Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 000-53385
THREE SHADES FOR EVERYBODY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0430015
(State or Incorporation) (I.R.S. Employer Id. No.)
1150 Silverado, Ste. 204, La Jolla, CA 92037 (858) 459-1133
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of Class)
Indicate by check mark if Three Shades For Everybody, Inc. (Three Shades) is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act of
1933. Yes [ ] No [X]
Indicate by check mark if Three Shades is not required to file reports pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes [ ]
No [X]
Indicate by check mark whether Three Shades (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 Three Shades 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Three Shades' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether Three Shades is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether Three Shades is a shell company (as defined in
Rule 12b-2 of the Exchange Act): Yes [ ] No [X]
The aggregate market value of Three Shades' common stock held by non-affiliates
of Three Shades as of the last business day of Three Shades' most recently
completed fiscal quarter (June 30, 2011) was approximately $0.00 (based on lack
of any trade or posted price reported by OTC on or prior to June 30, 2011). For
this purpose, all of Three Shades' officers and directors and their affiliates
were assumed to be affiliates of Three Shades.
There were 2,243,500 shares of Three Shades' common stock outstanding as of
September 1, 2011.
DOCUMENTS INCORPORATED BY REFERENCE: None.
THREE SHADES FOR EVERYBODY, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2011
INDEX
PART I
Item 1 Business 3
Item 1A Risk Factors 4
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
PART II
Item 5 Market for Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities 10
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operation 11
Item 7A Quantitative and Qualitative Disclosure About Market Risk 12
Item 8 Financial Statements and Supplementary Data 12
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 24
Item 9A Controls and Procedures 24
Item 9B Other Information 24
PART III
Item 10 Directors, Executive Officers, and Corporate Governance 24
Item 11 Executive Compensation 25
Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 26
Item 13 Certain Relationships and Related Transactions and Director
Independence 26
Item 14 Principal Accounting Fees and Services 27
PART IV
Item 15 Exhibits and Financial Statement Schedules 27
SIGNATURES 28
2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this Annual Report on Form 10-K contains some
forward-looking statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these statements
since they do not relate strictly to historical or current facts. Such
statements may include words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," "hope" and other words and terms of
similar meaning. In particular, these include, among others, statements relating
to our business plan and our intention to seek a business combination with an
operating entity, the impact of new accounting pronouncements, and other
statements regarding matters that are not historical facts or statements of
current condition.
There are important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements.
We undertake no obligation (and expressly disclaim any such obligation) to
publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law. You are
advised, however, to review any further disclosures we make on related subjects
in our filings with the United States Securities and Exchange Commission (the
"SEC"), all of which are available in the SEC EDGAR database at www.sec.gov and
from us.
BACKGROUND AND PRIOR NAMES
Three Shades for Everybody, Inc. (the "Company") was incorporated in July 1985
as Na Pali Funding, Inc. under the laws of the State of Delaware. The Company
was initially formed to invest in new business ventures and on March 19, 1987,
it acquired Vutek Systems, Inc., a California corporation, and the name was
changed to Vutek Systems, Inc. In July, 1999 the Company agreed to acquire an
apparel design and manufacturing business and on July 9, 1999 the name was again
changed, this time to Three Shades for Everybody, Inc. While the name was
changed, the acquisition of the apparel business was never completed.
From March, 1987 until March, 1990 the Company operated as Vutek Systems, Inc.
("Vutek"). Vutek was primarily engaged in the design, manufacture, and sale of
image capturing or processing products for IBM personal computers and
compatibles. The flagship product, FreezFrame allowed a picture or image from a
standard video source such as a video camera, VCR or video disk player to be
digitized and combined with text and graphics or otherwise altered for more
useful display on a computer screen. The software allowed it to be used with
other commercial off-the-shelf software programs such a dBASE III Plus,
ShowPartner, and Storyboard. The company had intended to develop an entire line
of products for this market. The company tried to raise funds through the
exercise of outstanding warrants, however the funds raised were insufficient to
maintain operations. As a result of the Company's failure to generate adequate
capital, it continued to operate at a loss. By March 1, 1990 all funds had been
expended, and the Company thereafter became dormant.
In 1998 the Company was revived and the search for a successor business was
commenced. On July 9, 1999 the Company changed its name to Three Shades for
Everybody, Inc. ("Three Shades"), with the intent of going into clothing design,
manufacture, and sales by acquiring a private business, also named Three Shades
for Everybody, however the private operating business experienced a reversal and
the acquisition was never completed. Thus there was no business activity from
1990 until June of 2010 when the Company embarked upon its current business
which is the purchase and sale of art and collectibles.
3
DESCRIPTION OF CURRENT BUSINESS
In June of 2010 management decided to take the Company in a new business
direction and agreed on a plan to market fine art and collectibles on a retail
basis via the internet and also via consignment placements with traditional art
galleries. Our primary sales outlet is expected to be ebay where we believe that
we will receive maximum marketing exposure with minimal expense. We also expect
to place works on consignment with traditional, brick and mortar galleries in
the Southern California region.
In June of 2011 the Company acquired Internet Artworks, Inc., a Delaware
corporation, to carry on the internet sales aspect of its business and Art
Extraordinaire, Inc., also a Delaware corporation, to carry on the consignment
sales aspect of its business. Neither corporation had any assets or liabilities
at the time of the acquisition and there was no acquisition cost. Both
corporations were wholly owned by the President of Three Shades for Everybody,
Inc. and were donated by him to the Company at no cost.
We expect to purchase fine art and collectibles and to sell these from our own
inventory, and in fact we have already acquired an initial inventory of art and
collectibles consisting of 87 lithographic art works by the comedian and artist
Red Skelton. We also plan to sell art and collectibles owned by others who
consign them to us. Like our own inventory sales, consigned items will be
offered for sale both through ebay and through galleries in the Southern
California region.
In June of 2010 we issued a total of 2,000,000 restricted common shares in
exchange for 87 signed, numbered, limited edition, lithographic art works by the
famed comedian and artist Red Skelton. This was a related party transaction. The
seller of the Red Skelton art was our president. For accounting purposes the art
was valued at $10,000 or $0.005 per share. There was no independent appraisal.
To date we have sold one of our art works. We believe that the holiday gift
giving season makes the fourth quarter an especially good time to market this
type of art, and we therefore expect to begin more active marketing efforts in
October of 2011.
ITEM 1A. RISK FACTORS
Our business is subject to numerous risk factors, including the following:
OUR BUSINESS IS NEW, WE HAVE NO SUBSTANTIAL OPERATING HISTORY IN THIS BUSINESS,
AND WE HAVE NEVER BEEN PROFITABLE. AS A RESULT, WE MAY NEVER BECOME PROFITABLE,
AND, AS A RESULT, OUR INVESTORS COULD LOSE SOME OR ALL OF THEIR INVESTMENT.
Although we were organized as a corporation in 1985, we began preparation for
our current business, the sale of fine art and collectibles, in June 2010, and
as of the date of this report we have sold only one art work. From the inception
of the corporation in July, 1985 through June 30, 2010, we generated a net loss
of $1,461,494, most of which is related to the video imaging business we
operated in the late 1980s. In the year ended June 30, 2011, when we were
organizing our fine art and collectibles business, we had sales revenues of $150
and generated a net loss of $4,953. We cannot guarantee we will ever develop a
substantial volume of sales. Even if we develop a substantial number of sales,
there is no assurance that we will become a profitable company. We may never
become profitable, and, as a result, our investors could lose some or all of
their investment.
BECAUSE WE HAVE INCURRED OPERATING LOSSES FROM OUR INCEPTION, OUR ACCOUNTANTS
HAVE EXPRESSED DOUBTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
For the periods ended June 30, 2011 and 2010 our accountants have expressed
doubt about our ability to continue as a going concern as a result of our
continued net losses. Our ability to achieve and maintain profitability and
positive cash flow is dependent upon:
4
* our ability to sell our art and collectibles at a price which will
provide us a profit; and
* our ability to attract consignment clients whose art and collectibles
will sell.
Based upon current plans, we may incur operating losses in future periods
because we may, from time to time, be incurring expenses but not generating
sufficient revenues. We expect approximately $4,000 in operating costs over the
next twelve months. We cannot guarantee that we will be successful in generating
sufficient revenues or other funds in the future to cover these operating costs.
Failure to generate sufficient revenues will cause us to go out of business.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR US TO EVALUATE OUR FUTURE
BUSINESS PROSPECTS AND MAKE DECISIONS BASED ON THOSE ESTIMATES OF OUR FUTURE
PERFORMANCE.
We have a limited operating history in our current business, minimal revenues
and a lack of profitability. These factors make it difficult to evaluate our
business on the basis of historical operations. As a consequence, our past
results may not be indicative of future results. Although this is true for any
business, it is particularly true for us because our limited operating history
means that we do not have a historical basis for making future management
decisions. This may hinder our ability to anticipate and timely adapt to
increases or decreases in sales, revenues or expenses. For example, if we
overestimate our future sales for a particular period or periods based on our
very limited historical growth rate, we may increase our overhead and other
operating expenses to a greater degree than we would have if we correctly
anticipated the lower sales level for that period and reduced our controllable
expenses accordingly. If we make poor budgetary decisions as a result of
unreliable historical data, we could continue to incur losses and our investors
could lose some or all of their investment.
WE HAVE A LACK OF LIQUIDITY AND MAY NEED ADDITIONAL FINANCING IN THE FUTURE.
ADDITIONAL FINANCING MAY NOT BE AVAILABLE WHEN NEEDED, WHICH COULD DELAY,
INDEFINITELY POSTPONE, OR PREVENT OUR SUCCESSFUL DEVELOPMENT.
Because we are only minimally capitalized, we expect to experience a lack of
liquidity for the foreseeable future in our proposed operations. We will adjust
our expenses as necessary to prevent cash flow or liquidity problems. However,
it is possible that we will need additional financing of some type, which we do
not now possess, to fully develop our operations. Our ability to raise
additional financing cannot be guaranteed. If needed, we will look at both
equity and debt financing, including loans from our principal shareholder.
However, at the present time, we have no definitive plans for financing in
place, other than any funds which may be generated from sales of our inventory,
and any funds which may be loaned to us by Mr. Masters, our President. In the
event that we need additional capital, Mr. Masters has agreed to loan such funds
as may be necessary through June 30, 2012 for working capital purposes. To the
extent that we experience a substantial lack of liquidity, our development in
accordance with our proposed plan may be delayed or indefinitely postponed, our
operations could be impaired, we may never become profitable, fail as an
organization, and our investors could lose some or all of their investment.
AS A COMPANY WITH NO PROFITABLE OPERATING HISTORY, AND A RELATIVELY NEW BUSINESS
WITH LITTLE HISTORY, WE ARE AN INHERENTLY RISKY INVESTMENT. AN INVESTOR COULD
LOSE HIS ENTIRE INVESTMENT.
Although we are a 25 year old corporation, we are a new entrant in the art
business and we have made only one sale in this business. Because we are a
business with little history, the operations which we engage in, the internet
based fine art and collectibles business, is an extremely risky business for us.
An investor could lose his entire investment.
OUR GROWTH WILL DEPEND PRIMARILY ON OUR ABILITY TO EXECUTE OUR BUSINESS PLAN.
Our growth will depend upon our ability to execute our business plan, which in
turn depends on various factors including the ability to: 1) negotiate and
maintain contracts and agreements with acceptable terms; 2) maintain marketing
5
and development costs at affordable rates; 3) hire and train qualified personnel
when needed; and 4) identify and maintain the necessary relationships within our
industry.
OUR FAILURE TO MANAGE GROWTH EFFECTIVELY COULD HARM OUR BUSINESS AND OPERATING
RESULTS.
Financial and management controls, and information systems may be inadequate to
support our expansion. Managing our growth effectively will require us to
continue to enhance these systems, procedures and controls, and to hire, train,
and retain management and staff. We may not respond quickly enough to the
changing demands that our expansion will impose on our management. Our failure
to manage our growth effectively could harm our business and operating results.
BECAUSE WE ARE SMALL AND DO NOT HAVE MUCH CAPITAL, WE MUST LIMIT OUR OPERATIONS.
A COMPANY IN OUR INDUSTRY WITH LIMITED OPERATIONS HAS A SMALLER OPPORTUNITY TO
BE SUCCESSFUL. IF WE DO NOT MAKE A PROFIT, WE MAY HAVE TO SUSPEND OR CEASE
OPERATIONS.
Because we are small and do not have much capital, we must limit our operations.
We must limit our consignment gallery operations to the Southern California area
for the foreseeable future. Because we must limit our operations, we may not
generate sufficient sales to make a profit. If we do not make a profit, we may
have to suspend or cease operations.
OUR SUCCESS WILL DEPEND UPON OUR ABILITY TO DEVELOP RELATIONSHIPS WITH OUR
CLIENTS AND CUSTOMERS. IF WE CANNOT DEVELOP SUFFICIENT RELATIONSHIPS, WE MAY
NEVER BECOME PROFITABLE. AN INVESTOR COULD LOSE HIS ENTIRE INVESTMENT.
Our business model requires that we develop successful relationships with art
buyers, who will purchase from us via the internet, with art collectors /
sellers, who will either sell to us or consign with us, and with management of
art galleries where we plan to sell fine art and collectibles on a retail
consignment basis. Our performance depends, in large part, on our ability to
develop relationships with these potential customers, clients and colleagues. We
have no contracts or other assurances that we will be able to sell from or buy
for inventory, or that we will be able to obtain art works on consignment or
that we will be able to sell art on consignment, all of which could have a
material adverse effect on our financial condition and results of operations.
There can be no assurance that we will be able to acquire desired merchandise in
sufficient quantities on terms acceptable to us, or that an inability to acquire
suitable merchandise, or the loss of one or more key sources of supply to us,
will not have a material adverse effect on our financial condition and results
of operations. As a result, we may never become profitable. An investor could
lose his entire investment.
WE ARE DEPENDANT ON THIRD-PARTY PROVIDERS FOR INTERNET SERVICES AND MAY NOT BE
ABLE TO CONTINUE OPERATIONS IF THERE IS A DISRUPTION IN THE SUPPLY OF SUCH
SERVICES.
We depend and will continue to depend upon third-party independent contractors
such as ebay for providing a sales venue and Pay Pal for processing payments. We
cannot guaranty that these third party independent contractors will continue to
allow us to utilize their services. We also anticipate hiring contractors to
create and maintain a website for us. Such third party contractors have no
fiduciary duty to the shareholders of our company and may not perform as
expected. Inasmuch as the capacity for certain services by certain third-parties
may be limited, the inability of those third-parties, for economic or other
reasons, to provide services could have a material adverse effect upon the
results of our operations and financial condition.
INTENSE COMPETITION IN OUR MARKET COULD PREVENT US FROM DEVELOPING REVENUE AND
PREVENT US FROM ACHIEVING ANNUAL PROFITABILITY. IN EITHER SITUATION, WE MAY
NEVER BECOME PROFITABLE, FAIL AS AN ORGANIZATION, AND OUR INVESTORS COULD LOSE
SOME OR ALL OF THEIR INVESTMENT.
The secondary market for fine art and collectibles is intensely competitive.
Competition is expected to intensify as a result of the current financial
condition of the country. Fewer customers are expected to purchase art and more
6
collectors are expected to attempt to sell some or all of their collections.
This is expected to result in price reductions, fewer customer orders, reduced
gross margins and loss of market share. We are aware of a number of other
companies that are presently retailing fine art and/or collectibles online. We
believe that there will be an increasing number of online retailers of fine art
and collectibles of the types we offer and, in the instance of certain
reproductions, identical to the reproductions we offer. Some of our competitors
may be able to secure merchandise from suppliers on more favorable terms,
fulfill customer orders more efficiently, and adopt more aggressive pricing or
inventory availability policies than we can.
OUR BUSINESS HAS A SEASONAL FLUCTUATION IN SALES, WHICH CAN DEVELOP FLUCTUATING
QUARTERLY RESULTS IN OUR OPERATIONS.
The gallery industry can be subject to seasonal variations in demand. For
example, we expect that most of our operations will see the greatest demand
during the winter holiday shopping period. Consequently, we expect to be most
profitable during the fourth quarter of the calendar year. Quarterly results may
also be materially affected by the timing of new product introductions, the gain
or loss of significant customers or product lines and variations in merchandise
mix. Accordingly, our performance in any particular quarter may not be
indicative of the results that can be expected for any other quarter or for the
entire year. Significant deviations from projected demand for merchandise could
have a material adverse effect on our financial condition and quarterly or
annual results of operations.
WE EXPECT TO BE DIRECTLY AFFECTED BY FLUCTUATIONS IN THE GENERAL ECONOMY.
Demand for art and other collectible merchandise is affected by the general
economic conditions in the United States. When economic conditions are favorable
and discretionary income increases, purchases of non-essential items like art
and other collectible merchandise generally increase. When economic conditions
are less favorable, sales of art and other collectibles are generally lower. In
addition, we may experience more competitive pricing pressure during economic
downturns. Therefore, the current economic downturn and any future economic
downturn, or any future changes in consumer spending habits, could have a
material adverse effect on our financial condition and results of operations.
WE EXPECT OUR PRODUCTS TO BE SUBJECT TO CHANGES IN CUSTOMER TASTE.
The markets for our products are subject to changing customer tastes and the
need to create and market new products. Demand for collectibles is influenced by
the popularity of certain themes, cultural and demographic trends, marketing and
advertising expenditures and general economic conditions. Because these factors
can change rapidly, customer demand also can shift quickly. Some collectibles
appeal to customers for only a limited time. The success of new product
introductions depends on various factors, including product selection and
quality, sales and marketing efforts, timely production and delivery and
consumer acceptance. We may not always be able to respond quickly and
effectively to changes in customer taste and demand due to the amount of time
and financial resources that may be required to identify new products and bring
them to market. If we were to materially misjudge the market, items in our
inventory and/or certain of our consignments may remain unsold. The inability to
respond quickly to market changes could have a material adverse effect on our
financial condition and results of operations.
WE MAY BE AFFECTED BY SALES TAX CONSIDERATIONS FROM VARIOUS STATES.
Various states are increasingly seeking to impose sales or use taxes on
inter-state mail order sales and are aggressively auditing sales tax returns of
mail order businesses. Complex legal issues arise in these areas, relating,
among other things, to the required nexus of a business with a particular state,
which may permit the state to require a business to collect such taxes. Although
we believe that we can adequately provide for sales taxes on mail order sales,
there can be no assurance as to the effect of actions taken by state tax
authorities on our financial condition or results of operations. In the future,
we may be required to collect sales tax on sales made to customers in all of the
states in which we conduct our operations. The imposition of sales taxes on mail
7
order sales generally has a negative effect on mail order sales levels. All of
the factors cited above may negatively affect our financial condition and
results of operations in the future. Any such impact cannot currently be
quantified.
OUR BUSINESS WILL BE CONCENTRATED IN ONLY ONE INDUSTRY.
We plan to be in the art and collectibles business, selling art and collectibles
through the Internet and through consignment sales in physical art galleries.
Our proposed operations, even if successful, will result in the operation of
only this one business. Our lack of diversity into a number of areas may subject
us to economic fluctuations within our industry and therefore increase the risks
associated with our proposed operations.
THERE ARE FACTORS BEYOND OUR CONTROL WHICH MAY ADVERSELY AFFECT US. OUR
INVESTORS COULD LOSE SOME OR ALL OF THEIR INVESTMENT.
Our operations may also be affected by factors which are beyond our control,
principally general market conditions and changing client preferences. Any of
these problems, or a combination thereof, could have an effect on our viability
as an entity. We may never become profitable, we could fail as an organization,
and our investors could lose some or all of their investment.
OUR SUCCESS WILL BE DEPENDENT UPON OUR MANAGEMENT'S EFFORTS. WE CANNOT ACHIEVE
PROFITABILITY WITHOUT THE EFFORTS OF OUR MANAGEMENT. AN INVESTOR COULD LOSE HIS
ENTIRE INVESTMENT.
Our success will be dependent upon the decision making of our two directors and,
especially, of our president, Daniel Masters. Mr. Masters is a practicing
attorney and therefore will devote only part time to our business. He is
currently devoting about 20 hours per week to his law practice and he expects to
devote approximately 20 hours per week to our business. The loss of Mr. Masters,
our President, would significantly harm our operations. We have no written
employment agreements with Mr. Masters. We have not obtained key man life
insurance on the lives of either of our officers or directors.
OUR STOCK HAS NO PUBLIC TRADING MARKET AND THERE IS NO GUARANTEE A TRADING
MARKET WILL EVER DEVELOP FOR OUR SECURITIES. YOU MAY NOT ABLE TO SELL YOUR
SHARES WHEN YOU WANT TO DO SO, IF AT ALL.
There is no public market for our common stock and there has been no trading
market since approximately 1998. An active trading market for our shares may
never develop or be sustained. If you purchase shares of common stock, you may
not be able to resell those shares at or above the initial price you paid. If a
public market is established the market price of our common stock may fluctuate
significantly in response to numerous factors, some of which are beyond our
control, including the following:
* actual or anticipated fluctuations in our operating results;
* changes in financial estimates by securities analysts or our failure
to perform in line with such estimates;
* changes in market valuations of other companies, particularly those
that market services and products such as ours;
* announcements by us or our competitors of significant innovations,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
* departures of key personnel.
Additionally, as restrictions on resale end, the market price of our stock could
drop significantly if the holders of restricted shares sell them or are
perceived by the market as intending to sell them.
8
APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMIT THE LIQUIDITY
OF OUR COMMON STOCK, WHICH MAY AFFECT THE TRADING PRICE OF OUR COMMON STOCK. YOU
MAY NOT BE ABLE TO SELL YOUR SHARES WHEN YOU WANT TO DO SO, IF AT ALL.
Our common stock is currently not quoted in any market. If our common stock
becomes quoted, we anticipate that it will trade well below $5.00 per share. As
a result, our common stock is considered a "penny stock" and is subject to SEC
rules and regulations that impose limitations upon the manner in which our
shares can be publicly traded. These regulations require the delivery, prior to
any transaction involving a penny stock, of a disclosure schedule explaining the
penny stock and the associated risks. Under these regulations, certain brokers
who recommend such securities to persons other than established customers or
certain accredited investors must make a special written suitability
determination for the purchaser and receive the written purchaser's agreement to
a transaction prior to purchase. These regulations will have the effect of
limiting the trading activity of our common stock and reducing the liquidity of
an investment in our common stock.
THE OVER-THE-COUNTER MARKET FOR STOCK SUCH AS OURS IS SUBJECT TO EXTREME PRICE
AND VOLUME FLUCTUATIONS. YOU MAY NOT ABLE TO SELL YOUR SHARES WHEN YOU WANT TO
DO SO, AT THE PRICE YOU WANT, OR AT ALL.
The securities of companies such as ours have historically experienced extreme
price and volume fluctuations during certain periods. These broad market
fluctuations and other factors, such as product developments and trends in our
industry and in the investment markets generally, as well as economic conditions
and quarterly variations in our operational results, may have a negative effect
on the market price of our common stock.
WE DO NOT EXPECT TO PAY DIVIDENDS ON COMMON STOCK.
We have not paid any cash dividends with respect to our common stock, and it is
unlikely that we will pay any dividends on our common stock in the foreseeable
future. Earnings, if any, that we may realize will be retained in the business
for further development and expansion.
ITEM 2. PROPERTIES
We presently utilize office space in the home of our president. This
space is provided to the Company by our president on a rent free basis, and it
is anticipated that this arrangement will continue for at least the next twelve
months.
ITEM 3. LEGAL PROCEEDINGS
There is no litigation, pending or threatened, by or against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the period ended
June 30, 2011.
9
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
There is no trading market for our Common Stock at present and there has been no
trading market since approximately 1998. We do not have a trading symbol. There
is no assurance that a trading market will ever develop or, if such a market
does develop, that it will continue. The Company intends to request a
broker-dealer to make application to Finra to have the Company's securities
traded on the OTC Bulletin Board System or published, in print and electronic
media, or either, in the Pink Sheets, LLC ("Pink Sheets"), however there is no
assurance that a broker-dealer will agree to make such application or, if one
does, that Finra will provide us with a symbol.
HOLDERS
As of June 30, 2011, there were approximately 644 stockholders of record holding
our common stock.
DIVIDENDS
We have never paid a dividend on our common stock and we do not intend to pay a
dividend in the foreseeable future. We have had no earnings to date and we
anticipate that any earnings we may realize in the future will be utilized to
build up our inventory of art and collectibles for sale.
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal year ended June 30, 2011 there were no sales of unregistered
securities. The last sale of unregistered securities was on June 28, 2010 when
the Company's president, Daniel Masters purchased unregistered securities from
the Company. Mr. Masters received a total of 2,000,000 common shares on June 28,
2010 in exchange for 87 signed, numbered, limited edition, lithographic prints
produced by comedian and artist Red Skelton valued at a total of $10,000 or
$0.005 per share of stock issued. We relied upon Section 4(2) of the Securities
Act of 1933, as amended for the above issuances. We believed that Section 4(2)
was available because:
* The issuance had no underwriters, underwriting discounts or
commissions;
* We placed a restrictive legend on the certificate issued;
* The sale was not made by general solicitation or advertising;
* The sales was made to an officer, director, and accredited investor.
In connection with the above transaction, we provided the following to the
investor:
* Access to all our books and records.
* Access to all material contracts and documents relating to our
operations.
* The opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investor was given access.
FORWARD STOCK SPLIT
There were no stock splits during the year ended June 30, 2011. On June 25, 2010
the Company affected a forward split of its existing and outstanding shares on
the basis of 12 new shares for each 10 old shares.
10
REPURCHASES
We have never repurchased any shares of our common stock, nor were any
repurchases made on our behalf, nor have any future repurchases been authorized.
ITEM 6. SELECTED FINANCIAL DATA
The following balance sheet data and statement of operations data for the year
ended June 30, 2011 and 2010 were derived from our audited financial statements.
Our audited financial statements for those periods and the notes thereto appear
elsewhere herein. The data should be read in conjunction with the annual
financial statements, related notes, and other financial information appearing
elsewhere herein.
June 30, 2011 June 30, 2010
------------- -------------
STATEMENT OF OPERATIONS DATA
Revenues 150
Cost of Sales 115 0
Expenses 5,000 5,200
(Net Loss) (4,965) (5,200)
Other Income 12 0
(Net Loss before Tax) (4,953) (5,200)
Loss per Share (0.002) (0.0003)
Weighted Average Common Shares 2,243,500 15,365,852
BALANCE SHEET DATA
Cash 5,162 5,000
Inventory 9,885 10,000
Total Assets 15,047 15,000
Liabilities 20,200 15,200
Stockholders' Equity (5,153) (200)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis is intended to help you understand our
financial condition and results of operations for the fiscal years ended June
30, 2011 and 2010. You should read the following discussion and analysis
together with our audited financial statements and the notes to the financial
statements included under Item 8 in this report. Our future financial condition
and results of operations will vary from our historical financial condition and
results of operations described below based on a variety of factors. You should
carefully review the risks described under Item 1A and elsewhere in this report,
which identify certain important factors that could cause our future financial
condition and results of operations to vary.
11
1) Liquidity: On June 30, 2011 the Company had cash on hand of $5,162 and an
inventory of art and/or collectibles consisting of 86 signed, numbered, limited
edition, lithographic prints by artist and comedian Red Skelton. These
lithographs are valued at $9,885. This compares with cash of $5,000 and
inventory of 87 signed, numbered, limited edition, lithographic prints by Red
Skelton valued at $10,000 at June 30, 2010. It is anticipated that we will incur
nominal expenses in the implementation of the business plan described herein.
While we have only limited cash with which to pay these anticipated expenses,
the President of the Company has agreed that he will pay these charges, if they
exceed the cash on hand, with his personal funds as interest free loans to the
Company or as capital contributions.
2) Capital Resources: As noted above, the Company has only $5,162 in liquid
capital resources but will rely upon interest free loans or capital
contributions from its President, if necessary, to meet its needs.
3) Results of Operations: From 2008 to June, 2010 the Company conducted no
operations other than the search for a merger or acquisition candidate and the
preparation of its filings with the SEC. In June 2010 the Company acquired an
inventory of 87 artworks and determined to enter the business of selling art and
collectibles. As of June 30, 2011 one such sale had been made.
4) Off-Balance Sheet Arrangements: The Company has no off balance sheet
arrangements.
5) Disclosure of Contractual Obligations: The Company has no contractual
obligations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management believes that the Company bears no direct market risk. The Company
holds no debt or equity securities, no foreign currencies, and has no credit
facility. The President of the Company has agreed to extend loans to the Company
as needed to meet obligations, however these will be interest free. The Company
has not made any sales, purchases, or commitments with foreign entities which
would expose it to currency risks.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THREE SHADES FOR EVERYBODY, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
June 30, 2011 and 2010
Immediately following please see:
Report Of Independent Registered Public Accountant
Balance Sheets
Statement of Operations
Statement of Changes in Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements
12
Stan J.H. Lee, CPA
2160 North Central Rd. Suite 209 * Fort Lee * NJ 07024
Mailing address: P.O. Box 436402 * San Diego * CA 92143
Tel: 619-623-7799 * Fax: 619-564-3408 * E-mail: stan2u@gmail.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Three Shades For Everybody, Inc.
We have audited the accompanying balance sheets of Three Shades For Everybody,
Inc. as of June 30, 2011 and 2010 and the related statements of operations,
changes in shareholders' equity and cash flows for the fiscal years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Three Shades For Everybody,
Inc. as of June 30, 2011 and 2010 , and the results of their operations and its
cash flows for the fiscal years then ended in conformity with U.S. generally
accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in the notes to the financial
statements, the Company's lack of profitability and short-term liquidity raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Stan J.H. Lee, CPA
----------------------------------
Stan J.H. Lee, CPA
August 17, 2011
Fort Lee, NJ, 07024
13
THREE SHADES FOR EVERYBODY, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
As of As of
June 30, June 30,
2011 2010
---------- ----------
CURRENT ASSETS
Cash $ 5,162 $ 5,000
Inventory 9,885 10,000
---------- ----------
TOTAL ASSETS $ 15,047 $ 15,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expense $ 2,500 $ --
Payable to a related party 17,700 15,200
---------- ----------
TOTAL LIABILITIES 20,200 15,200
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value,
50,000,000 shares authorized, none issued
or outstanding as of June 30, 2011 and 2010
Common stock, 200,000,000 shares authorized
at $.001 par value, 2,243,500 shares issued
and outstanding as of June 30, 2011 and 2010
after giving effect to a 12 for 10 forward
stock split 2,243 2,243
Paid-in capital 1,459,051 1,459,051
Deficit during Development Stage (1,466,447) (1,461,494)
---------- ----------
(5,153) (200)
---------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 15,047 $ 15,000
========== ==========
See Notes to Financial Statements
14
THREE SHADES FOR EVERYBODY, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Cumulative since
Year Ended Year Ended inception to
June 30, June 30, June 30,
2011 2010 2011
------------ ------------ ------------
REVENUE $ 150 $ -- $ 4,290,286
------------ ------------ ------------
Cost of Sales 115 --
------------ ------------ ------------
Gross Profite 35 -- 4,290,136
OPERATING EXPENSES
General & Administrative Exps (5,000) (5,200) 5,756,745
------------ ------------ ------------
TOTAL EXPENSES (5,000) (5,200) 5,756,745
------------ ------------ ------------
Gross Profit (Loss) (4,965) (5,200) (1,466,459)
OTHER INCOME (LOSS)
Interest income 12 -- 12
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (4,953) (5,200) (1,466,447)
Provision for income taxes -- -- --
------------ ------------ ------------
NET LOSS $ (4,953) $ (5,200) $ (1,466,447)
============ ============ ============
Loss per Common Share (0.002) (0.0003)
------------ ------------
Weighted Average Number of Common Shares
Basic and Diluted 2,243,500 15,365,852
------------ ------------
See Notes to Financial Statements
15
THREE SHADES FOR EVERYBODY, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage Balance
------ ------ ------- ----- -------
Initial Issuance of Common Stock 26,427 $ 26 $ 974 $ -- $ --
Net loss for year Ended 6/30/85 (18,475)
---------- ------ ---------- ----------- -----------
Balance at 6/30/85 26,427 $ 26 $ 974 $ (18,475) $ (17,475)
---------- ------ ---------- ----------- -----------
Issuance of Common Stock 65,537 66 12,334
Net loss for year Ended 6/30/86 (647,204)
---------- ------ ---------- ----------- -----------
Balance at 6/30/86 91,964 $ 92 $ 13,308 $ (665,679) $ (652,279)
---------- ------ ---------- ----------- -----------
Issuance of Common Stock for Cash 36,996 37 69,963
Issuance of Common Stock for Acquisition 90,405 90 3,331
Net loss for year Ended 6/30/87 (290,805)
---------- ------ ---------- ----------- -----------
Balance at 6/30/87 219,365 $ 219 $ 86,602 $ (956,484) $ (869,663)
---------- ------ ---------- ----------- -----------
Issuance of Common Stock for Cash 9,976 10 91,490
Net loss for year Ended 6/30/88 (489,278)
---------- ------ ---------- ----------- -----------
Balance at 6/30/88 229,341 $ 229 $ 178,092 $(1,445,762) $(1,267,441)
---------- ------ ---------- ----------- -----------
Issuance of Stock on Warrant Exercise 37,012 37 378,513
Issuance of Stock for Debt Forgiveness 6,030 6 196,463 196,241
Net loss for year Ended 6/30/89 (708,631)
---------- ------ ---------- ----------- -----------
Balance at 6/30/89 272,383 $ 272 $ 753,068 $(1,958,152) $(1,204,812)
---------- ------ ---------- ----------- -----------
Issuance of Stock for Debt Forgiveness 41,350 42 206,943 205,420
Net loss for year Ended 6/30/90 (157,399)
---------- ------ ---------- ----------- -----------
Balance at 6/30/90 313,733 $ 314 $ 960,011 $(1,910,131) $ (949,806)
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/91 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/91 313,733 $ 314 $ 960,011 $(1,910,131) $ (949,806)
---------- ------ ---------- ----------- -----------
16
Net loss for year Ended 6/30/92 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/92 313,733 $ 314 $ 960,011 $(1,910,131) $ (949,806)
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/93 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/93 313,733 $ 314 $ 960,011 $(1,910,131) $ (949,806)
---------- ------ ---------- ----------- -----------
Debt eliminated by statute of limitations 463,937 463,937
Net loss for year Ended 6/30/94 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/94 313,733 $ 314 $1,423,948 $(1,446,194) $ (21,932)
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/95 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/95 313,733 $ 314 $1,423,948 $(1,446,194) $ (21,932)
---------- ------ ---------- ----------- -----------
Issuance of stock for services 502,099 502 18,498
Net loss for year Ended 6/30/96 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/96 815,832 $ 816 $1,442,446 $(1,446,194) $ (2,932)
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/97 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/97 815,832 $ 816 $1,442,446 $(1,446,194) $ (2,932)
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/98 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/98 815,832 $ 816 $1,442,446 $(1,446,194) $ (2,932)
---------- ------ ---------- ----------- -----------
Reverse stock split 1 for 100 (807,675) (808) 808
Issuance of stock for cash 26,427 26 2,474
Net loss for year Ended 6/30/99 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/99 34,584 $ 34 $1,445,728 $(1,446,194) $ (432)
---------- ------ ---------- ----------- -----------
Stock split 2.8 for 1 62,253 62 (62)
Issuance of stock for cash 11,419 12 420
Net loss for year Ended 6/30/2000 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/2000 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/01 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/01 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
17
Net loss for year Ended 6/30/02 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/02 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/03 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/03 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/04 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/04 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/05 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/05 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/06 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/06 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/07 0
---------- ------ ---------- ----------- -----------
Balance at 6/30/07 108,256 $ 108 $1,446,086 $(1,446,194) $ --
---------- ------ ---------- ----------- -----------
Issuance of stock for services 135,244 135 4,965
Net loss for year Ended 6/30/08 (5,100)
---------- ------ ---------- ----------- -----------
Balance at 6/30/08 243,500 $ 243 $1,451,051 $(1,451,294) $ --
Net loss for year Ended 6/30/09 (5,000)
---------- ------ ---------- ----------- -----------
Balance at 6/30/09 243,500 $ 243 $1,451,051 $(1,456,294) $ (5,000)
---------- ------ ---------- ----------- -----------
Issuance of stock for art works 2,000,000 2,000 8,000
Net loss for year Ended 6/30/10 (5,200)
---------- ------ ---------- ----------- -----------
Balance at 6/30/10 2,243,500 $2,243 $1,459,051 $(1,461,494) $ (200)
---------- ------ ---------- ----------- -----------
Net loss for year Ended 6/30/11 (4,953)
---------- ------ ---------- ----------- -----------
Balance at 6/30/11 2,243,500 $2,243 $1,459,051 $(1,466,447) $ (5,153)
========= ====== ========== =========== ===========
See Notes to Financial Statements
18
THREE SHADES FOR EVERYBODY, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative since
Year Ended Year Ended inception to
June 30, June 30, June 30,
2011 2010 2011
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (4,953) $ (5,200) $ (1,466,447)
------------ ------------ ------------
Adjustments to reconcile net Income (loss) to cash provided
by (used in) operations
Depreciation -- -- --
Common stock issued for service -- -- --
Changes in operating
Assets and liabilities 2,615 (10,000) (7,385)
------------ ------------ ------------
NET CASH PROVIDE BY (USED IN) OPS (2,338) (15,200) (1,473,832)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- --
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loan from related party 2,500 10,200 1,468,994
Common stock issued -- 10,000 10,000
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTS 2,500 20,200 1,478,994
------------ ------------ ------------
NET INCREASE (DECREASE) 162 5,000 5,162
Cash at beginning of period 5,000 -- --
------------ ------------ ------------
Cash at end of period $ 5,162 $ 5,000 $ 5,162
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ -- $ -- $ --
------------ ------------ ------------
Income taxes paid $ -- $ -- $ --
------------ ------------ ------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued $ -- $ 10,000 $ 10,000
See Notes to Financial Statements
19
THREE SHADES FOR EVERYBODY, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2011 and 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Three Shades for Everybody, Inc. (the "Company"), was incorporated in the state
of Delaware on July 23, 1985 as Na Pali Funding, Inc. The Company was organized
to invest in other firms and in 1987 the Company approved the acquisition of
Vutek Systems, Inc., a California corporation, and a name change to Vutek
Systems, Inc. As a result of this acquisition, the Company was primarily engaged
in the design, manufacture, and sale of image capturing or processing products
for IBM personal computers and compatibles until 1990. From 1990 to 2010 the
Company had no business activity, although the Company changed its name to Three
Shades for Everybody, Inc. in 1999. In June 2010 the Company acquired an
inventory of 87 lithographic art works and entered the retail art business,
however it has had only one sale 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.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers cash
instruments with original maturities of less than three months to be cash
equivalents.
START-UP COSTS
Costs of start-up activities, including organization costs, are expensed as
incurred, in accordance with Statement of Position (SOP) 98-5.
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes." This statement requires an asset and liability approach to account for
income taxes. The Company provides deferred income taxes for temporary
differences that will result in taxable or deductible amounts in future years
based on the reporting of certain costs in different periods for financial June
30, 2011 or 2010.
USE OF ESTIMATES
The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the periods presented. Actual results
may differ significantly from those estimates.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet. In
cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows.
20
In that regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. Statement No. 107 excludes certain
financial instruments and all non-financial instruments from its disclosure
requirements.
FISCAL YEAR
The Company adopted June 30 as its fiscal year ending.
STOCK-BASED COMPENSATION
In accordance with the provisions of SFAS 123, the Company follows the intrinsic
value based method of accounting as prescribed by APB 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, for its stock-based compensation.
IMPACT OF NEW ACCOUNTING STANDARDS
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position, or cash flows.
NOTE 2 - STOCKHOLDERS' EQUITY
COMMON STOCK
The Company has authorized share capital of two hundred million (200,000,000)
shares of common stock, having one hundredth of a cent ($0.001) par value per
share, and fifty million (50,000,000) shares of preferred stock, also having one
hundredth of a cent ($0.001) par value per share.
In the year ended June 30, 1987 the Company went public, issuing 1,400,000
units, each consisting of one share and two warrants, at a price of $0.05 per
unit. Also in that year it acquired VuTek Systems, Inc., in a stock for stock
exchange which resulted in the issuance of an additional 3,421,000 shares.
Additional shares were issued in 1988, 1989, and 1990 as a result of warrant
exercises, private placements, and issuances for services.
By June 30, 1990 the Company had a total of 11,872,069 shares issued and
outstanding. In that year the Company completed the closure of its business and
became dormant. In 1994 the number of shares issued and outstanding remained at
11,872,069, however the additional paid in capital was increased by $463,937 as
a result of the expiration and forgiveness of debt through the Statute of
Limitations.
In 1996 19,000,000 shares were issued for services and in 1999, with a total of
30,872,069 shares outstanding, a 1 for 100 reverse split was voted which reduced
the total number of shares issued and outstanding to 308,721. Also in June 1999
1,000,000 shares were issued in a private placement, bringing the total
outstanding to 1,308,721 shares.
In the year ended June 30, 2000 there was a forward split of 2.8 for 1, bringing
the total number of shares outstanding to 3,664,419. Additional shares were
issued in that year bringing the total outstanding to 4,096,575.
The total number of shares issued and outstanding remained at 4,096,575 until
July 23, 2007. On that date an additional 5,100,000 shares were issued to the
Company's officers in exchange for services and as reimbursement for expenses
paid on behalf of the company, bringing the total outstanding to 9,196,575
shares.
On July 24, 2008 the Company, with the consent of its majority shareholder,
adopted a resolution calling for a reverse split of its issued and outstanding
common stock at a ratio of one (1) new share for each sixty (60) old shares. As
21
a result the total number of common shares issued and outstanding was reduced to
153,572.
On June 25, 2010 the Company, with the consent of its majority shareholder,
adopted a resolution and an amendment to its articles of incorporation calling
for a forward split of its issued and outstanding common stock at a ratio of
twelve (12) new shares for each ten (10) old shares and for rounding of odd lots
to the nearest round lot of shares. As a result, the total number of common
shares issued and outstanding was increased to 243,500. The accompanying
financial statements have been retroactively adjusted, pursuant to SAB Topic
4:C, to reflect the results of this forward split.
On June 28, 2010 a total of 2,000,000 shares were issued to the President of the
Company in exchange for a collection of signed, numbered, lithographs by Red
Skelton. The collection consisted of 87 pieces and was valued at $10,000 or
$0.005 per share.
As a result of these issuances and the forward split there were a total of
2,243,500 shares of common stock issued and outstanding as of June 30, 2011 and
2010. There are no shares of preferred stock issued and outstanding.
NOTE 3 - EARNINGS PER SHARE
The computations of earnings per share for the years ended June 30, 2011 and
2010 are as follows:
2010 2010
---------- ----------
LOSS PER COMMON SHARE, BASIC
Numerator Net income (loss) $ (4,953) $ (5,200)
Denominator Weighted-average shares 2,243,500 15,365,852
--------- ----------
Net loss per common share $ (0.002) $ (0.0003)
========== ==========
For the year ended June 30, 2011 there were 17,700,000 shares issuable under
convertible notes, and for the year ended June 30, 2010 there were 15,200,000
shares issuable under convertible notes. The earnings per share calculations for
2011 and 2010 are based on the number of shares outstanding after the 12 for 10
forward split discussed in Note 2 above.
NOTE 4 - INCOME TAXES
There was no income and no provisions for income taxes for the years ended June
30, 2011 and 2010.
NOTE 5 - RELATED PARTY TRANSACTIONS
As set forth in Note 2 above, on July 23, 2007 a total of 5,100,000 shares were
issued to the Company's two officers in exchange for services and as
reimbursement for expenses paid on behalf of the company. Also as set forth in
Note 2 above, on June 28, 2010 a total of 2,000,000 shares were issued to the
Company's President in exchange for 87 signed, numbered, limited edition,
lithographs by Red Skelton.
During the year ended June 30, 2009, the President of the Company advanced
$5,000 to cover recurring expenses; during the year ended June 30, 2010 the
President advanced an additional $10,200 to cover expenses incurred and provide
a cash reserve for future expenses; during the year ended June 30, 2011 the
President advanced an additional $2,500 to cover expenses incurred. All of these
22
cash advances were evidenced by non-interest bearing Notes convertible into
common shares in the Company at par value ($0.001). The balance payable to a
related party is $17,700 as of June 30, 2011.
NOTE 6 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's financial position and
operating results raise substantial doubt about the Company's ability to
continue. The Company has had no operating revenue since 1990.
The ability of the Company to continue as a going concern is dependent upon
developing sales and obtaining additional capital and financing. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
NOTE 7 - SUBSEQUENT EVENT
There are no subsequent events to report.
NOTE 8 - COMMITMENT AND CONTIGENCY
There was no commitment or contingency to disclose during years ended June 30,
2011 and 2010.
23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no changes or disagreements with the findings of our accountants.
ITEM 9A. CONTROLS AND PROCEDURES
We are responsible for establishing and maintaining adequate internal control
over financial reporting in accordance with Exchange Act Rule 13a-15. Our Chief
Executive Officer and Chief Financial Officer conducted an evaluation of the
effectiveness of our internal control over financial reporting as of June 30,
2011 and concluded that as of that date, our disclosure controls and procedures
were effective to provide reasonable assurance that information we are required
to disclose in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms, and that such
information is accumulated and communicated to our Chief Executive Officer and
Chief Financial Officer to allow timely decisions regarding required disclosure.
This annual report does not include a report of management's assessment
regarding internal control over financial reporting or an attestation report of
the company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
Changes in internal control over financial reporting. There have not been any
changes in our internal control over financial reporting (as such term is
defined in Rule 13a-15(f) under the Exchange Act), or any other factors during
the period covered by this report, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The current members of our board of directors are as follows:
Name of Director Age Year First Became a Director
---------------- --- ----------------------------
Daniel Masters 66 Member since 1986
Dominique Garcia 35 Member since 2007
PRINCIPAL OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS AND CERTAIN
DIRECTORSHIPS
Since 2002 Daniel Masters has practiced business law with an emphasis on
corporate reorganizations and Chapter 11 bankruptcies. Before establishing his
current law practice Mr. Masters served as an independent investment banker and
corporate finance consultant from 1990 to 2002. Between 1978 and 1989 he worked
as an investment banker with L.F. Thompson & Co., and at Capital Technology
Group and as Vice President for Finance with the Trilon Group, a private holding
company with over a billion dollars in assets. Prior to 1978 Mr. Masters held
24
positions as a legislative aid on the staff of the U.S. Congress and as
executive assistant to the President of the University of California. Mr.
Masters received his Bachelor's Degree (A.B.) from Harvard University and a
Juris Doctorate (J.D.) from Thomas Jefferson School of Law where he served on
the Editorial Board of the Law Review. He occasionally serves as an Adjunct
Professor of Law at Thomas Jefferson School of Law where he teaches bankruptcy
law.
Dominique Garcia has worked in marketing and marketing communications roles for
the past 11 years, including public relations, advertising, account management,
and product management. Her experience includes roles in marketing agencies as
well as positions in business to business software and biotechnology companies
like Invitrogen Corporation. Ms. Garcia has a Bachelor's Degree (A.B) from
Harvard University.
The current executive officers of the Company are as follows:
Name of Director Age Year First Became a Director
---------------- --- ----------------------------
Daniel Masters 66 President and CEO
Dominique Garcia 35 Secretary, Treasurer, and CFO
Background information on our executive officers is set forth above under our
board of directors.
CODE OF ETHICS
We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, and persons performing similar functions.
The code of ethics will be posted on the investor relations section of the
Company's website in the event that we develop a website. At such time as we
have posted the code of ethics on our website, we intend to satisfy the
disclosure requirements under Item 10 of Form 8-K regarding any amendment to, or
waiver from, a provision of the code of ethics by posting such information on
the website.
AUDIT COMMITTEE
Our board of directors has not established an audit committee. In addition, we
do not have a compensation committee or executive committee or similar
committees. We will not, in all likelihood, establish an audit committee until
such time as the Company generates a positive cash flow of which there can be no
assurance. We recognize that an audit committee, when established, will play a
critical role in our financial reporting system by overseeing and monitoring
management's and the independent auditors' participation in the financial
reporting process. At such time as we establish an audit committee, its
additional disclosures with our auditors and management may promote investor
confidence in the integrity of the financial reporting process.
Until such time as an audit committee has been established, the full board of
directors will undertake those tasks normally associated with an audit committee
to include, but not by way of limitation, the (i) review and discussion of the
audited financial statements with management, and (ii) discussions with the
independent auditors of matters required to be discussed by the Statement On
Auditing Standards No. 61 and No. 90, as may be modified or supplemented.
ITEM 11. EXECUTIVE COMPENSATION
No officer or director has received any cash compensation for services rendered
to the Company since its inception, nor are there any agreements in place or
contemplated to provide cash compensation to any officer or director. However,
both of our officers and directors received stock as compensation for past
25
services and reimbursement for past expenses in 2008. There are no agreements in
place or contemplated at this time to provide stock compensation to our
directors or officers in the future. We have no retirement, pension, profit
sharing, stock option or insurance programs or other similar programs for the
benefit of our officers, directors, or employees, and we have no employees at
this time.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of June 30, 2011 regarding
the beneficial ownership of our common stock (i) by each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
common stock, (ii) by each director of the Company, (iii) by each executive
officer of the Company and (iv) by all executive officers and directors of the
Company as a group.
Name and Address of Number of Shares Percent
Beneficial Owner Beneficially Owned of Class
---------------- ------------------ --------
Daniel Masters 2,100,000 93.60%
1150 Silverado, Ste 204
La Jolla, CA 92037
Dominique Garcia 2,100 0.09%
1150 Silverado, Ste 204
La Jolla, CA 92037
All Officers and 2,102,100 93.69%
Directors as a Group
(two individuals)
The remaining 141,400 shares of the Company's outstanding common shares are held
by 642 persons, no one of which is known to be the beneficial owner of five
percent (5%) or more of the Company's common shares. There are, as of the date
hereof, a total of 2,243,500 common shares issued and outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS AND DIRECTOR
INDEPENDENCE
On June 28, 2010 the president and majority shareholder of the Company, Daniel
Masters, sold 87 signed, numbered, limited edition, lithographs produced by
comedian and actor Red Skelton to the Company in exchange for 2,000,000 shares
of restricted stock. The transaction was valued at $10,000 or $0.005 per share.
There were no other reportable transactions with related persons during fiscal
2010 and no reportable transactions with related persons during fiscal 2011.
The Company's two directors are also its two officers. Therefore none of its
directors may be considered as independent.
26
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Stan J. H. Lee, CPA has audited the Company's financial statements since 2007.
The following table sets forth the aggregate fees billed by Stan J. H. Lee to
the Company for:
2011 2010
---- ----
Audit fees, including the audit of the Company's
annual financial statements and fees related to
consents and review of registration statements $2,500 $2,500
Audit related fees 0 0
Tax fees and tax related fees 0 0
All other fees for other services 0 0
The Board of Directors acts as the Audit Committee. The Board pre-approves the
engagement of accountants to render all audit services for the Company, as well
as any changes to the terms of the engagement. The Board will also pre-approve
all non-audit related services proposed to be provided by the Company's
independent registered public accounting firm. The Board reviews the terms of
the engagement, a description of the engagement and a budget for the engagement.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report or incorporated by
reference:
The financial statements listed below are included under Item 8 of this report:
Balance Sheets as of June 30, 2011 and 2010;
Statements of Operations for the years ended June 30, 2011 and 2010;
Statements of Stockholders' Equity since 1985 (inception);
Statements of Cash Flows for the years ended June 30, 2011 and 2010; and
Notes to Financial Statements.
Exhibit 3.1 Articles of Incorporation. Incorporated by reference to Exhibit
3.1 of our Form 10-K for the year ended June 30 2010, filed on
Sept. 14, 2010
Exhibit 3.1.1 Amendment to Articles of Incorporation. Incorporated by
reference to Exhibit 3.1.1 of our Form 10-K for the year ended
June 30 2010, filed on Sept. 14, 2010
Exhibit 3.2 By-Laws of the Corporation. Incorporated by reference to
Exhibit 3.2 of our Form 10-12G, filed on Aug. 25, 2008
Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer Filed herewith
Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer Filed herewith
Exhibit 32 Section 1350 Certification Filed herewith
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Three Shades For Everybody, Inc., the Registrant, has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: September 22, 2011 THREE SHADES FOR EVERYBODY, INC.
By: /s/ Daniel Masters
------------------------------------
Daniel Masters
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Three Shades For
Everybody, Inc., in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Daniel Masters President and Director September 22, 2011
-------------------------- (Principal Executive Officer)
(Daniel Masters)
/s/ Dominique Garcia Secretary, Treasurer, Director September 22, 2011
-------------------------- (Principal Financial Officer)
(Dominique Garcia)
28
