Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Luxeyard, Inc. | Financial_Report.xls |
| EX-32 - EXHIBIT 32 - Luxeyard, Inc. | v238791_ex32.htm |
| EX-31 - EXHIBIT 31 - Luxeyard, Inc. | v238791_ex31.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2011
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to ____________
Commission file number: 333-168066
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TOP GEAR INC.
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(Exact name of Registrant as specified in its charter)
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Delaware
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30-0473898
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(State or other jurisdiction of incorporation or
organization)
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(IRS Employer Identification No.)
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72 Yehudah HaMaccabi Street
Unit 11
Tel Aviv, Israel 61070
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(Address of principal executive offices) (zip code)
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+ (972) 52-570-3774
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(Registrant’s telephone number, including area code)
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N/A
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(Former name, former address and former fiscal year, if changed since last report)
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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x
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of November 1, 2011, there were 8,620,000 shares of the Registrant's common stock issued and outstanding.
TOP GEAR INC.
TABLE OF CONTENTS
Part I—Financial Information
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Item 1. Financial Statements - Unaudited
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Balance Sheets as of September 30, 2011 and December 31, 2010
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F-2
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Statements of Operations and Comprehensive (Loss) for the Three and Nine Months Ended September 30, 2011 and 2010, and Cumulative from Inception
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F-3
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Statement of Stockholders’ Equity for the Period from Inception Through March 31, 2011
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F-4
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Statements of Cash Flows for the Three Months Ended September 30, 2011 and Cumulative from Inception
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F-5
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Notes to Financial Statements September 30, 2011
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F-6
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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3
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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4
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Item 4. Controls and Procedures
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5
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Part II – Other Information
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Item 1. Legal Proceedings
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5
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Item 1A. Risk Factors
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5
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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5
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Item 3. Defaults upon Senior Securities
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5
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Item 4. (Removed and Reserved)
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5
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Item 5. Other Information
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5
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Item 6. Exhibits
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6
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Signatures
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7
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2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements – (Unaudited)
INDEX TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2011
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Financial Statements-
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Balance Sheets as of September 30, 2011 and December 31, 2010
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F-2
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Statements of Operations for the Three Months and Nine Months Ended September 30, 2011 and 2010, and Cumulative from Inception
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F-3
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Statement of Stockholders’ Equity for the Period from Inception through September 30, 2011
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F-4
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Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010,and Cumulative from Inception
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F-5
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Notes to Financial Statements
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F-6
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F-1
TOP GEAR INC.
(A DEVELOPMENT STAGE COMPANY)
AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
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As of
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As of
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|||||||
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September 30,
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December 31,
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|||||||
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2011
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2010
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(Unaudited)
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(Audited)
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ASSETS
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Current Assets:
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||||||||
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Cash and cash equivalents
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$ | 4,383 | $ | 6,176 | ||||
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Prepaid expenses
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307 | - | ||||||
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Total current assets
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4,690 | 6,176 | ||||||
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Total Assets
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$ | 4,690 | $ | 6,176 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
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Current Liabilities:
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||||||||
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Accounts payable and accrued liabilities
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$ | 26,578 | $ | 18,277 | ||||
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Advance customer payments
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90 | - | ||||||
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Loan payable to directors
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25,475 | 15,975 | ||||||
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Total current liabilities
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52,143 | 34,252 | ||||||
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Commitments and Contingencies
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- | - | ||||||
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Stockholders' Equity (Deficit):
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||||||||
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Common stock, par value $0.0001 per share, 100,000,000 shares authorized; 8,620,000 shares issued and outstanding
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862 | 862 | ||||||
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Additional paid-in capital
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89,778 | 89,778 | ||||||
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(Deficit) accumulated during development stage
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(138,094 | ) | (118,716 | ) | ||||
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Total stockholders' equity (deficit)
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(47,454 | ) | (28,076 | ) | ||||
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Total Liabilities and Stockholders' Equity
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$ | 4,690 | $ | 6,176 | ||||
The accompanying notes to financial statements are
an integral part of these statements.
F-2
TOP GEAR INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010, AND
CUMULATIVE FROM INCEPTION (DECEMBER 31, 2007)
THROUGH SEPTEMBER 30, 2011
(Unaudited)
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Three Months
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Three Months
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Nine Months
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Nine Months
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|||||||||||||||||
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Ended
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Ended
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Ended
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Ended
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Cumulative
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||||||||||||||||
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September 30,
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September 30,
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September 30,
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September 30,
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From
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||||||||||||||||
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2011
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2010
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2011
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2010
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Inception
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||||||||||||||||
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Revenues
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$ | - | $ | - | $ | 26,670 | $ | - | $ | 26,670 | ||||||||||
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Expenses:
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||||||||||||||||||||
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General and administrative-
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||||||||||||||||||||
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Professional fees
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3,517 | 8,400 | 29,684 | 19,909 | 71,727 | |||||||||||||||
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Consulting fees
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5,000 | - | 16,261 | 2,050 | 91,574 | |||||||||||||||
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Other
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18 | 115 | 102 | 623 | 1,462 | |||||||||||||||
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Total general and administrative expenses
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8,535 | 8,515 | 46,047 | 22,582 | 164,763 | |||||||||||||||
| - | ||||||||||||||||||||
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Profit (Loss) from Operations
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(8,535 | ) | (8,515 | ) | (19,377 | ) | (22,582 | ) | (138,093 | ) | ||||||||||
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Other Income (Expense)
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- | - | - | - | - | |||||||||||||||
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Provision for income taxes
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- | - | - | - | - | |||||||||||||||
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Net Income (Loss)
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$ | (8,535 | ) | $ | (8,515 | ) | $ | (19,377 | ) | $ | (22,582 | ) | $ | (138,093 | ) | |||||
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(Loss) Per Common Share:
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||||||||||||||||||||
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(Loss) per common share - Basic and Diluted
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
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Weighted Average Number of Common Shares Outstanding - Basic and Diluted
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8,620,000 | 8,620,000 | 8,620,000 | 8,620,000 | ||||||||||||||||
The accompanying notes to financial statements are
an integral part of these statements.
F-3
TOP GEAR INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THE PERIOD FROM INCEPTION (DECEMBER 31, 2007)
THROUGH SEPTEMBER 30, 2011
(Unaudited)
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(Deficit)
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||||||||||||||||||||||||
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Accumulated
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||||||||||||||||||||||||
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Stock
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Additional
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During the
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Common stock
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Subscriptions
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Paid-in
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Development
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|||||||||||||||||||||
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Description
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Shares
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Amount
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Receivable
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Capital
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Stage
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Totals
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||||||||||||||||||
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Balance - at inception
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- | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
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Common stock issued for cash ($0.0001/share)
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6,000,000 | 600 | - | - | - | 600 | ||||||||||||||||||
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Capital contribution
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- | - | - | 49,400 | - | 49,400 | ||||||||||||||||||
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Net (loss) for the period
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- | - | - | - | (42,166 | ) | (42,166 | ) | ||||||||||||||||
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Balance - December 31, 2008
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6,000,000 | 600 | - | 49,400 | (42,166 | ) | 7,834 | |||||||||||||||||
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Common stock subscribed ($0.00014/share)
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1,000,000 | 100 | (140 | ) | 40 | - | - | |||||||||||||||||
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Common stock issued for cash ($0.025/share)
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1,620,000 | 162 | - | 40,338 | - | 40,500 | ||||||||||||||||||
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Net (loss) for the period
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- | - | - | - | (31,618 | ) | (31,618 | ) | ||||||||||||||||
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Balance -December 31, 2009
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8,620,000 | 862 | (140 | ) | 89,778 | (73,784 | ) | 16,716 | ||||||||||||||||
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Stock subscription payment received
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- | - | 140 | - | - | 140 | ||||||||||||||||||
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Net (loss) for the period
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- | - | - | - | (44,932 | ) | (44,932 | ) | ||||||||||||||||
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Balance -December 31, 2010
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8,620,000 | 862 | - | 89,778 | (118,716 | ) | (28,076 | ) | ||||||||||||||||
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Net (loss) for the period
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- | - | - | - | (19,378 | ) | (19,378 | ) | ||||||||||||||||
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Balance - September 30, 2011
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8,620,000 | 862 | - | 89,778 | (138,094 | ) | (47,454 | ) | ||||||||||||||||
The accompanying notes to financial statements are
an integral part of these statements.
F-4
TOP GEAR INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010, AND
CUMULATIVE FROM INCEPTION (DECEMBER 31, 2007)
THROUGH SEPTEMBER 30, 2011
(Unaudited)
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Nine Months Ended
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Nine Months Ended
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Cumulative
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||||||||||
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September 30,
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September 30,
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From
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||||||||||
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2011
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2010
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Inception
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||||||||||
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Operating Activities:
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||||||||||||
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Net (loss)
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$ | (19,378 | ) | $ | (22,582 | ) | $ | (138,094 | ) | |||
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Adjustments to reconcile net (loss) to net cash provided by operating activities:
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||||||||||||
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Changes in net assets and liabilities-
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||||||||||||
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Prepaid expenses
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(307 | ) | - | (307 | ) | |||||||
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Accounts payable and accrued liabilities
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8,301 | 5,726 | 26,578 | |||||||||
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Advance customer payments
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90 | - | 90 | |||||||||
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Net Cash Used in Operating Activities
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(11,293 | ) | (16,856 | ) | (111,732 | ) | ||||||
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Investing Activities:
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Cash provided by investing activities
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- | - | - | |||||||||
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Net Cash Provided by Investing Activities
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- | - | - | |||||||||
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Financing Activities:
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||||||||||||
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Proceeds from director loans
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9,500 | 15,975 | 25,475 | |||||||||
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Proceeds from common stock
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- | 140 | 90,640 | |||||||||
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Net Cash Provided by Financing Activities
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9,500 | 16,115 | 116,115 | |||||||||
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Net (Decrease) Increase in Cash
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(1,793 | ) | (741 | ) | 4,383 | |||||||
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Cash - Beginning of Period
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6,176 | 16,716 | - | |||||||||
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Cash - End of Period
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$ | 4,383 | $ | 15,975 | $ | 4,383 | ||||||
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Supplemental Disclosure of Cash Flow Information:
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Cash paid during the period for:
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||||||||||||
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Interest
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$ | - | $ | - | $ | - | ||||||
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Income taxes
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$ | - | $ | - | $ | - | ||||||
F-5
TOP GEAR INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Basis of Presentation and Organization
Top Gear Inc. (the “Company”) is in the development stage, and has limited operations. The Company was incorporated under the laws of the State of Delaware on December 31, 2007 and began activity in 2008. The business plan of the Company is to become a leading kosher food certification organization. The accompanying financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.
Unaudited Interim Financial Statements
The interim financial statements of the Company as of September 30, 2011, and for the periods then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2011, and the results of its operations and its cash flows for the periods ended September 30, 2011, and cumulative from inception. These results are not necessarily indicative of the results expected for the calendar year ending December 31, 2011. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of December 31, 2010, filed with the SEC, for additional information, including significant accounting policies.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Revenue Recognition
The Company is in the development stage and has yet to realize revenues from operations. Once the Company has commenced operations, it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
Loss per Common Share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the period ended September 30, 2011.
F-6
Income Taxes
The Company accounts for income taxes pursuant to FASB ASC 740. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of September 30, 2011 and December 31, 2010, the carrying value of accounts payable-trade and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.
Deferred Offering Costs
The Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated.
Common Stock Registration Expenses
The Company considers incremental costs and expenses related to the registration of equity securities with the SEC, whether by contractual arrangement as of a certain date or by demand, to be unrelated to original issuance transactions. As such, subsequent registration costs and expenses are reflected in the accompanying financial statements as general and administrative expenses, and are expensed as incurred.
Lease Obligations
All non cancellable leases with an initial term greater than one year are categorized as either capital leases or operating leases. Assets recorded under capital leases are amortized according to the methods employed for property and equipment or over the term of the related lease, if shorter.
Estimates
The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation 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 as of September 30, 2011 and December 31, 2010, and expenses for the three months and nine month ended September 30, 2011 and 2010, and cumulative from inception. Actual results could differ from those estimates made by management.
F-7
Fiscal Year End
The Company has adopted a fiscal year end of December 31.
Recent Accounting Pronouncements
In April 2010, the FASB issued ASU No. 2010-17, Revenue Recognition—Milestone Method (ASU 2010-017). ASU 2010-017 provides guidance in applying the milestone method of revenue recognition to research or development arrangements. This guidance concludes that the milestone method is a valid application of the proportional performance model when applied to research or development arrangements. Accordingly, an entity can make an accounting policy election to recognize a payment that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
In February 2010, the FASB issued amended guidance on subsequent events. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and the Company adopted these new requirements upon issuance of this guidance.
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements (ASU No. 2010-06). ASU No. 2010-06 requires: (1) fair value disclosures of assets and liabilities by class; (2) disclosures about significant transfers in and out of Levels 1 and 2 on the fair value hierarchy, in addition to Level 3; (3) purchases, sales, issuances, and settlements be disclosed on gross basis on the reconciliation of beginning and ending balances of Level 3 assets and liabilities; and (4) disclosures about valuation methods and inputs used to measure the fair value of Level 2 assets and liabilities. ASU No. 2010-06 becomes effective for the first financial reporting period beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements of Level 3 assets and liabilities which will be effective for fiscal years beginning after December 15, 2010. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605)—Multiple-Deliverable Revenue Arrangements: a consensus of the FASB Emerging Issues Task Force (ASU 2009-13). ASU 2009-13 establishes a selling-price hierarchy for determining the selling price of each element within a multiple-deliverable arrangement. Specifically, the selling price assigned to each deliverable is to be based on vendor-specific objective evidence (VSOE) if available, third-party evidence, if VSOE is unavailable, and estimated selling prices if neither VSOE or third-party evidence is available. In addition, ASU 2009-13 eliminates the residual method of allocating arrangement consideration and instead requires allocation using the relative selling price method. ASU 2009-13 will be effective prospectively for multiple-deliverable revenue arrangements entered into, or materially modified, in fiscal years beginning on or after June 15, 2010 The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value (ASU 2009-05). ASU 2009-05 provides guidance in measuring the fair value of a liability when a quoted price in an active market does not exist for an identical liability or when a liability is subject to restrictions on its transfer. ASU 2009-15 was effective for the Company beginning with the quarter ended December 31, 2009. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.
F-8
2. Development Stage Activities and Going Concern
The Company is currently in the development stage, and has not commenced operations. The business plan of the Company is to become a leading kosher food certification organization.
On June 25, 2009, the Company offered a capital formation activity through a PPO, exempt from registration under the Securities Act of 1933, to raise up to $40,500 through the issuance of 1,620,000 shares of its common stock, par value $0.0001 per share, at an offering price of $0.025 per share. As of September 8, 2009, the Company raised $40,500 in proceeds with the issuance of 1,620,000 shares of its common stock.
The Company commenced an activity to submit a Registration Statement on Form S-1 to the Securities and Exchange Commission (“SEC”) to register 1,620,000 of its outstanding shares of common stock on behalf of selling stockholders. The Company will not receive any of the proceeds of this registration activity once the shares of common stock are sold.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenues to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2011 the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
3. Common Stock
On April 17, 2008, the Company issued 6,000,000 shares of common stock to an officer and director of the Company, for cash payment of $600.
On February 16, 2009, the Company issued 1,000,000 shares of common stock to an officer and director of the Company, for cash payment of $140.
On June 25, 2009, the Company began a capital formation activity through a PPO, exempt from registration under the Securities Act of 1933, to raise up to $40,500 through the issuance of 1,620,000 shares of its common stock, par value $0.0001 per share, at an offering price of $0.025 per share. As of September 8, 2009, the Company had received $40,500 in proceeds from the PPO.
The Company also commenced an activity to submit a Registration Statement on Form S-1 to the Securities and Exchange Commission (“SEC”) to register 1,620,000 of its outstanding shares of common stock on behalf of selling stockholders. The Company will not receive any of the proceeds of this registration activity once the shares of common stock are sold.
4. Income Taxes
The provision (benefit) for income taxes for the nine months ended September 30, 2011 and 2010, was as follows (assuming a 23% effective tax rate):
F-9
|
2011
|
2010
|
|||||||
|
Current Tax Provision:
|
||||||||
|
Federal-
|
||||||||
|
Taxable income
|
$ | - | $ | - | ||||
|
Total current tax provision
|
$ | - | $ | - | ||||
|
Deferred Tax Provision:
|
||||||||
|
Federal-
|
||||||||
|
Loss carryforwards
|
$ | 4,457 | $ | 5,194 | ||||
|
Change in valuation allowance
|
(4,457 | ) | (5,194 | ) | ||||
|
Total deferred tax provision
|
$ | - | $ | - | ||||
The Company had deferred income tax assets as of September 30, 2011, and December 31, 2010, as follows:
|
2011
|
2010
|
|||||||
|
Loss carryforwards
|
$ | 31,762 | $ | 27,305 | ||||
|
Less - Valuation allowance
|
(31,762 | ) | (27,305 | ) | ||||
|
Total net deferred tax assets
|
$ | - | $ | - | ||||
The Company provided a valuation allowance equal to the deferred income tax assets for periods ended September 30, 2011 and December 31, 2010 because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.
As of September 30, 2011, the Company had approximately $138,094 in tax loss carryforwards that can be utilized future periods to reduce taxable income, and expire by the year 2031.
The Company did not identify any material uncertain tax positions on tax returns that were or will be filed. The Company did not recognize any interest or penalties for unrecognized tax benefits.
The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed.
5. Related Party Loans and Transactions
On April 17, 2008, the Company issued 6,000,000 shares of common stock to an officer and director of the Company, for cash payment of $600. In addition, the officer and director made a capital contribution of $49,400.
On February 16, 2009, the Company issued 1,000,000 shares of common stock to an officer and director of the Company, for cash payment of $140.
As of September 30, 2011, loans from an individual who is a stockholder of the Company amounted to $25,475. The loans were provided for working capital purposes, and are unsecured, non-interest bearing, and have no terms for repayment.
The Company's president and director provides rent-free office space to the Company.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
Certain statements that the Company may make from time to time, including all statements contained in this report that are not statements of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the safe harbour provisions set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,” “will,” “world,” “should,” and other words of similar meaning used in conjunction with, among other things, discussions of future operations, transactions financial performance, product development and new product launches, market position and expenditures. The Company assumes no obligation to update any forward-looking statements. Additional information concerning factors which could cause differences between forward-looking statements and future actual results is discussed under the heading “Risk Factors” in the Company’s Registration Statement on Form S-1, as filed with the SEC and effective from February 3, 2011 (“Registration Statement”).
Executive Overview
We are a development stage company with limited operations and no revenues from our business operations. Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months. We do not anticipate that we will generate significant revenues until we are in a position to market our services to prospective customers. Accordingly, we must raise cash from sources other than our operations in order to implement our marketing plan.
In our management’s opinion, there is a market for a reasonably-priced and efficient kosher supervision and certification services. However, due to the substantial doubt about our ability to continue as a going concern and the lack of prospects for obtaining the necessary funding to launch our marketing plan, we have entered into negotiations with a privately held company for the reverse acquisition of the Company by such privately held company (the “Proposed Transaction”). Under the terms of the Proposed Transaction, we would acquire all of the equity securities of the private company from the holders of such securities in exchange for newly issued shares of our common stock. As a result of the Proposed Transaction, the private company would become our wholly owned subsidiary and we would terminate our current operations and assume the operations of the private company. In addition, the equity holders of the private company would become our principal shareholders and our current management would resign and be replaced by the private company’s management. It is anticipated that the Proposed Transaction will be completed in the near future, if at all.
The following sets forth an overview of our planned operations in the event that the Proposed Transaction is not completed in the near future.
We believe that we will need to raise additional funds in order to allow us to begin our market development and to remain in business for twelve months. We have generated revenues of $26,670 from the provision of consulting services. If we raise the necessary funds, but are unable to generate revenues for any reason, or if we are unable to make a reasonable profit, we may have to suspend or cease operations and/or consider a potential merger with another entity. At the present time, we have not made any arrangements to raise additional cash to finance our operations. Other than as described in this paragraph, we have no financing plans at this time.
Our goal is to become a leading kosher food certification organization. We plan to operate our business under the name GO KOSHER. Our plan of operation will rely strongly on the convenience and global access offered by the internet. By intelligently utilizing the internet as well as other more traditional channels, we plan to achieve our primary operational objective of attracting candidates to build a US- network of qualified and motivated independent contractors to provide our kosher supervision services.
We envision three groups within our corporate structure working together to promote our Company and to advance our goals: a marketing team, a sales team, and a team of field representatives. Until we are able to raise additional funding or our cash flow permits us to hire employees, the responsibilities of our proposed marketing and sales teams will be administered by our officers and Directors, who are not receiving any compensation for their activities on behalf of the Company. We plan for our marketing team, initially consisting of our Secretary, to create the positioning for the Company and to determine how we will promote our organization. We expect our marketing team to create the tools, materials, and directions to be used by our sales team. We plan for our sales team, initially consisting of our President, to work “on-the-ground” locally, finding contractors to work as field representatives and developing regional promotional mechanisms to sell our services to potential customers. The third group, our field representatives, will be independent contractors associated with our sales team and located in each of the local regions designated for activity. These field representatives, who will be responsible for inspection and certification projects, will follow the directives of our marketing team and report directly to our sales team. While the responsibilities of our marketing team and sales team will overlap in some ways, we expect these two groups to complement one another. Our marketing plan is not currently complete and partly remains to be determined.
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Results of Operations
During the period from November 21, 2007 (date of inception) through September 30, 2011, we incurred a net loss of $138,093. This loss consisted primarily of general and administrative expenses, comprising professional fees paid for legal and accounting services provided to us, travel expenses related to two business trips to the Far East by a consultant to evaluate potential suppliers of teeth whitening systems, and consulting fees for assistance with the writing of our business plan. During the period from July 1, 2011 through September 30, 2011, we had a net loss of $8,535. Since inception, we have sold 7,000,000 shares of common stock to our Directors.
Revenues
During the nine months ended September 30, 2011, we had revenues of $26,670 as a result of consulting services.
Liquidity and Capital Resources
Our balance sheet as of September 30, 2011 reflects assets of $4,690. Cash and cash equivalents from inception to date have been insufficient to provide the working capital necessary to operate to date. We anticipate generating losses and, therefore, may be unable to continue operations in the future. If we require additional capital, we would have to issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
Going Concern Consideration
Our independent auditors included an explanatory paragraph in their report on the financial statements attached to our Annual Report on Form 10-K regarding concerns about our ability to continue as a going concern. Our financial statements for the fiscal period ended September 30, 2011 contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.
Development Stage Company
We are considered a development stage company as defined by ASC 915 “Development Stage Entities,” as we have no principal operations or revenue from any source. Operations from the inception of the development stage have been devoted primarily to strategic planning, raising capital and research and development activities.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Not Applicable.
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Item 4. Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president (who is acting as our principal executive officer) and our chief financial officer (who is acting as our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of September 30, 2011, the end of the nine-month period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our management, including our president and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and our chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2011, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. However, from time to time, we may become a party to certain legal proceedings in the ordinary course of business.
Item 1A. Risk Factors.
Not Applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. (Removed and Reserved).
Not applicable.
Item 5. Other Information.
None.
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Exhibit No.
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Description
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3.1
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Articles of Incorporation (Incorporated by reference from our Registration Statement on Form S-1).
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3.2
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Bylaws (Incorporated by reference from our Registration Statement on Form S-1).
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4.1
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Specimen ordinary share certificate (Incorporated by reference from our Registration Statement on Form S-1).
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31*
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Section 302 Certification of the Sarbanes-Oxley Act of 2002 of Omri Amos Shalom.
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32*
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Section 906 Certification of the Sarbanes-Oxley Act of 2002 of Omri Amos Shalom.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 2, 2011
TOP GEAR INC.
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/s/Omri Amos Shalom
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Omri Amos Shalom
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President, Chief Executive Officer, Chief Financial Officer and a member of the Board of Directors
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(who also performs as the Principal Executive and Principal Financial and Accounting Officer)
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November 2, 2011
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