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EX-31 - EX-31.1 SECTION 302 CERTIFICATION - CHERUBIM INTERESTS, INC.innocent10q053111ex311.htm
EX-32 - EX-32.1 SECTION 906 CERTIFICATION - CHERUBIM INTERESTS, INC.innocent10q053111ex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

 

FORM 10-Q


 X .  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED May 31, 2011

 

     .  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

EXCHANGE ACT FOR THE TRANSITION PERIOD FROM

_______________ to _______________

 

Commission File Number       333-150061

 

INNOCENT, INC.

(Exact name of small business issuer as specified in its charter)

  

NEVADA

 

98-0585268

(State of other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

3280 Suntree Blvd, Suite 150

Melbourne, FL. 32940

 


32940

(Address of Principal Executive Offices)

 

(Zip Code)


Issuer's telephone number: (828) 702-7687


_________________

(Former address if changed since last report)


Indicate by check mark whether the issuer (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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes  X . No      .


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes      . No  X .


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  (Check one):


Large accelerated filer

      .

Accelerated filer

      .

Non-accelerated filer

      . (Do not check if a smaller reporting company)

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      . No  X .

 

As of Jul 14, 2011, there were 20,000,000 shares of common stock, par value $0.001, outstanding.

 




INDEX

 


PART I - FINANCIAL INFORMATION

3

 

 

ITEM 1.  FINANCIAL STATEMENTS

4

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS  OF OPERATION

13

 

 

ITEM 4.  CONTROLS AND PROCEDURES

20

 

 

PART II - OTHER INFORMATION

21

 

 

ITEM 1A. RISK FACTORS

21

 

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

23

 

 

ITEM 5.  OTHER INFORMATION

24

 

 

ITEM 6.  EXHIBITS

24

 

 

SIGNATURES

24


 




2




INNOCENT, INC.

(A Development Stage Company)


FINANCIAL STATEMENTS

May 31, 2011 and 2010

(Unaudited)




3




INNOCENT, INC.

(A Development Stage Company)

Balance Sheets

 

 

 

 

 

 

 

 

 

May 31,

2011

 

August 31,

2010

 

 

(Unaudited)

 

 

 

ASSETS

Current assets

 

 

 

 

 

 

Cash

$

18,042

 

$

2,907

 

Note receivable, net of allowance

 

-

 

 

250,000

Total current assets

 

18,042

 

 

252,907

 

 

 

 

 

 

 

 

Fixed assets

 

210,000

 

 

-

 

Investment in joint venture

 

290,010

 

 

-

 

 

 

 

 

 

 

Total assets

$

518,052

 

$

252,907

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

$

76,314

 

$

37,456

 

Notes payable

 

666,012

 

 

57,396

 

Related party payables

 

341,450

 

 

341,450

Total current liabilities

 

1,083,776

 

 

436,302

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

Shares Held in Escrow

 

-

 

 

(10,000)

 

Common stock, $.001 par value; 75,000,000 shares authorized; 20,000,000 and 30,000,000 issued; 20,000,000 outstanding at May 31, 2011 and August 31, 2010

 

20,000

 

 

30,000

 

Additional paid in capital

 

27,000

 

 

27,000

 

Deficit accumulated during the development stage

 

(612,724)

 

 

(230,395)

Total stockholders' deficit

 

(565,724)

 

 

(183,395)

 

 

 

 

 

 

 

Total liabilities and stockholders' deficit

$

518,052

 

$

252,907

 

 

 

 

 

 

 

See accompanying notes to financial statements.




4




INNOCENT, INC.

(A Development Stage Company)

Statements of Operations (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September

27, 2006

(inception)

to May 31,

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended May 31,

 

Nine months ended May 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

Revenues

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

16,260

 

 

9,900

 

 

41,341

 

 

18,236

 

 

117,366

 

Travel and promotion

 

6,968

 

 

768

 

 

20,590

 

 

13,153

 

 

49,385

 

Bad debt

 

-

 

 

-

 

 

250,000

 

 

-

 

 

338,344

 

Other general & administrative

 

11,077

 

 

1,604

 

 

34,024

 

 

6,094

 

 

69,020

Total operating expenses

 

34,305

 

 

12,272

 

 

345,955

 

 

37,483

 

 

574,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

-

 

 

-

 

 

7,340

 

 

-

 

 

7,340

 

Interest expense

 

(22,222)

 

 

(778)

 

 

(43,714)

 

 

(1,855)

 

 

(48,801)

Total other income (expense)

 

(22,222)

 

 

(778)

 

 

(36,374)

 

 

(1,855)

 

 

(41,461)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(56,527)

 

 

(13,050)

 

 

(382,329)

 

 

(39,338)

 

 

(615,576)

Income from discontinued operations

 

-

 

 

-

 

 

-

 

 

 

 

 

2,852

Net loss

$

(56,527)

 

$

(13,050)

 

$

(382,329)

 

$

(39,338)

 

$

(612,724)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per common share

$

(0.00)

 

$

(0.00)

 

$

(0.02)

 

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

20,000,000

 

 

30,000,000

 

 

20,000,000

 

 

26,582,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.




5




INNOCENT, INC.

(A Development Stage Company)

Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 27,

2006

(inception) to

May 31,

2011

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended May 31,

 

 

 

 

2011

 

2010

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net loss

$

(382,329)

 

$

(39,338)

 

$

(612,724)

 

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 payable and accrued liabilities

 

38,858

 

 

(11,100)

 

 

76,314

Cash provided by (used in) operating activities

 

(343,471)

 

 

(47,438)

 

 

(533,410)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

(210,000)

 

 

-

 

 

(210,000)

 

 

Investment in joint venture

 

(290,010)

 

 

-

 

 

(290,010)

 

 

Note receivable, net of allowance

 

250,000

 

 

-

 

 

-

Cash flows used in investing activities

 

(250,010)

 

 

-

 

 

(500,010)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

Proceeds from related party loan

 

10,687

 

 

45,198

 

 

367,137

 

 

Repayments of related party loan

 

(10,687)

 

 

(15,000)

 

 

(25,687)

 

 

Proceeds from notes payable

 

608,616

 

 

7,607

 

 

676,012

 

 

Common stock issued for conversion of note

 

-

 

 

10,000

 

 

-

 

 

Proceeds from sale of stock

 

-

 

 

-

 

 

34,000

Cash provided by financing activities

 

608,616

 

 

47,805

 

 

1,051,462

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash

 

15,135

 

 

367

 

 

18,042

 

 

Cash at beginning of period

 

2,907

 

 

-

 

 

-

 

 

Cash at end of period

$

18,042

 

$

367

 

$

18,042

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing activities

 

 

 

 

 

 

 

 

 

 

Common shares issued for investment in gold mine

$

-

 

$

500,000

 

$

-

 

 

Common shares issued for subscription receivable

$

-

 

$

880,000

 

$

-

 

 

Common shares issued for conversion of debt

$

-

 

$

10,000

 

$

10,000

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow Information:

 

 

 

 

 

 

 

 

 

Cash paid for interest

$

-

 

$

-

 

$

-

 

Cash paid for income taxes

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.



6



INNOCENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

May 31, 2011 and 2010


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 is pursuing oil and gas exploration activities.


Going Concern


These financial statements have been prepared on a going concern basis. 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. 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, 2010, 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 periods ended May 31, 2011 are not necessarily indicative of the results that may be expected for the year ending August 31, 2011.


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 judgment. Actual results may vary from these estimates.


Development Stage Company


The Company complies with FASB ASC Topic 915 and The Securities and Exchange Commission Act Guide 7 for its characterization of the Company as development stage.


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.



7



INNOCENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

May 31, 2011 and 2010


Note 2 - Summary of Significant Accounting Policies - cont'd


Impairment of Long-lived Assets


The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals, as applicable. The Company reviews long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified.


Advertising and Promotion


The Company's expenses all advertising and promotion costs as incurred. Advertising and promotion costs for the nine months ended May 31, 2011 and 2010 were $5,878 and $2,859.


Research and Development


Research and development expenditures are expensed as incurred. No such expenses have been incurred during the periods ended May 31, 2011 or 2010.


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.


Income Taxes


The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740. 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 June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162. With the issuance of SFAS 168, the FASB Accounting Standards Codification (“the Codification” or “ASC”) becomes the single source of authoritative U.S. accounting and reporting standards applicable for all nongovernmental entities, with the exception of guidance issued by the SEC. This change is effective for financial statements issued for interim or annual periods ending after September 15, 2009. The Codification does not modify existing GAAP nor any guidance issued by the SEC. Nonauthoritative accounting literature is excluded from the Codification. To improve usability, the Codification does include certain SEC guidance. GAAP accounting standards used to populate the Codification are superseded, with the exception of certain standards yet to be codified as of September 30, 2009, including SFAS 166 and 167 described subsequently.



8



INNOCENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

May 31, 2011 and 2010


Note 2 - Summary of Significant Accounting Policies - cont'd


Recent Accounting Pronouncements


The Company refers to FASB ASC 605-25 “Multiple Element Arrangements” in recognizing revenue from agreements with multiple deliverables. This statement provides principles for allocation of consideration among its multiple-elements, allowing more flexibility in identifying and accounting for separate deliverables under an arrangement. The EITF introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available, and significantly expands related disclosure requirements. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a retrospective basis, and early application is permitted. The Company does not expect the adoption of this statement to have a material effect on its consolidated financial statements or disclosures.


In August 2009, the FASB issued Accounting Standards Update No. 2009-05, “Measuring Liabilities at Fair Value,” (“ASU 2009-05”). ASU 2009-05 provides guidance on measuring the fair value of liabilities and is effective for the first interim or annual reporting period beginning after its issuance. The Company’s adoption of ASU 2009-05 did not have an effect on its disclosure of the fair value of its liabilities.


On June 12, 2009 the FASB issued two statements that amended the guidance for off-balance-sheet accounting of financial instruments: SFAS No. 166, “Accounting for Transfers of Financial Assets,” and SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).”  SFAS No. 166 revises SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and will require entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets, the FASB said. The statement eliminates the concept of a qualifying special-purpose entity, changes the requirements for the derecognition of financial assets, and calls upon sellers of the assets to make additional disclosures about them.


SFAS No. 167 amends FASB Interpretation (FIN) No. 46(R), “Consolidation of Variable Interest Entities,” by altering how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated, the FASB said. A company has to determine whether it should provide consolidated reporting of an entity based upon the entity's purpose and design and the parent company's ability to direct the entity's actions. SFAS Nos. 166 and 167 will be effective at the start of the first fiscal year beginning after November 15, 2009, which will mean January 2010 for companies that are on calendar years.


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 year ended August 31, 2010 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 year ended August 31, 2010, the Company issued 10,000,000 shares valued at $.001 for the conversion of a $10,000 note payable. Also during the year ended November 30, 2010 the Company issued 10,000,000 shares of its common stock which were held in escrow pending the close of a share exchange. These shares were rescinded during the nine months ended May 31, 2011.


From inception to May 31, 2011the 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 nine months ended May 31, 2011 management services of $25,813 (May 31, 2011 – $9,900) were charged to operations.


The Company has also received loans from shareholders totaling $367,137 since inception to fund operations. As of May 31, 2011, the Company owed $341,450 of principal plus accrued interest of $21,404. The loans are unsecured and due on demand and as such are included in current liabilities.



9



INNOCENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

May 31, 2011 and 2010



Note 5 – Significant Events


On August 27, 2010 Globalfinishing Ecuador acquired the Murciealagos Vizcaya and Lilly Rai mining concessions, located in Ecuador's El Oro Province.  Innocent Inc. funded the initial purchase with the assumption of majority ownership of Globalfinishing Ecuador via its acquisition agreement for 51% of Global Finishing Inc. the parent of Globalfinihing Ecuador.  Due to the cancellation of the share exchange agreement on October 20, 2010 the parties must negotiate the ownership of initial purchase and subsequent funds due. Innocent Inc. has recorded the funds advanced to Global Finishing Inc. as a note receivable until such time as the matter is resolved.  Under the terms of the purchase agreement for the mining properties, Globalfinishing Ecuador owes a total sum of $1,200,000 for the properties, with the initial down payment of $250,000 funded by Innocent Inc.  Five additional payments totaling $950,000 are due every sixth month thereafter.


On October 20, 2010 Innocent Inc. has terminated the agreement with Global Finish Inc., a Nevada Corporation, to acquire 51% of the issued and outstanding shares of Global Finishing Inc. in a share exchange whereby Innocent Inc. would have issued .9 shares of Innocent Inc. rule 144 restricted common stock for one share of Global Finishing Inc. The agreement was approved by an excess of 51% of the shareholders of both Global Finishing Inc. and Innocent Inc. by majority shareholder consent in lieu of a meeting. The agreement was signed on May 31, 2010 by the Companies with the approval of the Board of Directors. The agreement provided for 10 working days to administer the share exchange and this provision was extended until Innocent Inc. issued a demand to conclude the transaction and as of this date decided to cancel the agreement. Innocent Inc. and Global Finishing Inc. were unable to reach an acceptable timely conclusion to the share exchange under the terms of the original agreement. Therefore, the Board of Directors of Innocent Inc. cancelled the share exchange agreement effective October 20, 2010. The parties to the original agreement will meet to resolve the funding and purchase of the Murciealagos Vizcaya and Lilly Rai mining concessions in the Zaruma-Portovelo Mining District of Ecuador's El Oro Province. As a result of this decision Innocent Inc. will cancel the original 10,000,000 shares issued under the $880,000.00 subscription agreement due that was subsequently held for the share exchange that the Board of Directors of Innocent Inc. cancelled. The 10,000,000 shares will be returned to treasury and monies advanced for the Murciealagos Vizcaya and Lilly Rai mining concessions will be recorded as a note payable due Innocent Inc. from Global Finishing Inc. until such time as the parties can agree on the terms and conditions of joint ownership.


On October 20, 2010 Innocent Inc. received notification from Ecuador concerning the approval to own an Ecuador Registered Company, “JUST RESOURCES MINAS S.A.” file reference number 732697. This company is 100% owned by Innocent Inc. and will provide the company a structure to acquire and operate mineral interest in Ecuador in accordance with the new mining laws that went into effect in January 2010. Innocent Inc. is in negotiations with a local executive to manage this newly created operating company.


On November 23, 2010 Innocent Inc. entered into an agreement to acquire from Sedunda Oportunidad, LLC, the 100% working interest in an Oil and Gas Leasehold Estate including the effective net revenues flowing therefrom. The effective net revenue yield is 82% after the landowner Royalty is paid. The property, Thomas Lease, one well located center of south quarter section 7, Township 24 North Range West, Garfield County, Oklahoma, Book 1955 page 534 on 8/13/09.  The parties agreed on a purchase price of $150,000 whereby Innocent Inc. will issue a 10% interest bearing note payable for the purchase price. The note will be a one year demand note payable. The surrounding property of approximately 300 acres contains approximately 45 wells in various states of operation and non-operation that can be acquired. It is anticipated that an additional $150,000 working capital will be required to return the property to the status of a working well, with most of the expense associated to the pipeline of the gas to the refinery, that is already in process. The well was operational and has historical data but management has decided not to release any estimates until the well is back in operational mode, which we expect within the next ninety days from the filing of this report. The company has acquired the initial start-up funding for the lease.

 

The company has been dependent upon related party/shareholders for its funding to date and currently lacks funding to complete the opportunities in Ecuador. Although, we plan to pursue the Note Receivable from Global Finishing Inc., instead of a joint ownership of Murciealagos Vizcaya and Lilly Rai mining concessions, there can be no assurances that Global Finishing Inc., will execute a funding plan to complete the acquisition or a plan that will insure that Innocent Inc. is repaid, therefore we have financially reserved the note payable against earnings. In the event Global Finishing Inc. secures the property and/or funding, Innocent Inc., will utilize all remedies available to recover the entire note receivable.




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.



11






On April 7, 2010 the Company decided to direct that the initial funding of $880,000 US held in escrow by Dr. Vicente Sanchez Jaramillo a third party of the initial agreement in Ecuador be returned. The company has received such notification that said funds are being returned to the original accounts as received. Global Finishing, Inc. has confirmed in writing that said funds are the property of Innocent Inc. and will be forwarded upon receipt. The company has adjusted the general ledger to reflect said funds as a subscription receivable until received. Innocent Inc. and Global Finishing Inc. agree that the existing agreement on Miranda and as a result of the new mining laws that went into effect on January 1, 2010, it is in the best interest of all parties to renegotiate the contract, whereby Innocent Inc. will be the direct designated benefactor of the Miranda Mineral Rights.


On May 31, 2010 Innocent Inc. entered into an agreement with Global Finish Inc., a Nevada Corporation, to acquire 51% of the issued and outstanding shares of Global Finishing Inc. in a share exchange whereby Innocent Inc. will issue .9 shares of Innocent Inc. rule 144 restricted common stock for one share of Global Finishing Inc. The agreement has been approved by an excess of 51% of the shareholders of both Global Finishing Inc. and Innocent Inc. by majority shareholder consent in lieu of a meeting. The agreement was signed on May 31, 2010 by the Companies with the approval of the Board of Directors. The agreement provides for 10 working days to administer the share exchange which will result in Global Finishing Inc. to exchange 13,975,208 shares of Global Finishing Inc. 27, 402,369 shares issued and outstanding for 12,557,687 shares of Innocent Inc., representing approximately 25.4% ownership of Innocent committed and issued and outstanding shares of common stock. The agreement further provided for the share exchange of the remaining 49% under the same exchange provisions, and that no additional shares of Global Finish Inc. will be issued until such time as the parties execute the 49% exchange or decide that not additional share exchange will take place.   The acquisition of the controlling interest in Global Finishing Inc., will allow Innocent Inc. to proceed with its Ecuador mineral interest, although given the time since the initial agreement, the agreement for the Miranda interest must be renegotiated. Global Finishing Inc. currently owns the majority interest in an approved Ecuador subsidiary, Globalfinishing Ecuador S A that can legally operate and own mining interest and register new mineral rights and agreements. Innocent will retain the ownership rights in Companis Minera Monte-Verde S.A. Comimontsa and the 10,000,000 shares issued in the September 1, 2009 agreement will be offset against the 12,557,687 shares of common stock due to be issued to Global Finish Inc., for the 51% interest, leaving a balance of 2,557,687 additional shares to be issued in the share exchange described above.


On August 27, 2010 Globalfinishing Ecuador acquired the Murciealagos Vizcaya and Lilly Rai mining concessions, located in Ecuador's El Oro Province.  Innocent Inc. funded the initial purchase with the assumption of majority ownership of Globalfinishing Ecuador via its acquisition agreement for 51% of Global Finishing Inc. the parent of Globalfinihing Ecuador.  Due to the cancellation of the share exchange agreement on October 20, 2010 the parties must negotiate the ownership of initial purchase and subsequent funds due. Innocent Inc. has recorded the funds advanced to Global Finishing Inc. as a note receivable until such time as the matter is resolved.  Under the terms of the purchase agreement for the mining properties, Globalfinishing Ecuador owes a total sum of $1,200,000 for the properties, with the initial down payment of $250,000 funded by Innocent Inc.  Five additional payments totaling $950,000 are due every sixth month thereafter.


On October 20, 2010 Innocent Inc. has terminated the agreement with Global Finish Inc., a Nevada Corporation, to acquire 51% of the issued and outstanding shares of Global Finishing Inc. in a share exchange whereby Innocent Inc. would have issued .9 shares of Innocent Inc. rule 144 restricted common stock for one share of Global Finishing Inc. The agreement was approved by an excess of 51% of the shareholders of both Global Finishing Inc. and Innocent Inc. by majority shareholder consent in lieu of a meeting. The agreement was signed on May 31, 2010 by the Companies with the approval of the Board of Directors. The agreement provided for 10 working days to administer the share exchange and this provision was extended until Innocent Inc. issued a demand to conclude the transaction and as of this date decided to cancel the agreement. Innocent Inc. and Global Finishing Inc. were unable to reach an acceptable timely conclusion to the share exchange under the terms of the original agreement. Therefore, the Board of Directors of Innocent Inc. cancelled the share exchange agreement effective October 20, 2010. The parties to the original agreement will meet to resolve the funding and purchase of the Murciealagos Vizcaya and Lilly Rai mining concessions in the Zaruma-Portovelo Mining District of Ecuador's El Oro Province. As a result of this decision Innocent Inc. will cancel the original 10,000,000 shares issued under the $880,000.00 subscription agreement due that was subsequently held for the share exchange that the Board of Directors of Innocent Inc. cancelled. The 10,000,000 shares will be returned to treasury and monies advanced for the Murciealagos Vizcaya and Lilly Rai mining concessions will be recorded as a note payable due Innocent Inc. from Global Finishing Inc. until such time as the parties can agree on the terms and conditions of joint ownership.


On October 20, 2010 Innocent Inc. received notification from Ecuador concerning the approval to own an Ecuador Registered Company, “JUST RESOURCES MINAS S.A.” file reference number 732697. This company is 100% owned by Innocent Inc. and will provide the company a structure to acquire and operate mineral interest in Ecuador in accordance with the new mining laws that went into effect in January 2010. Innocent Inc. is in negotiations with a local executive to manage this newly created operating company.



12






On November 23, 2010 Innocent Inc. acquired from Sedunda Oportunidad, LLC, the 100% working interest in an Oil and Gas Leasehold Estate including the effective net revenues flowing therefrom. The effective net revenue yield is 82% after the landowner Royalty is paid. The property, Thomas Lease, one well located center of south quarter section 7, Township 24 North Range West, Garfield County, Oklahoma, Book 1955 page 534 on 8/13/09.  The parties agreed on a purchase price of $150,000 whereby Innocent Inc. will issue a non interest bearing note payable for the purchase price. The note will be a one year demand note payable. The surrounding property of approximately 300 acres contains approximately 45 wells in various states of operation and non-operation that can be acquired. It is anticipated that an additional $150,000 working capital will be required to return the property to the status of a working well, with most of the expense associated to the pipeline of the gas to the refinery, that is already in process. The well was operational and has historical data but management has decided not to release any estimates until the well is back in operational mode, which we expect within the next ninety days from the filing of this report. The company has acquired the initial start-up funding for the lease.


The company has been dependent upon related party/shareholders for its funding to date and currently lacks funding to complete the opportunities in Ecuador. Although, we plan to pursue the Note Receivable from Global Finishing Inc., instead of a joint ownership of  Murciealagos Vizcaya and Lilly Rai mining concessions, there can be no assurances that Global Finishing Inc., will execute a funding plan to complete the acquisition or a plan that will insure that Innocent Inc. is repaid, therefore we have financially reserved the note payable against earnings. In the event Global Finishing Inc. secures the property and/or funding, Innocent Inc., will utilize all remedies available to recover the entire note receivable.


On February 14, 2011 Innocent Inc. Board of Directors approved a letter of intent ("LOI") which constitutes an expression of the intent of Steele Resources, Inc. ("SRI") to enter into a Joint Venture Agreement with Innocent Inc. ("INI") which will govern the exploration and operations of mineral rights within the A&P Patented Claims and the Pony exploration projects jointly referred to as the Mineral Hill Project ("Mineral Hill Project"). The agreement (non- binding LOI) has been funded with the initial payment, completing the initial obligation of Innocent, Inc. as provided in the LOI attached as an exhibit. Innocent, Inc. expects that the second deposit will be funded no later than the end of February 2011, in accordance with the Letter of Intent executed on January 27, 2011. The parties have verbally agreed to extend the funding dates from the original agreement to allow time for the Funder to forward the funds to Innocent, Inc. if necessary. Although the Funder of the initial payment has committed the balance of the funds and we expect that obligation to be met, no guarantee can be issued until such time as the funds are received by the funding source.


On February 21, 2011 Innocent Inc., entered into a material definitive agreement with Steele Resources, Inc. (SELR: OTCBB) to acquire 50% of the Mineral Hill Gold Exploration Project. The project is located near Pony Hill, Montana in the Mineral Hill Mining District and consists of 17 patented and 67 unpatented lode mining claims (approximately 1,800 acres). The agreement is a 50/50 Joint Venture under which the two companies will work together to explore and operate the claims. The initial participating interests of Innocent, Inc. and Steele Resources, Inc. in the JV will be 50% and 50%. Under the terms of the agreement, Innocent may contribute up to $5,000,000 in operating funds over one year.  In the event those funds are not provided, Innocent will forfeit 10% per $1,000,000 not provided. Steele Resources, Inc. will act as the operating partner and have a commitment to match up to $5,000,000 in funding within one year of Innocent, Inc. contributing its first $1,000,000. Steel Resources, Inc. will forfeit 10% per $1,000,000 not provided under its obligation. Innocent Inc. has made the initial payment of three hundred thousand dollars ($300,000) under the terms of the LOI dated January 27, 2011. The second payment is expected be completed on or before May 31th, 2011.


Pursuant to a non-binding Letter of Intent entered into on January 27, 2011 (the “LOI”), between Steele Resources Corporation (“SRC”) and Innocent, Inc. (“INCT”), INCT and SRC expressed an interest in entering into a Joint Venture in which INCT would provide up to $5,000,000 of funding to explore the Mineral Hill Mining Project located near Pony, Montana.  Pursuant to the LOI, INCT was required advance up to $500,000 to SRC’s subsidiary, Steele Resources, Inc. (“SRI”) in order to allow SRI to close on two mineral leases representing the Mineral Hill Mining Project. Pursuant to the LOI, on February 7, 2011, INCT advanced an initial $300,000 which allowed SRI to close on the Pony Project representing 17 patented and 67 unpatented mining claims located in the Pony Mining District of Montana.


Pursuant to the LOI, on February 20, 2011 INCT and SRC entered into a definitive Joint Venture Agreement (the “JV Agreement”) relating to the Mineral Hill Mining Project. Pursuant to the JV Agreement INCT agreed to provide up to $5,000,000 to fund the exploration and development of the Mineral Hill Mining Project. However, the JV Agreement was conditioned upon INCT providing an initial $550,000 to close the Pony Project and the A&P Project, of which $300,000 was provided on February 15, 2011 and the remaining $250,000 was funded on March 23, 2011. In addition, the parties have agreed to amend the JV Agreement to allow INCT to fund an additional $450,000 on or before March 31, 2011. The JV Agreement provides that when INCT provides at least $1,000,000 of financing, then SRC would agree to match INCT’s investment up to $5,000,000 thus providing up to an aggregate of $10,000,000 to explore and, if warranted, develop the Mineral Hill Mining Project. Under the terms of the JV Agreement INCT and SRC would each own 50% of the Joint Venture however the percentage ownership would be reduced by 10% for each $1,000,000 a party failed to contribute to the Joint Venture.



13






Of the funds received on March 23, 2011,  $200,000 will be used to allow SRI to close on the Atlantic and Pacific mining property mineral lease (the”A&P Project”)  representing two patented mining claims located next to the Pony Project and together representing the Mineral Hill Mining Project.


The Company received a notification from its joint venture partner (SRI), that Innocent Inc. was in default on the balance of its funding commitment of the $1,000,000. The Company did not agree with the exact interpretation of the default and Innocent Inc. is seeking the additional capital to fulfill its committed obligation. After further discussion the JV Partners have decided that in consideration of Innocent’s willingness to negotiate, in good faith, a payment plan for the $460,000 currently due from the commitment under the Joint Venture Agreement. Steele Resources is willing to withdraw the default condition established in its letter of notification conditional upon Innocent Inc. entering into a negotiation process with Steele by May 2, 2011. Steele Resources stated that it would not seek any default remediation so long as Innocent negotiates a “good faith” funding solution. The JV Agreement is clear that ; Under the terms of the JV Agreement INCT and SRC would each own 50% of the Joint Venture however the percentage ownership would be reduced by 10% for each $1,000,000 a party failed to contribute to the Joint Venture. The balance of the $460,000 is still due Steele to complete the initial obligation of Innocent. Innocent expected, due to a shareholder nonbinding commitment letter to complete this funding, and as of the date of this Form Q filing the funding has not been completed. The shareholder that issued the nonbinding commitment letter in May has issued a follow up letter stating the intent to complete a private placement in August and September 2011 and explained the delay was due to unavoidable causes. Although the company believes the intent of the Shareholder in reference to a private placement to be a good faith commitment, there can be no guarantee that the funds will received or received in a timely manner to complete the $460,000 obligation since Steele may utilize a third party to secure the funds. Under the terms and conditions of the agreement, Steel is within its right to secure the funds from a third party or advance the funds itself and become the majority shareholder of the JV. The full agreement was filed by Innocent in an 8K filing.


As our business plan of operation exist today, we plan in Ecuador to acquire existing mineral rights that are being mined or have been mined and are properly registered under the Ecuador Mining Laws and Regulations. We will become an exploration company for the primary mineral of Gold but some silver and copper exist in the areas we are focused on. The new mining laws and registration of the mineral properties have given the government the opportunity to refocus on true ownership, back tax obligation and environment issues and concerns. We expect to operate within these guidelines and believe that the cost associated with mining within the governmental guidelines will not have an adverse cost impact. The steady increase in the value of gold should provide sufficient revenue to cover a responsible mode of operation. Although as of today we do not currently have an operating property in Ecuador we have visited the sites we have disclosed and they appear to operate within a safe and responsible manner. In regard to the Thomas Lease, we plan to extract primarily gas, but historically reports indicate some oil present. We plan to utilize a well-known third party operator to manage the site and insure we are in compliance with state and federal guidelines. The company is in the process of refurbishing the existing well and piping to a gas feed supply line. We have supplied the initial start-up capital and expect to provide a more definitive date the well will be operational.  The Mineral Hill Exploration project is a gold project located 4-6 miles west of Pony, Montana and includes 17 patented claims and 67 unpatented claims, approximately 1800 acres. Mineral Hill is an exploration venture. The first 6-9 months will involve drilling and geologic analysis to identify the resource potential and the economic viability. The cost for the drilling and analysis is $2.75M. With an economically viable resource the following steps will be the site work, $1.5-3M, and mining operations with the target of $150 per ton. Actual operating plans will not be established until the mining economics are validated. Although the parties plan a 50/50 revenue sharing with Steele Resources Inc. managing and operating the Mineral Hill Exploration project, the percent ownership that now stands at 50/50 may change if either party fails to contribute its obligated share. The first 1,000,000 share by both parties will provide for the drilling and core samples and determine the final operating plan for the site along with any changes in operating control or percent held by either party.


RESULTS OF OPERATIONS

 

The following is a discussion and analysis of our results of operation for the six-month period ended May 31, 2011, 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.



14






 

Three months ended May 31,

 

nine months ended May 31,

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

16,260

 

 

9,900

 

 

41,341

 

 

8,336

Travel and promotion

 

6,968

 

 

768

 

 

20,590

 

 

13,152

Bad debt

 

-

 

 

-

 

 

250,000

 

 

-

Other general & administrative

 

11,077

 

 

1,604

 

 

34,024

 

 

6,094

Total operating expenses

 

34,305

 

 

12,272

 

 

345,955

 

 

37,483


Revenue

 

Our gross revenue for the three-month period ended May 31, 2011, was $0, compared to $0 for the same period in fiscal 2010. Prior revenues and cost of sales have been included in income from discontinued operations.


 

Three months ended May 31,

 

nine months ended May 31,

 

2011

 

2010

 

2011

 

2010

Revenues

$

-

 

$

-

 

$

-

 

$

-


Liquidity and Capital Resources


 

May 31,

2011

 

August 31,

2010

 

(Unaudited)

 

 

Current assets

 

 

 

 

 

Cash

$

18,042

 

$

2,907

Note receivable, net of allowance

 

-

 

 

250,000

Total current assets

 

18,042

 

 

252,907

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

$

76,314

 

$

37,456

 

Notes payable

 

666,012

 

 

57,396

 

Related party payables

 

341,450

 

 

341,450

Total current liabilities

 

1,083,776

 

 

436,302


Cash Flows


 

 

 

 

 

 

 

September 27,

2006

 

nine months ended

May 31,

 

(inception) to

May 31,

 

2011

 

2010

 

2011

 

 

 

 

 

 

 

 

 

Cash provided by (used in) operating activities

 

(343,471)

 

 

(47,438)

 

 

(533,410)

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities

 

(250,010)

 

 

-

 

 

(500,010)

 

 

 

 

 

 

 

 

 

Cash provided by financing activities

 

608,616

 

 

47,805

 

 

1,051,462

 

 

 

 

 

 

 

 

 

Cash at end of period

$

18,042

 

$

367

 

$

18,042


We had cash of $18,042, accounts payable and accrued liabilities of $76,314, a note payable $666,012 and related party notes of $341,450 and an accumulated shareholder deficit of ($565,724) as of May 31, 2011.

 

Cash Used In Operating Activities

 

Our cash balance of $18,042 as of May 31, 2011, has increased by $15,135 during the nine months ended May 31, 2011.



15






Cash From Investing Activities


The two hundred fifty thousand dollars used from investing activities was for the down payment via Global Finishing Inc. for the Murciealagos Vizcaya and Lilly Rai mining concessions, located in Ecuador's El Oro Province. We are in discussions with Global Finishing Inc., concerning the repayment of this Note Receivable and all funds sent for the Ecuador Operations.


Supplemental disclosure of non-cash investing activities

 

 

 

 

 

 

 

Common shares issued for investment in gold mine

$

-

 

$

500,000

 

$

-

 

Common shares issued for subscription receivable

$

-

 

$

880,000

 

$

-

 

Common shares issued for conversion of debt

$

-

 

$

10,000

 

$

10,000


Going Concern


The audited financial statements for the year ended August 31, 2010, 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 May 31, 2011, our company has accumulated losses of $612,724 inception. As we do not have sufficient funds for our planned operations, we will be required to raise additional funds for operations and expansion.


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 31,2010,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

 

The company’s operating budget to maintain the public entity reporting requirements is approximately $50,000.  The balance of funding necessary to complete the initial Mineral Hill Exploration obligation is approximately $460,000. Innocent Inc. is in receipt of a non-binding commitment letter to fund the $460,000 from Quote Brand Limited to provide funding within the next 60 to 90 days. Quote Brand is currently a significant note holder and its principals and associates are shareholders of the company. Given the investment to date we expect that they will complete the necessary funding of the Mineral Hill Exploration project. We are still in discussion with Global Finishing Inc. concerning Ecuador, and upon completion of a funding Global Finishing Inc. expects to receive, Global has indicated they intend to repay the notes receivable in the amount of $389,000.00. We continue to present to various funding groups the current opportunities in attempts to secure additional capital.


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 secure 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 secure 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 and continue to be dependent upon related party/shareholder funding. The company plans to secure additional capital by the use of Notes Payable, Convertible Notes Payable, Private Placements, and partnerships and revenue sharing in future opportunities. This financing activity may lead to stock dilution and changes in control.


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.



16





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 our existing controls for the periods presented. Our Chief Executive Officer identified material weaknesses in our internal control over financial reporting and determined that we did not maintain effective internal control over financial reporting. The identified material weaknesses did not result in material audit adjustments to our financial statements; however, uncured material weaknesses could negatively impact our financial statements for subsequent years. Additionally, we have identified deficiencies in our disclosures which have been amended to include all required disclosures. In addition, a material weakness in the effectiveness of our internal controls over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition. Based on this evaluation, our principal executive officer has concluded that the design and operation of our disclosure controls and procedures are not 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 May 31, 2011 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.


The disclosure controls and procedures and internal control over financial reporting were not effective due to lack of experience related to the requirements as defined by the SEC reporting guidelines. The CEO is reviewing these guidelines based upon the questions and comments from the SEC and the overall reporting responsibility. We also plan to utilize an outside service, such as a CPA or other knowledge service to assist the CEO in the filing of the August 31, 2011.  Although the control deficiency noted, the company does not feel that this has resulted in any material breach or omission of material information. The company does feel that the result of the acknowledgement of this deficiency will result in greater detail in the company reporting in accordance with the SEC guidelines


PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

 

None.


ITEM 1A. RISK FACTORS.


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.



17






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 November 14, 2010. 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.



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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


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. These funds we used for company initial operating expenses.


During the year ended August 31, 2010 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 year ended August 31, 2010, the Company issued 10,000,000 shares valued at $.001 for the conversion of a $10,000 note payable. The funds were utilized for company operations.  Also during the year ended November 30, 2010 the Company issued 10,000,000 shares of its common stock which were held in escrow pending the close of a share exchange. These shares were rescinded.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.


None


ITEM 5. OTHER INFORMATION.


The Company received notification that Pursuant to NASD Rule 6530(e), that any OTCBB issuer that is delinquent in its reporting obligations three times in a 24-month is ineligible for quotation on the OTCBB for a period of one year. This letter served notification that the Company has been delinquent three times in the past 24-month period. Accordingly, the Company’s securities were removed from quotation on the OTCBB, effective at the open of business on 04/29/2011. The company is exploring the different options offered on the OTC Market and plans to retain its fully reporting status with the SEC. This last delay could not be avoided due to several outstanding issues and medical issues with its Chief Executive Officer.


ITEM 6. EXHIBITS

 

Exhibit Number

Title of Document

31.1

Sec.302 Certification of CEO/CFO

32.1

Sec.906 Certification of CEO/CFO

 



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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.

 

 

By:

/s/ Wayne A Doss

 

Wayne A. Doss

 

President, Chief Executive

 

Officer, and Director

 

Dated: July 14, 2011




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