|
||||||||||||
Basic
|
14,839,185 | 6,480,000 | ||||||||||
Diluted
|
15,141,185 | 6,480,000 |
The
accompanying notes are an integral part of these financial
statements.
5
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Statements
of Cash Flows
(unaudited)
November 13,
|
||||||||||||
Three Months Ended
|
2007 (Inception) to
|
|||||||||||
September 30,
|
September 30,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
loss
|
$ | (283,165 | ) | $ | (226,931 | ) | $ | (2,058,670 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Depreciation
expense
|
329 | 256 | 2,556 | |||||||||
Common
stock issued for finder fees
|
- | - | 162,000 | |||||||||
Common
stock issued for services
|
8,400 | - | 28,400 | |||||||||
Amortization
of debt discount
|
2,063 | - | 33,441 | |||||||||
Amortization
of services prepaid with common stock
|
2,083 | - | 2,083 | |||||||||
Interest
on debt converted to common stock
|
- | - | 124,500 | |||||||||
Loss
on disposal of fixed assets
|
- | - | 10,373 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Decrease
in accounts receivable
|
- | - | 572 | |||||||||
Increase
in inventory
|
(2,250 | ) | (3,445 | ) | (11,050 | ) | ||||||
Decrease
in prepaid expenses
|
2,500 | - | ||||||||||
Decrease
in prepaid expenses – related party
|
- | 44,394 | - | |||||||||
Increase
in prepaid royalties
|
(47,500 | ) | (46,250 | ) | (102,500 | ) | ||||||
Increase
in accounts payable
|
8,020 | - | 51,294 | |||||||||
Increase
in accrued liabilities – officers
|
163,856 | 125,000 | 1,072,871 | |||||||||
Increase
in accrued interest,
|
||||||||||||
convertible
debentures
|
453 | - | 760 | |||||||||
Increase
in accrued interest, notes payable
|
6,333 | - | 23,919 | |||||||||
Increase
in accrued interest, notes payable – related party
|
3,088 | - | 10,454 | |||||||||
Increase
in royalties payable
|
46,875 | 51,224 | 78,646 | |||||||||
Net
cash used in operating activities
|
(88,915 | ) | (55,752 | ) | (570,351 | ) | ||||||
Cash
flows from investing activities:
|
||||||||||||
Net
cash received in reverse recapitalization
|
- | - | 31,769 | |||||||||
Purchase
of property and equipment
|
(874 | ) | - | (3,945 | ) | |||||||
Cash
flows used for investing activities
|
(874 | ) | - | 27,824 | ||||||||
Cash
flows from financing activities
|
||||||||||||
Increase
in cash drawn in excess of bank balance
|
7,302 | - | 12,476 | |||||||||
Proceeds
from notes payable – related party
|
- | 25,000 | 77,500 | |||||||||
Repayment
of notes payable – related party
|
- | - | (2,700 | ) | ||||||||
Proceeds
from notes payable
|
- | 25,000 | 280,000 | |||||||||
Proceeds
from issuance of common stock
|
76,000 | - | 183,000 | |||||||||
Proceeds
from issuance of convertible debentures
|
- | - | 21,300 | |||||||||
Net
cash provided by financing activities
|
83,302 | 50,000 | 571,576 | |||||||||
Increase
(decrease) in cash
|
(6,487 | ) | (5,752 | ) | 29,049 | |||||||
Cash,
beginning of period
|
35,536 | 41,801 | - | |||||||||
Cash,
end of period
|
$ | 29,049 | $ | 36,049 | $ | 29,049 |
(continued)
6
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Statements
of Cash Flows (cont’d)
(unaudited)
November 13,
|
||||||||||||
Three Months Ended
|
2007 (Inception) to
|
|||||||||||
September 30,
|
September 30,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
Non-cash
investing and financing activities
|
||||||||||||
Issuance
of common stock upon conversion of debentures
|
$ | - | $ | - | $ | 40,000 | ||||||
Issuance
of common stock upon conversion of loan
|
$ | - | $ | - | $ | 500 | ||||||
Issuance
of common stock in settlement of vendor debt
|
$ | - | $ | - | $ | 1,000 | ||||||
Conversion
of notes payable to convertible debentures
|
$ | - | $ | - | $ | 21,400 | ||||||
Supplemental
cash flow information:
|
||||||||||||
Interest
paid in cash
|
$ | 1,416 | $ | 8,503 | $ | 31,473 | ||||||
Income
taxes paid in cash
|
$ | - | $ | - | $ | - |
The
accompanying notes are an integral part of these financial
statements
7
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
A.
|
ORGANIZATION
|
NanoTech
Entertainment, Inc. (“NEI”) was incorporated under the laws of the state of
Nevada on November 13, 2007. On April 30, 2009, NEI entered into a
Sale and Acquisition Agreement (the “Agreement”) with Aldar Group, Inc. (“AGI”),
a Nevada corporation, wherein AGI acquired 100% of NEI’s issued and outstanding
common stock through the issuance of 6,480,000 common shares. As a
result of the Agreement, AGI changed its name to NanoTech Entertainment, Inc.
(“NTI”) (“the Company”) to better reflect the direction of the newly formed
entity. For accounting purposes, the share exchange transaction was
treated as a capital transaction where AGI, as the shell corporation and legal
acquirer, issued stock for the net monetary assets of NEI, the accounting
acquirer, accompanied by a recapitalization. The accounting is similar in form
to a reverse acquisition, except that goodwill or other intangibles are not
recorded. All references to NTI’s common stock have been restated to
reflect the equivalent numbers of AGI’s common shares (Note E).
The
accompanying financial statements include those of NEI for the period of
inception on November 13, 2007 through September 30, 2009. The
financial statements of AGI are consolidated from the date of the Agreement
through June 30, 2009, subsequent to which the NEI Nevada corporation was
dissolved and the AGI Nevada corporation amended its Articles of Incorporation
to effect its name change to NanoTech Entertainment, Inc. (“NTI”), thereby
discontinuing all AGI operations and assuming all of the former NEI assets,
liabilities, and operations. Prior to June 30, 2009, all significant
intercompany balances and transactions between NEI and AGI were eliminated in
consolidation. Subsequent to June 30, 2009, the financial statements
consist solely of NTI.
The
Company operates as a virtual manufacturer, developing technology and games, and
then licensing such products to third parties for manufacturing and ultimate
distribution.
DEVELOPMENT
STAGE COMPANY
The
Company is considered to be in the development stage as defined in Statement of
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic No. 915. The Company’s efforts have been devoted
primarily to raising capital, borrowing funds and attempting to implement its
planned, principal activities.
B.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
USE
OF ESTIMATES
The
preparation of the Company’s financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. The Company’s periodic filings with the Securities and
Exchange Commission include, where applicable, disclosures of estimates,
assumptions, uncertainties and markets that could affect the financial
statements and future operations of the Company.
8
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
B.
|
SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
|
CASH
AND CASH EQUIVALENTS
Cash and
cash equivalents include cash in banks, money market funds, and certificates of
term deposits with maturities of less than three months from inception, which
are readily convertible to known amounts of cash and which, in the opinion of
management, are subject to an insignificant risk of loss in
value. The Company’s cash balances totaled $29,049 and $35,536 as of
September 30, 2009 and June 30, 2009, respectively.
INVENTORY
The
Company’s inventory is stated at lower of cost or market using the FIFO costing
method. Inventory on hand totaled $11,050 and $8,800 at September 30,
2009 and June 30, 2009, respectively, and consisted entirely of finished goods
gaming equipment available and ready for sale.
PROPERTY
AND EQUIPMENT
The
Company’s property and equipment is comprised of office and computer equipment,
which are stated at cost. Depreciation is calculated over the
estimated useful lives ranging from 3 to 7 years using the straight – line
method. The Company is in the development stage and has only acquired
minimal operating assets. At September 30, 2009 and June 30, 2009,
the Company had property and equipment of $3,945 and $3,071, respectively, and
accumulated depreciation of $1,853 and $1,524,
respectively. Depreciation expense totaled $329 and $256 for the
three months ended September 30, 2009 and 2008, respectively.
REVENUE
RECOGNITION
Revenues
for gaming equipment sales are recognized when risks associated with ownership
have passed to unaffiliated customers, and when all criteria of ASB Topic No.
605 (SAB Topic 13) have been met. Typically, this occurs when
finished products are shipped.
NET
INCOME (LOSS) PER SHARE OF COMMON STOCK
ASC Topic
No. 260 requires presentation of basic and diluted EPS on the face of the
statement of operations for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. In the accompanying financial statements, basic loss per
share is computed by dividing net loss by the weighted average number of shares
of common stock outstanding during the period, while diluted loss per share
takes into consideration the convertible bonds (Note F) and their related
interest and debt discount. The potential conversion of the bonds
would have no effect on loss per share due to the Company’s continuing losses,
so basic and diluted loss per share are the same. The Company has no
other potentially dilutive securities, such as options or warrants, currently
issued and outstanding.
9
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
B.
|
SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
|
NET
INCOME (LOSS) PER SHARE OF COMMON STOCK (CONT’D)
Three
Months Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
BASIC
|
||||||||
Net
loss
|
$ | (283,165 | ) | $ | (226,931 | ) | ||
Weighted
average common shares outstanding
|
14,839,185 | 6,480,000 | ||||||
Net
loss per share (Basic)
|
$ | (0.02 | ) | $ | (0.04 | ) | ||
DILUTED
|
||||||||
Net
loss (Basic)
|
$ | (283,165 | ) | $ | (226,931 | ) | ||
Convertible
bond interest expense
|
2,516 | - | ||||||
Unamortized
convertible bond issuance costs
|
(12,159 | ) | - | |||||
Net
loss (Diluted)
|
$ | (292,808 | ) | $ | (226,931 | ) | ||
Weighted
average common shares outstanding (Basic)
|
14,839,185 | 6,480,000 | ||||||
Convertible
preferred shares
|
- | - | ||||||
Convertible
bonds and notes
|
302,000 | - | ||||||
Options
|
- | - | ||||||
Warrants
|
- | - | ||||||
Weighted
average common shares outstanding (Diluted)
|
15,141,185 | 6,480,000 | ||||||
Net
loss per share (Diluted)
|
$ | (0.02 | ) | $ | (0.04 | ) |
RECENTLY-ISSUED
ACCOUNTING PRONOUNCEMENTS
In June
2009 the FASB established the Accounting Standards Codification ("Codification"
or "ASC") as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the preparation of financial
statements in accordance with generally accepted accounting principles in the
United States ("GAAP"). Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") issued under authority of federal securities laws
are also sources of GAAP for SEC registrants. Existing GAAP was not intended to
be changed as a result of the Codification, and accordingly the change did not
impact our financial statements. The ASC does change the way the guidance is
organized and presented.
Statement
of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic 855),
"Subsequent Events," SFAS No. 166 (ASC Topic 810), "Accounting for Transfers of
Financial Assets-an Amendment of FASB Statement No. 140," SFAS No. 167 (ASC
Topic 810), "Amendments to FASB Interpretation No. 46(R)," and SFAS No. 168 (ASC
Topic 105), "The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles-a replacement of FASB Statement No.
162," were recently issued. SFAS No. 165, 166, 167, and 168 have no current
applicability to the Company or their effect on the financial statements would
not have been significant.
10
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
B.
|
SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
|
RECENTLY-ISSUED
ACCOUNTING PRONOUNCEMENTS (CONT’D)
Accounting
Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair
Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605),
Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985),
Certain Revenue Arrangements that include Software Elements, and various other
ASU's No. 2009-2 through ASU No. 2010-18 which contain technical corrections to
existing guidance or affect guidance to specialized industries or entities were
recently issued. These updates have no current applicability to the Company or
their effect on the financial statements would not have been
significant.
C.
|
RELATED
PARTY TRANSACTIONS
|
NOTES
PAYABLE
Several
of the Company’s current and former officers have provided funding in the form
of notes payable, totaling $80,500 at both September 30, 2009 and June 30,
2009. The notes carry interest rates ranging from 0% to 20%,
resulting in interest expense of $3,088 and $0 for the quarters ended September
30, 2009 and 2008, respectively, and accrued interest of $12,311 and $9,223 as
of September 30, 2009 and June 30, 2009, respectively. The notes are
due on demand and therefore classified as current liabilities. Interest has not
been imputed due to its nominal impact on the financial statements.
ACCRUED
LIABILITIES
The
Company has employment agreements with two of its officers whereby the officers
are entitled to the annual salaries payable as follows:
Salary for the Year Ended June 30,
|
||||||||||||||||||
2008
|
2009
|
2010
|
2011
|
Total
|
||||||||||||||
$ | 175,000 | $ | 400,000 | $ | 500,000 | $ | 275,000 | $ | 1,350,000 | |||||||||
75,000 | 162,500 | 192,500 | 105,000 | 535,000 | ||||||||||||||
$ | 250,000 | $ | 562,500 | $ | 692,500 | $ | 380,000 | $ | 1,885,000 |
Accrued
salaries totaled $985,625 and $812,500 at September 30, 2009 and June 30, 2009,
respectively. The Company also reimburses its officers for expenses
they incur in the Company’s behalf, including rent for the use of property for
business purposes. Salary expense totaled $173,125 and $125,000 for
the three months ended September 30, 2009 and 2008, and rent expense totaled
$49,500 for each of the periods then ended. Salaries, rent, and other
reimbursable expenses owed to the officers totaled $1,145,762 and $981,906 at
September 30, 2009 and June 30, 2009, respectively, and will be repaid as cash
flows allow.
11
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
D.
|
NOTES
PAYABLE
|
The
Company has originated the following notes payable with unaffiliated entities
and individuals:
Principal Balance
|
Accrued Interest
|
|||||||||||||||
9/30/2009
|
6/30/2009
|
9/30/2009
|
6/30/2009
|
|||||||||||||
Note
1, 10% interest, due April 30, 2011
|
$ | 250,000 | $ | 250,000 | $ | 22,918 | $ | 16,668 | ||||||||
Note
2, 20% interest, due on demand
|
25,000 | 25,000 | 835 | 835 | ||||||||||||
Note
3, 20% interest, due on demand
|
5,000 | 5000 | 166 | 83 | ||||||||||||
Totals
|
280,000 | 280,000 | $ | 23,919 | $ | 17,586 | ||||||||||
Less
current portion (Notes 2 & 3)
|
(30,000 | ) | (30,000 | ) | ||||||||||||
Noncurrent
portion (Note 1)
|
$ | 250,000 | $ | 250,000 |
The notes
require monthly interest payments only, with principal and any accrued interest
payable upon maturity or demand, as indicated above.
E.
|
STOCKHOLDERS’
DEFICIT
|
The
Company has authorized 75,000,000 shares of common stock with a par value of
$.001, and no preferred stock. Upon inception on November 13, 2007,
the Company had 6,480,000 shares issued and outstanding, which represents the
number of shares issued by AGI in the recapitalization retroactively reflected
to have occurred at inception. The recapitalization also included an
effective share issuance of 4,533,000, which represents the number of AGI shares
issued and outstanding at June 30, 2008 (the most recent fiscal year prior to
the recapitalization). Additional share issuances occurring through
September 30, 2009 to arrive at the total shares issued and outstanding of
15,346,000 are as follows:
During
the period of January through June 2009, the following shares were issued for
cash in accordance with private offerings (of which 1,670,000 shares were issued
and $87,000 cash received subsequent to the reverse
recapitalization):
Number
|
Stock
|
Cash
|
||||||||||
Date
|
of Shares
|
Price
|
Received
|
|||||||||
1/16/2009
|
100,000 | $ | 0.10 | $ | 10,000 | |||||||
2/19/2009
|
96,000 | 0.05 | 4,800 | |||||||||
5/15/2009
|
100,000 | 0.05 | 5,000 | |||||||||
5/29/2009
|
20,000 | 0.10 | 2,000 | |||||||||
6/14/2009
|
1,500,000 | 0.05 | 75,000 | |||||||||
6/23/2009
|
50,000 | 0.10 | 5,000 | |||||||||
Totals
|
1,866,000 | $ | 101,800 |
During
the period of July through September 2009, the following shares were issued for
cash in accordance with private offerings to unrelated
individuals:
12
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
E.
|
STOCKHOLDERS’
DEFICIT (CONT’D)
|
Number
|
Stock
|
Cash
|
||||||||||
Date
|
of Shares
|
Price
|
Received
|
|||||||||
7/1/2009
|
200,000 | $ | 0.10 | $ | 20,000 | |||||||
9/11/2009
|
560,000 | 0.10 | 56,000 | |||||||||
Totals
|
760,000 | $ | 76,000 |
On
January 30, 2009, the Company issued 10,000 shares at $.10 per share to a vendor
to settle a $1,000 debt.
During
March through May 2009, several convertible debenture holders converted their
debentures resulting in the issuance of 400,000 shares of common stock at $.10
for total value of $40,000 (Note F).
On April
30, 2009 and in connection with the reverse recapitalization between NTI and
AGI, the Company issued 648,000 shares to an unaffiliated entity as a finders’
fee. The shares were valued at $.25 per share, resulting in total
expense of $162,000. As a term of the recapitalization, the Company also issued
500,000 shares at $.001 to an affiliated entity in settlement of $500 in
debt. This issuance resulted in recognition of $124,500 in additional
interest expense.
On August
1, 2009, the Company entered into an agreement with an unrelated entity that was
to render financial consulting services for a 12-month period. As
compensation, the Company issued 125,000 shares of common stock upon the
agreement’s execution. The shares were valued at $.10 per share for
total compensation of $12,500 to be amortized ratably over the term of the
agreement. During the quarter ended September 30, 2009, the Company
amortized $2,083 to consulting expense, resulting in a $10,417 prepaid balance
that has been reported in the stockholders’ equity section of the balance
sheet. The entity is also entitled to $25,000 in finders’ fees for
each $1,000,000 of funding raised in the Company’s behalf. No funds
have been raised as of the date of this report.
On June
19, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 26-week period. The
consultant was to receive cash compensation of $36,400 over the term of the
contract, and 104,000 shares of common stock upon the contract’s completion on
or about December 18, 2009. The shares were valued at $.10 per share,
for total stock compensation of $10,400 to be expensed ratably over the
contract’s term. The Company recorded 15 weeks, or $27,000, of
consulting expense during the three months ended September 30, 2009, of which
$21,000 was paid in cash and $6,000 of stock compensation was accrued and
reported as the current liability, common stock payable.
On August
5, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 6-week period. The consultant
was to receive cash compensation of $6,000 over the term of the contract, and
24,000 shares of common stock upon the contract’s completion. The
shares were valued at $.10 per share, for total stock compensation of $2,400 to
be expensed ratably over the contract’s term.
13
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
E.
|
STOCKHOLDERS’
DEFICIT (CONT’D)
|
The
Company recorded 6 weeks, or $8,400, of consulting expense during the three
months ended September 30, 2009, of which $6,000 was paid in
cash. The 24,000 shares of common stock were issued upon the
contract’s completion on September 16, 2009.
F.
|
CONVERTIBLE
DEBENTURES
|
During
the period of March through May 2009, the Company issued convertible debentures
bearing interest at 6% with a term of two years. The debenture
principal and accrued interest may be converted into shares of the Company’s
common stock in the first year at a conversion price of $0.10 or in the second
year at a price which is 80% of the three lowest closing bid prices during the
ten days prior to conversion.
During
the year ended June 30, 2009, the Company issued debentures totaling $70,200
(convertible into potentially 702,000 shares of common stock based on a $.10
conversion rate), which amount includes cash received of $48,800 (of which
$21,300 was received after the reverse recapitalization) and $21,400 in notes
payable converted to convertible debentures on March 12,
2009. The fair market value of the stock on the convertible
debenture issuance dates ranged from $.10 to $.25, resulting in a beneficial
conversion feature of $45,800, of which $31,378 was amortized during the year
ended June 30, 2009.
The
following debentures were converted during the year ended June 30,
2009:
Conversion
|
Number
|
Conversion
|
||||||||||
Date
|
of Shares
|
Price
|
Total
|
|||||||||
3/13/2009
|
107,000 | $ | 0.10 | $ | 10,700 | |||||||
3/27/2009
|
50,000 | 0.10 | 5,000 | |||||||||
3/31/2009
|
10,000 | 0.10 | 1,000 | |||||||||
4/3/2009
|
20,000 | 0.10 | 2,000 | |||||||||
5/4/2009
|
80,000 | 0.10 | 8,000 | |||||||||
5/7/2009
|
50,000 | 0.10 | 5,000 | |||||||||
5/29/2009
|
83,000 | 0.10 | 8,300 | |||||||||
Total
|
400,000 | $ | 40,000 |
At
September 30, 2009 and June 30, 2009, respectively, the Company’s unconverted
debentures totaled $17,841 ($30,200 principal netted with $12,359 unamortized
debt discount) and $15,778 ($30,200 principal netted with $14,422 unamortized
debt discount), while the potential number of shares into which the debentures
could be converted was 302,000 based on a $0.10 conversion
rate. Accrued interest on the bonds totaled $911 and $458 at
September 30, 2009 and June 30, 2009, respectively. During the three
months ended September 30, 2009 and 2008, $2,063 and $0 of the debt discount was
amortized to interest expense. No debentures were converted during
the quarter ending September 30, 2009.
14
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
G.
|
INCOME
TAXES
|
The
Company recognizes the tax effects of transactions in the year in which such
transactions enter into the determination of net income, regardless of when
reported for tax purposes. Deferred taxes are provided in the financial
statements under ASC Topic No. 740 to give effect to the resulting temporary
differences which may arise from differences in the bases of fixed assets,
depreciation methods, allowances, and start-up costs based on the income taxes
expected to be payable in future years.
Deferred
officer compensation in the amount of $985,625 has been expensed per the
financial statements but is not deducted for tax purposes in the current
year. This results in a deferred tax asset of $344,969 that would
reduce tax payments in the future as the compensation is subsequently recognized
for tax purposes. This deferred tax asset however is offset in its
entirety by a valuation allowance of the same amount due to doubts concerning
the Company’s ability to utilize the deferred tax asset in future
years.
Operating
loss carry forwards of $1,443,356 (including permanent differences of $370,311
attributed to AGI’s accumulated losses on the reverse recapitalization date)
generated since inception through September 30, 2009 will begin to expire in
2027. Accordingly, deferred tax assets of approximately $505,175 were
completely offset by a valuation allowance, which increased by approximately
$99,108 and $79,426 during the quarters ended September 30, 2009 and 2008,
respectively, (including the allowance associated with deferred compensation tax
benefits). This deferred tax asset was also offset due to a lack of
evidence that suggests that the Company would likely be able to utilize the
asset to offset tax payments in future years.
H.
|
GOING
CONCERN CONSIDERATIONS
|
The
Company’s financial statements have been prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. As of and during the period from
November 13, 2007 (inception) to September 30, 2009, the Company has incurred
net losses totaling $2,058,670, and has a working capital deficit of
$1,355,340. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. The Company's ability to meet its ongoing financial
requirements is dependent on management being able to obtain additional equity
and/or debt financing, the realization of which is not assured.
15
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
I.
|
ROYALTIES
|
The
Company has entered into several licensing agreements whereby the Company
licenses certain gaming software from various developers. The Company
is responsible for paying royalties to the developers based on product
sales. In the event that no product is sold, the Company is also
required to pay a minimum royalty in order to maintain exclusivity (i.e., the
developer cannot license the same software to the Company's
competitors). Certain developers also require prepayment of royalties
that are either offset by future sales, or expire at the end of a calendar year
- at which point they are expensed. The Company had prepaid $102,500
and $55,000 in royalties at September 30, 2009 and June 30, 2009,
respectively. No sales of the licensed products had occurred during
the period of inception on November 13, 2007 through September 30, 2009, so only
exclusivity minimums of $78,646 and $31,771 have been accrued at September 30
2009 and June 30, 2009, respectively.
J.
|
SUBSEQUENT
EVENTS
|
On
October 23, 2009, the Company issued 100,000 shares of common stock at $.05 per
share for $5,000 to an unrelated individual. On that same date, the
Company received $2,500 pursuant to a non-interest bearing promissory note with
an unrelated individual.
On
December 1, 2009 upon Kenneth Liebscher’s resignation from his positions with
the Company, Ted Campbell was appointed as Chief Compliance Officer and Chief
Financial Officer. On that same date, the Company executed an
employment agreement whereby Mr. Campbell will be compensated with a base salary
as follows:
Months 1
– 6: $1,750 in cash per month plus common stock
equal to $3,250 based on the average trading price over the previous 30
days.
Months 7
– 24: $2,500 in cash per month plus common stock equal to
$3,500 based on the average trading price over the previous 30
days.
Mr.
Campbell is also eligible for an incentive bonus at the end of each year in an
amount between 10% and 100% of the base salary. The incentive bonus
will be determined by the Board of Directors and will be based on the Company’s
operating results.
On
December 1, 2009, the Company executed an agreement with a company affiliated
with the Company’s CFO (“the Affiliate”) that is to perform services including
the compilation and coordination of corporate documentation, as well as filing
services to facilitate the Company’s public listing on the OTCBB. The
Affiliate was compensated with a non-refundable $7,500 cash retainer payment and
50,000 shares of common stock upon the agreement’s execution, and an additional
$7,500 cash payment is due upon the completion of a Form S-1 to be filed with
the SEC. The stock was valued at $.05 per share for total
compensation of $2,500.
16
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Unaudited Financial Statements
Three
Months Ended September 30, 2009 and 2008,
and
the Period of November 13, 2007 (Inception) to September 30, 2009
J.
|
SUBSEQUENT
EVENTS (CONT’D)
|
On March
16, 2010, the Company received a $10,000 loan from a stockholder pursuant to a
promissory note carrying a 10% interest rate. The loan and $167 in
accrued interest were payable on May 16, 2010, but had not yet been repaid as of
the date of this report.
On March
30, 2010, the Company issued to an independent investor 50,000 shares of common
stock at $.10 per share for total proceeds of $5,000.
On April
1, 2010, the Company issued $5,000 in convertible debentures bearing interest at
6% with a maturity date of March 30, 2010. The debenture principle
and accrued interest may be converted into shares of the Company’s common stock
in the first year at a conversion price of $0.10 or in the second year at a
price which is 80% of the three lowest closing bid prices during the ten days
prior to conversion.
The
Company has evaluated events from September 30, 2009, through the date whereupon
the financial statements were issued and has determined that there are no
additional items to disclose.
17
ITEM 2.
|
MANAGEMENT’S
DISCUSSON AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
This
section must be read in conjunction with the unaudited financial statements
included in this report.
A.
|
Management’s
Discussion
|
NanoTech
Entertainment, Inc. (“NEI”) was originally organized as a Nevada corporation on
November 13, 2007. On April 30, 2009, NEI entered into a Sale and
Acquisition Agreement (the “Agreement”) with Aldar Group, Inc. (“AGI”), a Nevada
corporation organized on July 15, 2004, wherein AGI acquired 100% of NEI’s
issued and outstanding common stock through the exchange of 6,480,000 common
shares. As a result of the Agreement, the Company changed its name to
NanoTech Entertainment, Inc. (“NTI”) (“the Company” or “We” or “NanoTech”) to
better reflect the direction of the newly formed entity.
For
accounting purposes, the share exchange transaction was treated as a capital
transaction where AGI, as the legal acquirer and shell corporation, issued stock
for the net monetary assets of NEI, as the accounting acquirer, accompanied by a
recapitalization. The accounting is similar in form to a reverse acquisition,
except that goodwill or other intangibles are not
recorded.
The
Company now operates as a virtual manufacturer, developing technology and games,
and then licensing such products to third parties for manufacturing and ultimate
distribution. The Company’s business model supports relatively low
overhead costs and efficiencies in operations in the new global manufacturing
economy.
Company
Overview
NanoTech
Entertainment, Inc. is a provider of gaming technology for the coin-op arcade,
casino gaming and consumer gaming markets. Headquartered in Las Vegas, Nevada,
we operate as a virtual manufacturer, developing technology and games, and then
licensing them to third parties for manufacturing and distribution. This
business model supports extremely low overhead and efficient operations in the
new global manufacturing economy.
With an
ever-expanding lineup of technology and products, NanoTech is redefining the
role of developers and manufacturers in the gaming market. NanoTech's team is
compromised of industry veterans of the gaming industry that have collectively
been responsible for dozens of award winning products and multi-million copy
selling video games and technology.
During
the period of July 15, 2004 (AGI’s inception) to September 30, 2009, the Company
generated revenues of $62,642 while incurring $11,303 in cost of sales,
$1,869,651 in general and administrative expenses, $225,746 in interest expense,
and $14,612 in losses from AGI’s discontinued operations. This resulted in a
cumulative net loss of $2,058,670 for the period then ended from
inception.
During
the three months ended September 30, 2009, the Company generated revenues of
$6,791 while incurring $973 in cost of sales, $275,631 in general and
administrative expenses, and $13,352 in interest expense. This resulted in a net
loss for three months ended September 30, 2009 of $283,165. During the three
months ended September 30, 2008, the Company generated revenues of $5,530 while
incurring $60 in cost of sales, $222,385 in general and administrative expenses,
and $10,016 in interest expense. This resulted in a net loss for the quarter
ended September 30, 2008 of $226,931. The net loss for both periods is
attributable primarily to the continuing costs of start-up operations and
product development.
18
Liquidity and Capital
Resources
As of
September 30, 2009, the Company had $(1,355,340) in working capital, which is
current assets minus current liabilities. This negative working
capital is attributable to monies owed for the acquisition of the Company’s
current products, monies owed to officers for accrued salaries, convertible
debentures issued by the Company, and the current portion of notes payable to
related and unrelated parties. The Company’s current assets as of September 30,
2009 consisted of $29,049 in cash, $11,050 in inventory, and $102,500 in prepaid
royalties.
NTI has
limited capital resources from which to operate. Without the
realization of either significant cash flow from ongoing revenue or additional
capital investment, the Company may not be able to continue without short-term
loans from its current officer and director. However, the Company’s
independent auditors have expressed substantial doubt about the Company's
ability to continue as a going concern.
B.
|
Plan
of Operation
|
We have
experience and products for all aspects of the various gaming industries.
By traversing the market from consumer to coin-op to casino, the Company may be
able to take advantage of all three growth and profitable industries and balance
out the seasonal patterns of each.
Even in
the unsteady economic climate, the gaming market continues to flourish and
expand. In 2008, the arcade industry saw $7.2 billion in revenue and the
consumer market saw $58 billion with a growth of 19%. The following are excerpts
from other sources:
“As
people cut back on travel and going out, they are turning more to home
entertainment, providing a boost to the video game industry.” Reuters, April 2,
2009
“The
video game business continues to enjoy robust growth, making it the fastest
growing of the many consumer goods categories.” Market Watch, Feb 18,
2009
The
NanoTech team has won numerous awards in recent years including innovative
product of the year in 2005 and 2006 in the arcade industry, and innovative
product of the year in 2007 in the casino market.
Products
Below is
a list of the Company’s upcoming & current product line with detailed
descriptions. For more information on the Company’s products and services you
can view our web site at www.NanoTechEnt.com.
MultiPin™
- There is currently only one Pinball manufacturer left in the world, Stern
Pinball. While they supply over 10,000 machines per year to the market,
there is a huge demand for new and innovative pinball. MultiPin™
represents the next generation in pinball. By replacing the mechanical
parts of a pinball machine with state of the art electronics, MultiPin™ solves
two major problems seen by operators of Pinball machines. First, it
eliminates any mechanical failures, which are common amongst pinball
machines. Secondly, it provides a multi-game platform that can be
constantly updated with new games without having to swap out the machine.
Our proprietary physics engine and motion sensors allow MultiPin™ to accurately
recreate the experience of a mechanical pinball machine, while providing players
with a variety of classic and modern pinball games to choose
from.
19
Xtreme
Rally Racing™ - An Xtreme Off-Road Racing Experience with no boundaries. Xtreme
Rally Racing is an innovative new driving machine that features three modes of
game play:
Xtreme
Off-Road - Race head-to-head against other players and the computer to
checkpoints while driving anywhere on the map with no preset
course.
Timed
Rally Stages - Classic Rally Racing on real world courses. Players will be able
to race in five different countries on real world rally courses.
Xtreme
Stadium Racing - Custom stadiums designed for Xtreme racing including a figure 8
multi-lap course with huge jumps.
NanoNET
Online System - Local and Worldwide head-to-head competition in real time
against machines located around the world. Remote Operator Control of your
machines including diagnostics, accounting reports, and automatic software
updates and enhancements downloaded over the net. Link up to 4 Cabinets for
local multiplayer action.
Pinball
Wizard ™ - Consumer Pinball enthusiasts have been growing with the advent of
Visual Pinball and now Future Pinball. The official Visual Pinball forum
boasts over 155,000 members, and the free version Future Pinball has been
downloaded over 1 million times in the past six months, and over 500,000 copies
in April 2009. We have created the only input device designed to give
these players a way to experience real pinball controls on their personal
computer. Based on the technology developed for the MultiPin™
product we have built a controller that lets people play pinball using
traditional controls and the ability to “shake” and “nudge” the
table.
Mot-Ion™
Adapter - The Mot-Ion adapter is a USB adapter that allows do-it-yourself
Pinball enthusiasts to build their own cabinet using real pinball controls
providing analog inputs for nudging and bumping. This kit includes everything
needed to connect a pinball cabinet to a PC (I/O Board, Digital Plunger, Wiring
Harness).
Opti-Gun™
Adapter - The Opti-Gun Adapter is a USB adapter that allows players to connect
Arcade Light Guns to any USB based system. This universal adapter provides a
complete solution to implement an arcade game including Gun Inputs, Force
Feedback Outputs, digital inputs, and built-in audio amplifiers. The adapter can
also be used with PC-based emulators such as M.A.M.E. to connect arcade light
guns on your home system.
Retr-IO™
Adapter - The Retr-IO Adapter provides a standard JAMMA interface for USB based
systems. This universal adapter provides a complete solution to implement an
arcade game using Joysticks, Trackballs, Spinners, buttons and features, digital
outputs, and built-in audio and video amplifiers.
The board
works with any PC-based system including M.A.M.E and other emulation products.
It provides an all-in-one solution to hooking up traditional arcade controls to
your PC, or any USB system. All digital inputs and outputs are interfaced via
standard keyboard commands, and appear as mapped keys to your games. The default
key mappings match those of many popular PC emulation products. Two Trackballs
and two Spinners are supported, and are mapped to the system as mice. The board
supports four player standard configurations or two player four-way joystick and
six button configurations.
20
Competition
The
Company will compete against established companies with significantly greater
financial, marketing, research and development, personnel, and other resources
than the Company. Such competition could have a material adverse effect on the
Company's profitability.
Government
Regulation
There are
no government regulations regulating the development and sale of gaming products
for coin operated machines.
ITEM 3
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable.
ITEM 4T.
|
CONTROLS
AND PROCEDURES
|
The
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended) was evaluated under the supervision and with
the participation of our management, including the Chief Executive Officer and
Chief Financial Officer, including the period covered by this quarterly report.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are not
effective in providing reasonable assurance that the information required to be
disclosed in this quarterly report is recorded, processed, summarized and
reported within the time period required for the filing of this quarterly
report.
There was
no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended)
identified in connection with the evaluation of our internal control performed
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all errors and all fraud. A control system no matter how
well conceived and operated can provide only reasonable, not absolute assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints and the
benefits of control systems must be considered relative to their cost. As a
result of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues of fraud, if
any, have been detected.
Based on
their most recent review, which was completed within ninety days of the filing
of this report, NTI’s Officers have concluded that the Company’s newly adopted
disclosure controls and procedures will be effective to ensure that information
required to be disclosed by NTI in the reports it files or submits under the
Securities Exchange Act of 1934, as amended, is accumulated and communicated to
NTI’s management, including its Officers, as appropriate to allow timely
decisions regarding required disclosure and are effective to ensure that such
information is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms. There were no significant changes in NTI’s internal controls
or in other factors that could significantly affect those controls subsequent to
the date of their evaluation.
21
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
|
On July
1, 2009 and September 11, 2009, the Company issued to an unrelated individual,
200,000 and 560,000 shares, respectively, at $.10 per share for total proceeds
of $76,000 used to fund operations.
On August
1, 2009, the Company entered into an agreement with an unrelated entity that was
to render financial consulting services for a 12-month period. As
compensation, the Company issued 125,000 shares of common stock upon the
agreement’s execution. The shares were valued at $.10 per share for
total compensation of $12,500 to be amortized ratably over the term of the
agreement. During the quarter ended September 30, 2009, the Company
amortized $2,083 to consulting expense, resulting in a $10,417 prepaid balance
that has been reported in the stockholders’ equity section of the balance
sheet. The entity is also entitled to $25,000 in finders’ fees for
each $1,000,000 of funding raised in the Company’s behalf. No funds
have been raised as of the date of this report.
On June
19, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 26-week period. The
consultant was to receive cash compensation of $36,400 over the term of the
contract, and 104,000 shares of common stock upon the contract’s
completion. The shares were valued at $.10 per share, for total stock
compensation of $10,400 to be expensed ratably over the contract’s
term. The Company recorded 15 weeks, or $27,000, of consulting
expense during the three months ended September 30, 2009, of which $21,000 was
paid in cash and $6,000 of stock compensation was accrued and reported as the
current liability, stock payable.
On August
5, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 6-week period. The consultant
was to receive cash compensation of $6,000 over the term of the contract, and
24,000 shares of common stock upon the contract’s completion. The
shares were valued at $.10 per share, for total stock compensation of $2,400 to
be expensed ratably over the contract’s term. The Company recorded 6
weeks, or $8,400, of consulting expense during the three months ended September
30, 2009, of which $6,000 was paid in cash. The 24,000 shares of
common stock were issued upon the contract’s completion on September 16,
2009.
22
ITEMS 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
AND REPORTS ON FORM 8-K
|
Exhibit No.:
|
Description:
|
|
3.1(i)
|
Articles
of Incorporation and amendments thereto (1) and
(2)
|
|
3.1(ii)
|
Bylaws
(1)
|
|
14
|
Code
of Ethics (1)
|
|
31.1
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
32.1
|
|
Certification
of Principal Executive Officer and Principal Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act 0f
2002
|
(1)
|
Filed
with the Securities and Exchange Commission on February 12, 2008 as an
exhibit numbered as indicated above, to the Registrant’s registration
statement on Form S-1 (file no. 333-149184 which exhibit is incorporated
herein by reference.
|
(2)
|
Amendment
to the Article of Incorporation filed with the Securities and Exchange
Commission on Form 8K on May 7, 2009 which exhibit is incorporated herein
by reference.
|
(b)
Reports on Form 8-K
During
the period ended September 30, 2009, NANOTECH ENTERTAINMENT, INC. filed the
following Current Reports on Form 8-K:
Date of Report
|
Date Filed
|
Items Reported
|
||
None
|
23
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NanoTech Entertainment,
Inc.
|
||||
(Registrant)
|
||||
Signature
|
Title
|
Date
|
||
/s/ Robert DeKett
|
President
& CEO, Director
|
May
24, 2010
|
||
Robert
DeKett
|
||||
/s/ Robert DeKett
|
Secretary,
Treasurer, Director
|
May
24, 2010
|
||
Robert
DeKett
|
||||
/s/ Ted D. Campbell II
|
Principal
Financial Officer
|
May
24, 2010
|
||
Ted
D. Campbell II
|
||||
/s/ Robert DeKett
|
Principal
Accounting Officer
|
May
24, 2010
|
||
Robert
DeKett
|
24