Attached files
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EXCEL - IDEA: XBRL DOCUMENT - World Moto, Inc. | Financial_Report.xls |
EX-31.2 - World Moto, Inc. | ex31-2.htm |
EX-32.2 - World Moto, Inc. | ex32-2.htm |
EX-31.1 - World Moto, Inc. | ex31-1.htm |
EX-32.1 - World Moto, Inc. | ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2011
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from to
Commission
file number: 333-167777
Net Profits Ten
Inc.
(Exact
name of registrant as specified in its charter)
Nevada | 7372 | 77-0716386 | ||
(State
or other jurisdiction
of
Incorporation or organization)
|
Primary
Standard Industrial
Classification
Code Number
|
(IRS
Employer Identification No.)
|
1736
Angel Falls Street
Las Vegas, NV
89142-1230
(Address
of principal executive offices
And zip
code)
(209)
694-4885
(Registrant's
telephone number, including area code)
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 o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
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
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
|
Accelerated
filer m
|
|
Non-accelerated filer o |
Smaller
reporting company x
|
|
(Do
not check if a smaller reporting company)
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes x No o
As of
October 24, 2011, there were 4,808,000 shares of the issuer's common stock
outstanding.
November 10, 2011
Net
Profits Ten Inc.
Form
10-Q
For
the Three Months and Nine Months Ended September 30, 2011
INDEX
PART
I – FINANCIAL INFORMATION
|
Page
|
|
Item
1.
|
Financial
Statements
|
|
Balance
Sheets as of September 30, 2011 and December 31,
2010 (Unaudited)
|
F-1
|
|
Statements
of Operations - For the three months and nine months ended September 30,
2011 and 2010 and from Inception (March 24, 2008) through September 30,
2011 (Unaudited)
|
F-2
|
|
Statement
of Stockholders’ Equity (Deficit)- From Inception (March 24, 2008)
through September 30, 2011 (Unaudited)
|
F-3
|
|
Statements
of Cash Flows - For the nine months September 30, 2011 and 2010 and from
Inception (March 24, 2008) through September 30, 2011
(Unaudited)
|
F-4
|
|
Notes
to Financial Statements (Unaudited)
|
F-5
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
3
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
10
|
Item
4.
|
Controls
and Procedures
|
10
|
PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
11
|
Item
1A.
|
Risk
Factors
|
11
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
21
|
Item
3.
|
Defaults
Upon Senior Securities
|
21
|
Item
4.
|
(Removed
and Reserved)
|
21
|
Item
5.
|
Other
Information
|
21
|
Item
6.
|
Exhibits
|
22
|
Signatures
|
22
|
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements.
NET
PROFITS TEN INC.
(A
Development Stage Company)
Balance Sheets
(Unaudited)
September
30,
2011
|
December
31,
2010
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 62 | $ | 2,392 | ||||
Prepaid
expenses
|
— | 131 | ||||||
Total
Current Assets
|
62 | 2,523 | ||||||
PROPERTY
AND EQUIPMENT, Net of accumulated depreciation of $1,909 and
$914
|
2,993 | 3,988 | ||||||
TOTAL
ASSETS
|
$ | 3,055 | $ | 6,511 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 1,813 | $ | 7,638 | ||||
Advances
from related party
|
28,207 | 8,708 | ||||||
Total
Current Liabilities
|
30,020 | 16,346 | ||||||
STOCKHOLDERS’
DEFICIT
|
||||||||
Preferred
stock, 50,000,000 shares authorized at par value of $0.0001, no shares
issued and outstanding
|
— | — | ||||||
Common
stock, 100,000,000 shares authorized at par value of $0.0001, 4,808,000
issued and outstanding
|
481 | 481 | ||||||
Additional
paid-in capital
|
40,319 | 40,319 | ||||||
Deficit
accumulated during the development stage
|
(67,765 | ) | (50,635 | ) | ||||
Total
Stockholders’ Deficit
|
(26,965 | ) | (9,835 | ) | ||||
TOTAL
LIABILITIES AND
|
||||||||
STOCKHOLDERS’
DEFICIT
|
$ | 3,055 | $ | 6,511 |
The
accompanying notes are an integral part of these financial
statements.
F-1
NET
PROFITS TEN INC.
(A
Development Stage Company)
Statements
of Operations
(Unaudited)
For
the Three
Months
Ended
September
30,
|
For
the Nine
Months
Ended
September
30,
|
From
Inception on
March
24, 2008
through
|
||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
September
30, 2011
|
||||||||||||||||
REVENUES
|
$ | — | $ | 2,599 | $ | — | $ | 7,592 | $ | 10,188 | ||||||||||
OPERATING
EXPENSES
|
||||||||||||||||||||
General
and administrative
|
4,432 | 12,387 | 17,130 | 31,134 | 77,953 | |||||||||||||||
Total
Operating Expenses
|
4,432 | 12,387 | 17,130 | 31,134 | 77,953 | |||||||||||||||
LOSS
FROM OPERATIONS
|
(4,432 | ) | (9,788 | ) | (17,130 | ) | (23,542 | ) | (67,765 | ) | ||||||||||
PROVISION FOR INCOME TAXES
|
— | — | — | — | — | |||||||||||||||
NET
LOSS
|
$ | (4,432 | ) | $ | (9,788 | ) | $ | (17,130 | ) | $ | (23,542 | ) | $ | (67,765 | ) | |||||
BASIC AND DILUTED LOSS PER COMMON
SHARE
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND
DILUTED
|
4,808,000 | 4,808,000 | 4,808,000 | 4,808,000 |
The
accompanying notes are an integral part of these financial statements.
F-2
NET
PROFITS TEN INC.
(A
Development Stage Company)
Statement
of Stockholders' Equity (Deficit)
(Unaudited)
Deficit
|
||||||||||||||||||||
Accumulated
|
Total
|
|||||||||||||||||||
Additional
|
During
the
|
Stockholders'
|
||||||||||||||||||
Common
Stock
|
Paid-in
|
Development
|
Equity
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Stage
|
(Deficit)
|
||||||||||||||||
Balance,
March 24, 2008
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||
Common
stock issued to founders for services at $0.0001 per
share
|
4,000,000
|
400
|
-
|
-
|
400
|
|||||||||||||||
Common
stock issued for cash at $0.05 per share
|
808,000
|
81
|
40,319
|
-
|
40,400
|
|||||||||||||||
Net
loss from inception through December 31,
2008
|
-
|
-
|
-
|
(14,319
|
)
|
(14,319
|
)
|
|||||||||||||
Balance,
December 31, 2008
|
4,808,000
|
481
|
40,319
|
(14,319
|
)
|
26,481
|
||||||||||||||
Net
loss for the year ended December 31,
2009
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Balance,
December 31, 2009
|
4,808,000
|
481
|
40,319
|
(14,319
|
)
|
26,481
|
||||||||||||||
Net
loss for the year ended December 31,
2010
|
-
|
-
|
-
|
(36,316
|
)
|
(36,316
|
)
|
|||||||||||||
Balance,
December 31, 2010
|
4,808,000
|
481
|
40,319
|
(50,635
|
)
|
(9,835
|
)
|
|||||||||||||
Net
loss for the nine months ended September 30,
2011
|
-
|
-
|
-
|
(17,130
|
)
|
(17,130
|
)
|
|||||||||||||
Balance,
September 30, 2011
|
4,808,000
|
$
|
481
|
$
|
40,319
|
$
|
(67,765
|
)
|
$
|
(26,965
|
)
|
The
accompanying notes are an integral part of these financial
statements.
F-3
NET
PROFITS TEN INC.
(A
Development Stage Company)
Statements
of Cash Flows
(Unaudited)
From
Inception on
|
||||||||||||
For
the Nine
|
For
the Nine
|
March
24, 2008
|
||||||||||
Months
Ended
|
Months
Ended
|
through
|
||||||||||
September
30,
|
September
30,
|
September
30,
|
||||||||||
2011
|
2010
|
2011
|
||||||||||
OPERATING
ACTIVITIES
|
||||||||||||
Net
loss
|
$ | (17,130 | ) | $ | (23,542 | ) | $ | (67,765 | ) | |||
Adjustments
to reconcile net loss to net cash from operating
activities:
|
||||||||||||
Depreciation
expense
|
995 | 341 | 1,909 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Prepaid
expenses
|
131 | - | - | |||||||||
Accounts
receivable
|
- | 26,481 | - | |||||||||
Accounts
payable
|
(5,825 | ) | 8,706 | 1,813 | ||||||||
Net
Cash Provided by (Used in)
Operating Activities
|
(21,829 | ) | 11,986 | (64,043 | ) | |||||||
INVESTING
ACTIVITIES
|
||||||||||||
Purchase
of property and equipment
|
- | (3,500 | ) | (4,902 | ) | |||||||
Net
Cash Used in Investing Activities
|
- | (3,500 | ) | (4,902 | ) | |||||||
FINANCING
ACTIVITIES
|
||||||||||||
Proceeds
from common stock issued
|
- | - | 40,800 | |||||||||
Proceeds
from related party payables
|
19,499 | - | 28,207 | |||||||||
Net
Cash Provided by Financing Activities
|
19,499 | - | 69,007 | |||||||||
NET
INCREASE (DECREASE) IN CASH
|
(2,330 | ) | 8,486 | 62 | ||||||||
CASH
AT BEGINNING OF PERIOD
|
2,392 | - | - | |||||||||
CASH
AT END OF PERIOD
|
$ | 62 | $ | 8,486 | $ | 62 | ||||||
SUPPLEMENTAL
DISCLOSURES OF
|
||||||||||||
CASH
FLOW INFORMATION CASH PAID FOR:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
Taxes
|
$ | - | $ | - | $ | - |
The
accompanying notes are an integral part of these financial
statements.
F-4
NET
PROFITS TEN INC.
(A
Development Stage Company)
Notes to
the Financial Statements
(Unaudited)
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business
Net
Profits Ten Inc. (the “Company”) was incorporated in the State of Nevada on
March 24, 2008. The Company is engaged in offering interactive software products
for the creation of an interactive digital yearbook designed for fundraising for
the military. During the year ended December 31, 2010, the Company
generated revenues from its planned operations; however, the Company is
classified as a development stage company since it has earned only nominal
amounts of revenue and is devoting most of its efforts to developing its
website, finalizing the design and development of its software,
and raising capital.
Basis of
Presentation
The
accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information in accordance with Securities and Exchange
Commission (SEC) Regulation S-X rule 8-03. In the opinion of
management, the unaudited interim financial statements have been prepared on the
same basis as the annual financial statements and reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly the
financial position and the results of operations and cash flows for the periods
presented. The financial data and other information disclosed in these notes to
the interim financial statements related to the period are unaudited. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for any subsequent quarters or for the entire year ending
December 31, 2011.
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 of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Subsequent
Events
The
Company’s management reviewed all material events through the date these
financial statements were issued for subsequent event disclosure
consideration.
Recent Accounting
Pronouncements
Management
has considered all recent accounting pronouncements issued since the last audit
of our financial statements. The Company’s management believes that these recent
pronouncements will not have a material effect on the Company’s financial
statements.
NOTE
2 - GOING CONCERN
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. However, the Company
has a working capital deficit of $29,958 at September 30, 2011, has generated
revenues of $10,188 since inception and has an accumulated deficit of $67,765 at
September 30, 2011. The Company currently has limited liquidity and
has not completed its efforts to establish a stabilized source of revenues
sufficient to cover operating costs over an extended period of
time. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
Management
anticipates that the Company will be dependent, for the near future, on
additional investment capital, primarily from its shareholders, to fund
operating expenses. The Company intends to position itself so that it may be
able to raise additional funds through the capital markets. In light of
management’s efforts, there are no assurances that the Company will be
successful in this or any of its endeavors or become financially viable and
continue as a going concern.
NOTE
3 – RELATED PARTY PAYABLES
Various
expenses of the Company, including general and administrative expenses and
professional fees, have been paid for or made by a related party. The related
party payable totals $28,207 at September 30, 2011, bears no interest, is
unsecured and due upon demand.
F-5
Item 2. Management's
Discussion and Analysis or Plan of Operations.
The
following discussion and analysis of our financial condition as of September 30,
2011. Our results of operations should be read in conjunction with our unaudited
financial statements and notes thereto included elsewhere in this report and the
audited financial statements and the notes thereto included in our Form 10-K for
the year ended December 31, 2010.
Forward-Looking
Statements
Some of
the statements contained in this report discuss future expectations, contain
projections of results of operations or financial condition, or state other
"forward-looking" information. The words "believe," "intend," "plan," "expect,"
"anticipate," "estimate," "project," "goal" and similar expressions identify
such a statement was made. These statements are subject to known and unknown
risks, uncertainties, and other factors that could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous
assumptions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to the risks discussed in this and our other
Securities and Exchange Commission (“SEC”) filings. We do not take any
responsibility to update forward-looking information to reflect actual results
or changes in assumptions or other factors that could affect those statements
except as otherwise provided by law. Future events and actual results could
differ materially from those expressed in, contemplated by, or underlying such
forward-looking statements.
Business
Overview
Unless
otherwise indicated, we use “Net Profits,” “the Company,” “we,” “our” and “us”
in this quarterly report to refer to the businesses of Net Profits Ten
Inc.
We were
incorporated on March 24, 2008 in the State of Nevada. We are focused on
marketing and distributing user-friendly interactive yearbook software for the
military. We have been doing business as Mil Yearbook. Our offices are currently
located at: 1736 Angel Falls Street, Las Vegas, Nevada 89142-1230.
Our telephone number is 1-209-694-4885. We have secured a domain name
– www.netprofitsten.com,
which is functional but requires further development as of the date of this
report, which website includes information we do not desire to be incorporated
by reference herein.
Objectives
We are in
the business of marketing and distributing user-friendly interactive yearbook
software for the military. The software is planned to allow our customers to
create and burn their own interactive digital memories on CD/DVD, as a “Mil Yearbook”,
assuming we are able to complete the design and development of the
software. Once a CD/DVD is created, customers will be able to sell
this Mil Yearbook as a fundraising venture for their particular organization
(see also the flow chart below). They will be able to watch and play with their
digital memories on a personal computer or DVD, or sell it to their friends and
family. Our software is planned to allow for uploading photos, video, music and
text to their Mil Yearbook. The finalization and design and development of
our software is subject to certain risks, as described in greater detail below
under “Risk
Factors,” and we may not be able to execute on our business plan and/or
complete the development of the software in the future.
Assuming
we are able to complete our business plan and finalize the development and
design of our software, the software will enable the military, as well as other
military related organizations (including veterans associations, any other
Military related organizations as defined below in the description of the
Licensing Agreement) to turn their videos, music and digital photos into an
interactive yearbook on CD/DVD, which may include pictures and videos featuring
vacations, field trips, sporting events, or for military personnel, may include
pictures and videos of such personnel’s basic training, special ops,
war games and other military activities for their friends and family to view.
Our target market is primarily the military, who may desire to capture their
military, base or basic training life or events on CD/DVD’s who wish to capture
their memories, trips, and events, in a fun and interesting way, and to be able
to save those memories to watch and play for years to come. Our
software is also intended to serve as a way for groups and organizations to
raise money through the sale of the CD/DVD’s created with our
software.
-3-
Moving
forward we plan to complete our website (which is currently functional, but
which we plan to further refine and expand) and the development of our product,
which is functional, but requires further development to include the processes
and modules described below. We currently market our Mil Yearbook
product on google.com, but plan to expand such marketing efforts in the future,
funding permitting, as described below.
Below is
a flow chart describing in greater detail the Company’s planned distribution
steps for its Mil Yearbook software:
For
example: each CD/DVD costs less than a $1 to produce and the Company believes
that each can possibly be sold for approximately $12-$25 per unit, with each CD
being sold for approximately $12 and each DVD (which holds more information
being sold for $20). The above sample prices represent the Company’s
estimates and beliefs of the fair values of the resulting products; however, the
Company does not have any evidence that such products will be able to be sold
for those prices, and final prices will be determined by individual customers,
based on their own estimation of the value of the product created and the
ultimate market for such product. Each group will keep 100% of the
profits of any sales, and as such, the ultimate price at which customers
determine to sell the products will not have any effect on the Company’s
revenues.
Our
software (which is still in development) involves the following simple
three-step process for the creation of the interactive Mil
Yearbook:
We intend
for our customers to use a simple three step process for the creation of
the interactive Mil Yearbook as follows:
·
|
Add
Media
|
Creates
galleries to put their pictures into. They then import photos and videos from a
digital camera, scanner, hard drive and the internet to the galleries they have
created.
·
|
Add
Text
|
There
will be different sections or categories built in to the CD/DVD where they can
add text such as:
1)
|
The
Phone Book – they will be able to add the names, phone numbers and
addresses of their fellow enlisted, commanding officer and emergency
numbers.
|
2)
|
The
Personnel Page – this section lets them add the names and rank of their
friends and family.
|
3)
|
The
Galleries – this is where they will be able to add text naming their
Galleries of pictures and add names or stories to each individual
picture.
|
·
|
Add
Audio
|
-4-
This
section lets the enlisted member add his or her favorite music or sound to the
digital memories software.
When
completed, our website will enable customers to place orders, purchase and
download the software. Once the customer elects to purchase our product they are
then directed to our order fulfillment page to complete their order billing and
shipping information if they request a hard copy, rather than download the
software from our website. The customer is then asked to agree with our terms
and conditions of sale, and if in agreement, they are directed to the checkout
page where PayPal information is requested. On completion, a final step displays
the order and payment information for final confirmation by the
customer. The customer then receives an email summarizing the order,
shipping and payment information. We receive an identical email for
order processing and fulfillment.
Once we
set up our website and complete our software development, customers will be able
to purchase and download our software directly from our website. We plan to
price our software at between $499 for the simple stripped down version of the
software and $1,299 including additional functions which are not operational yet
including a private-chat function, multiple party capabilities and templates, in
US dollars and we also plan to offer a downloadable version and a slightly
higher priced boxed or hard copy version, depending on several factors including
the final features which make it into the product and overall demand. Currently,
we are offering the basic version of our software at $500; however, that price
may change in the future. Our revenues will come from online sales of
our software.
Status
of Software Development
We
currently have made limited sales of a basic stripped down operational version
for our Mil Yearbook software based on the Technology (defined
below). The software is however currently being further refined to
include additional capabilities which may include a private-chat like feature as
well as the ability of the software to be used by multiple parties (i.e., so
that more than one person can work on the same project), which the programmer
engaged by the Company as provided below under “Material Agreements,”
is in the process of completing. The Company hopes to have those
items completed by the end of September 2011, funding permitting; however the
Company may require additional time for beta-testing the completed
product. We also anticipate that our website (which is currently
operational in a limited capacity) will be fully operational by the end of March
2012.
Material
Agreements
In June
2010, we entered into an agreement with a programmer, pursuant to which the
programmer is to complete the development of the Mil Yearbook software and the
Company’s website in consideration for an aggregate of $3,500 which was due and
payable by June 14, 2010, and which funds have been paid to date, and $4,500
which was due and payable by December 1, 2010, subject to the programmer
completing the development of the Mil Yearbook software as described in the
agreement. The Company had not remitted payment to the unrelated
third party as of the date of this filing, since the programmer had not
completed the development of the software. The Company will remit the $4,500 to
the third party upon the completion of the development of the software, which
the Company anticipates to be completed by March 2012.
On
October 11, 2010, the Company entered into a Licensing Agreement (the “Licensing Agreement”)
with RN Consulting Services, d/b/a YearBook Alive Software, an entity controlled
by Ruthy Navon, our promoter and former Secretary (“RN
Consulting”). The Licensing Agreement amended, replaced and
superseded a prior Reseller Agreement entered into between RN Consulting (in the
name of Yearbook Alive Software) and the Company on or around March 1,
2008.
Pursuant
to the Licensing Agreement, RN Consulting agreed to provide us an exclusive,
limited, non-transferable (except in connection with the sale of our products)
license to use, market, sell and distribute certain software which RN Consulting
owns, which allows users to create and burn interactive digital memories on
CD/DVD (the “Technology”) in
software and products we sell and plan to sell to the Military (the “License”). “Military” is defined
in the Licensing Agreement as military personnel, servicepersons, persons in the
military reserves; persons in training for a career in and/or service in the
military (including cadets and the ROTC (Reserve Officers’ Training Corp);
military organizations (located throughout the world), organizations with
functions similar to the military such as the coast guard, national guard or
foreign legion); and current, former or retired military personnel.
-5-
In
December 2010, the Company entered into a First Addendum to the Licensing
Agreement, effective as of the effective date of the Licensing Agreement, to
clarify and confirm that RN Consulting would provide technical software support
to the Company and to customers of the Company, at no cost to the
Company.
We have
used and plan to continue to use the Technology (which RN Consulting, through
YearBook Alive, mainly markets to schools and school related organizations) as a
framework on which to add additional modules and functions and to expand the
functionality of such Technology in order to better market our products to and
make such products more appealing to the Military. The License also
provides us the right to use any and all of RN Consulting’s trademarks and
tradenames in connection with the marketing, advertising and sale of products
during the term of the License.
Pursuant
to the Licensing Agreement, no fees are due to RN Consulting under the License
until July 31, 2011, subsequent to which we agreed to pay RN Consulting 10% of
any of our net sales (i.e., total sales after taxes) related to the use of the
Technology, payable monthly in arrears during the term of the
License. The License terminates immediately upon the termination of
the Licensing Agreement.
The
License remains in effect until the earlier of (a) the mutual written consent of
the parties; (b) the occurrence of any act, which by law, would require the
License to terminate; (c) the bankruptcy of either party; or (d) upon thirty
days written notice by a non-breaching party, upon the material breach of a
material obligation of or the gross negligence in connection with the
fulfillment of the duties of such party in connection with the Licensing
Agreement by the other party, provided that such breaching party does not cure
such breach within such 30 day notice period. Upon termination
of the License, we are provided the right of ownership to any refinements,
additional modules, enhancements or modifications to the Technology which we
create, provided that such refinements do not otherwise infringe on the
License.
Pursuant
to the Licensing Agreement, and in an effort to avoid conflicts of interest and
competition between the Company and RN Consulting, we agreed to refer any
non-Military customers or potential customers to RN Consulting and RN Consulting
agreed to refer any Military customers or potential customers to
us. Furthermore, both parties agreed not to compete with the
other.
Distribution
of Software
We plan
to price our software at between $499 and $1,299 in US dollars offering a
downloadable version and a slightly higher priced boxed or hard copy version,
depending on several factors including the final features which make it into the
product and overall demand. Currently, we are offering the basic version of our
software at $500, however, that price may change in the future. We hope that the
majority of our sales moving forward will come from online sales of our
software. We hope to finalize the final version of the software by
March 2012.
Moving
forward, we plan to enter into an agreement with PayPal to act as our credit
card merchant. PayPal is a financial company that accepts and clears all
customer credit card payments on behalf of participating merchants, such as our
company. There are no short or long term contracts or obligations associated
with the use of PayPal. PayPal accepts all major credit cards (Visa,
MasterCard, Discover, American Express, ECheque, and transfer of funds to and
from bank accounts.)
Our
Target Market
We plan
to market our interactive digital software to the military, as well as other
military organizations who routinely undertake fund raising activities
throughout the United States and then Australia and Europe. This gives us the
opportunity to estimate the number of potential customers within our target
market.
According
to the following surveys in the United States, our target market in the United
States alone is very large:
-6-
According
to the Association of Military Colleges and Schools of the United
States, www.amcsus.com there
are approximately 30 private secondary schools dedicated to Military Education
(www.amcus.com,
“Directory of
Schools”, retrieved July 27, 2010).
According
to The Military Zone, there is over 200 hundred military bases (including camps,
forts and facilities) within the United State alone (http://themilitaryzone.com/military_bases.html,
“Information about US
Military Installations,” retrieved July 27, 2010).
The
American Legion is a community service organization with close to 3 million
members, men and women, organized in nearly 14,000 local American Legion Posts,
worldwide (http://en.wikipedia.org/wiki/American_Legion,
“American
Legion”, retrieved July 27, 2010).
An
additional Veterans Organization is the American Red Cross, which according to
their website www.redcross.org has
nearly 700 American Red Cross chapters in the United States alone (www.redcross.org,
“About Us”,
retrieved July 27, 2010).
The U.S.
Census Bureau’s estimate for the number of veterans in 2008, is over 23 million
people (www.census.gov/compendia/statab/cats/national_security_veterans_affairs/veterans.html,
“508 – Veterans by
Sex, Period of Service and State, 2008”, retrieved July 27,
2010).
Based on
the foregoing information, we believe that if we are able to make our products
attractive to only a small percentage of our target market in North America will
be able to generate the revenues we believe we require to sustain our
operations. There can be no assurance, however, that our software products will
appeal to our target market.
Competition
Net
Profits Ten’s competition comes from several industry participants which include
companies such as Yearbook Warehouse (http://www.yearbookwarehouse.com)
and E-Yearbook (http://www.e-yearbook.com),
however, we are not aware of any military yearbook suppliers offering digital
services at this time.
Our
plan of operation
To
establish ourselves as a company that will market and distribute interactive
military fundraising software called Mil Yearbook. Distribution would primarily
be via download from the Internet directly to the military and other military
clubs and organizations. The distribution of our software is subject
to our being able to finalize and complete the design and development of such
software as described above.
Our
target market
Our
initial target market is the military units, and other military clubs and
organizations in the United States, Europe and Australia.
Our
mission
To take
photographic memories to a new level by using a vast collection of photos,
video, audio and text in an interactive, and very easy to use interactive
software which is planned to be used for storing digital memories as a
fundraising tool for the particular military organization.
Our
business objectives are:
·
|
To
further develop and market an interactive software (using the
Technology licensed through the Licensing Agreement (described above) as a
framework) that will benefit the military and military
organizations giving them the opportunity to not just create but also
burn their own memories on CD/DVD for their friends, family and themselves
and then sell that CD/DVD for fundraising.
|
|
·
|
To
execute our web-based marketing campaign and to create interest in our
product.
|
|
·
|
To
establish a brand name that will be associated with user-friendly
interactive digital software.
|
During the first stages of our growth,
our officers and Directors will provide all of the labor required to execute
our
-7-
business
plan at no charge, except we intend to hire a website programmer on a contract
basis for two months beginning in approximately Feb 2012, at an estimated cost
of $5,000 to finish and upgrade our website and we plan to outsource final
software development tasks at an estimated total cost of $8,000, of which $3,500
has been paid and the remaining $4,500 we plan to pay out of our working capital
and through funds raised through the sale of debt or equity securities and/or
traditional bank funding. The Licensing Agreement provides that we
have the right to use the Technology free of charge until July 31, 2011, at
which time we are required to pay RN Consulting 10% of the net sales (i.e.,
total sales after taxes) relating to such Technology. As such, we do
not anticipate having any expenses in connection with the Licensing Agreement
until March 31, 2012, at which time the only fees due would be in direct
relationship to our total sales.
Estimated
Expenses for the Next Twelve-Month Period
The
following provides an overview of our estimated expenses to fund our plan of
operation over the next twelve months. We plan to pay for such
expenses as described below under “Liquidity and Capital
Resources.”
Description
|
Fees
(1)
|
|||
Legal,
Accounting and Transfer Agent Fees*
|
$ | 20,000 | ||
Software
Development
|
$ | 8,000 | ||
Website
Development
|
$ | 5,000 | ||
Marketing
and Advertising
|
$ | 5,000 | ||
Office
Rent
|
$ | 1,000 | ||
Office
Equipment and supplies
|
$ | 1,000 | ||
Total
|
$ | 40,000 |
(1)
Approximate. As stated above, no fees or expenses are due in connection with the
Licensing Agreement until July 31, 2011, at which time the only fees due would
be in direct relationship to our total sales (i.e., 10% of total sales in
connection with the Technology), and as such, no expenses associated with the
License have been included in the table above.
*
Includes additional legal, accounting and filing costs which we will incur
moving forward after we become a fully reporting company and fees and expenses
associated with our ongoing periodic and current report filing
obligations.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2010
We
generated no revenues for the three months ended September 30, 2011, compared to
$2,599 in revenues for the three months ended September 30, 2010. We
have generated a total of $10,188 of revenues since inception.
We had
operating expenses of $4,432 for the three months ended September 30, 2011,
compared to $12,387 in operating expenses for the three months ended September
30, 2010, which decrease was due to the fact that we had no sales during the
three months ended September 30, 2011. Operating expenses for the
three months ended September 30, 2011 and 2010 included $4,432 and $12,171 of
professional fees, respectively. We had a net loss of $4,432 for the three
months ended September 30, 2011 compared to $9,788 in 2010. We anticipate our
operating expenses will increase as we implement our business plan.
RESULTS
OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 2010
We
generated no revenues for the nine months ended September 30, 2011, compared to
$7,592 in revenues for the nine months ended September 30, 2010. We
have generated a total of $10,188 of revenues since inception.
We had
operating expenses of $17,130 for the nine months ended September 30, 2011,
compared to $31,134 in operating expenses for the nine months ended September
30, 2010, which decrease was due to the fact that we had no sales during the
nine months ended September 30, 2011. Operating expenses for the nine
months ended September 30, 2011 and 2010 included $17,130 and $28,165 of
professional fees, respectively. We had a net loss of $17,130 for the nine
months ended September 30, 2011 compared to $23,542 in 2010. We anticipate our
operating expenses will increase as we implement our business plan.
-8-
LIQUIDITY AND
CAPITAL RESOURCES
We have
raised $400 from the sale of stock to our officer and Directors and $40,400
through a private placement to 38 non-affiliated investors. At September 30,
2011, we had a working capital deficit of $29,958, which represented $62 of cash
offset by $30,020 of current liabilities, including $1,813 of accounts payable
and $28,207 of advances from a related party, which accrue no interest and are
payable on demand. We had a deficit accumulated during the
development stage of $67,765 as of September 30, 2011.
We had
net cash used in operating activities of $21,829 for the nine months ended
September 30, 2011, which mainly consisted of the net loss of $17,130 for the
nine months ended September 30, 2011 and $5,825 of decrease in accounts payable
and accrued expenses.
We had
$19,499 of net cash provided by financing activities for the nine months ended
September 30, 2011, which was solely due to proceeds borrowed from
a related party.
In the
opinion of our management, funds currently available will not satisfy our
working capital requirements for the next twelve months. Estimated funding
required during the twelve-month period is $40,000. Given our cash
position of $62 as of September 30, 2011, we will experience a shortfall in the
next twelve months. How
long we will be able to satisfy our cash requirements depends on how quickly we
can generate revenue and how much revenue can be generated. We
estimate that our current cash balances will be extinguished by October
2011.
In June
2008, we sold an aggregate of 808,000 shares of our common stock for aggregate
consideration of $40,400 ($0.05 per share) to 38 offshore
investors.
We have
not generated significant revenues from our operations to date. We will require
additional funds to implement our plans and anticipate the need for
approximately $40,000 over the next 12 months to continue our operations and pay
expenses associated with us being a public reporting company. These funds may be
raised through equity financing, debt financing, or other sources, which may
result in the dilution in the equity ownership of our shares. We will also need
more funds if the costs of the development of our website are greater than we
have budgeted. We will also require additional financing to sustain our business
operations if we are not successful in generating significant revenues. We
currently do not have any arrangements for further financing and we may not be
able to obtain financing when required. Our future is dependent upon our ability
to obtain financing.
Our
continuation is dependent upon us raising additional capital. In this regard we
have raised additional capital through private placements, but we will
still require additional funds to continue our operations and
plans.
The
continuation of our business is dependent upon us obtaining further financing,
further development of our software and website, a successful marketing and
promotion program, attracting and, further in the future, achieving a profitable
level of operations. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash
commitments.
There are
no assurances that we will be able to obtain further funds required for our
continued operations. We will pursue various financing alternatives to meet our
immediate and long-term financial requirements. There can be no assurance that
additional financing will be available to us when needed or, if available, that
it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will be unable to conduct
our operations as planned, and we will not be able to meet our other obligations
as they become due. In such event, we will be forced to scale down or perhaps
even cease our operations.
Off-Balance Sheet
Arrangements
None.
-9-
Recent Accounting
Pronouncements
For the
nine month period ended September 30, 2011, there were no accounting standards
or interpretations issued that are expected to have a material impact on
our financial position, operations or cash flows.
Item 3. Quantitative
and Qualitative Disclosures About Market Risk.
Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to
provide the information required by this Item as it is a “smaller reporting
company,” as defined by Rule 229.10(f)(1).
Item
4. Controls and Procedures.
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), we have carried out an evaluation of the effectiveness of
the design and operation of our Company's disclosure controls and procedures as
of the end of the period covered by this quarterly report, being September 30,
2011. This evaluation was carried out under the supervision and with
the participation of our Company's management, including our President,
Principal Executive Officer and Principal Financial Officer. Based
upon that evaluation, our President, Principal Executive Officer and Principal
Financial Officer concluded that our disclosure controls and procedures are
not effective as of the end of the period covered by this report due to the
material weaknesses described in Management's Report on Internal Control over
Financial Reporting included in our annual report on Form 10-K for the year
ended December 31, 2010.
There
have been no significant changes in our Company's internal controls or in other
factors, which could significantly affect internal controls subsequent to the
date we carried out our evaluation. Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information
required to be disclosed in our Company's reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed in our Company's reports filed under the
Exchange Act is accumulated and communicated to management, including our
Company's president and Principal Executive Officer as appropriate, to allow
timely decisions regarding required disclosure.
There
have been no changes in our internal controls over financial reporting during
the most recently completed fiscal quarter that have materially affected or are
reasonably likely to materially affect the Company’s internal control over
financial reporting.
-10-
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings.
We know
of no material, existing or pending legal proceedings against our Company, nor
are we involved as a plaintiff in any material proceeding or pending
litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our interest.
Item 1A. Risk
Factors.
An
investment in our common stock involves a high degree of risk. You should
carefully consider the following factors and other information in this report
and our Annual Report on Form 10-K, before deciding to invest in our company. If
any of the following risks actually occur, our business, financial condition,
results of operations and prospects for growth would likely suffer. As a result,
you could lose all or part of your investment.
RISKS
RELATED TO OUR BUSINESS
Because
we have not generated revenues sufficient to cover our operating expenses and
have incurred losses for the period from March 24, 2008 (inception)
to September 30, 2011 there is an uncertainty about whether we will be able
to continue as a going concern and, as a result, a possibility that shareholders
may lose some or all of their investment in our company.
We
generated revenues of $10,188 during the period from inception (March 24, 2008)
through September 30, 2011, and did not generate any revenues for the nine
months ended September 30, 2011. As of September 30, 2011, we had a working capital
deficit of $29,958 and a total accumulated deficit of $67,765. We
anticipate generating losses for the next 12 months. Therefore, we may be unable
to continue operations in the future as a going concern. If
financing is available, it may involve issuing securities senior to our common
stock. In addition, in the event we do not raise additional capital
from conventional sources, such as our existing investors or commercial banks,
there is every likelihood that our growth will be restricted and we may be
forced to scale back or curtail implementing our business plan.
No
adjustment has been made in the accompanying financial statements to the amounts
and classification of assets and liabilities, which adjustment may have to be
made, should we be unable to continue as a going concern. If we cannot continue
as a viable entity, our shareholders may lose some or all of their investment in
the Company.
We
just recently began generating revenues and we face many obstacles as a startup
venture. We may never be able to execute our business plan.
We were
incorporated on March 24, 2008. We are focused on the development and marketing
of an interactive “yearbook” software
product for the military, for the purpose of fundraising. This product is
called, “Mil
Yearbook", which we have been doing business as. Although we
have begun the development, marketing and sale of Mil Yearbook, we may not be
able to fully execute our business plan unless and until we are successful in
raising additional funds.
We may
not be able to obtain additional necessary funding. We generated
revenues of $10,188 during the period from inception (March 24, 2008) through
September 30, 2011, and did not generate any revenues for the nine months ended
September 30, 2011. There can be no assurance that we will ever
achieve any profitability or revenues sufficient to support our operations. The
revenue and income potential of our proposed business and operations are
unproven, and the lack of an operating history makes it difficult to evaluate
the future prospects of our business.
-11-
Because
our business plan may be unsuccessful, we may not be able to continue operations
as a going concern.
Our
ability to continue as a going concern is dependent upon our generating cash
flow sufficient to fund operations and reduce operating expenses. Our business
plans may not be successful in addressing these issues.
The
success of our business plan is dependent on our further developing and
marketing of the Mil Yearbook. Our ability to market
such software is unproven, and the lack of an operating history makes it
difficult to validate our business plan. If we cannot continue as a going
concern, our stockholders may lose their entire investment in our
company.
Because
we expect to incur losses over the next 12 months, our stockholders may lose
their entire investment in us.
We
generated revenues of $10,188 during the period from inception (March 24, 2008)
through September 30, 2011, which were not sufficient to offset the expenses
associated with our operations, and the marketing of, our software.
We cannot
guarantee that we will ever be successful in generating sufficient revenues to
support our operations in the future. We recognize that if we are unable to
generate sufficient revenues, we will not be able to earn profits or continue
operations.
Our
ability to continue as a going concern is dependent upon our generating cash
flow sufficient to fund operations and reduce operating expenses. Our business
plans may not be successful in addressing these issues.
The
success of our business plan is dependent on our improvement and marketing of
the Mil Yearbook. Our ability to market
such software is unproven, and the lack of an operating history makes it
difficult to validate our business plan. If we cannot continue as a going
concern, our stockholders may lose their entire investment in our
company.
Because
we have no operating history there is no assurance that our future operations
will result in profitable operations.
There is
no operating history upon which to base any assumption as to the likelihood that
we will prove successful, and we cannot provide investors with assurances that
we will generate operating revenues sufficient to support our operations or ever
achieve profitable operations. If we are unsuccessful in addressing these risks,
our business will most likely fail.
We were
incorporated on March 24, 2008, and have very limited
operations. While we have not realized any material revenues to date,
a beta version of the Mil Yearbook is ready for commercial sale, however we
do not expect the full version to be completed until April 2012. We have no
operating history at all upon which an evaluation of our future success or
failure can be made. As of September 30, 2011, we had a working capital
deficit of $29,958 and a total accumulated deficit of $67,765, and expect to
have net losses over the next 12 months. These losses will come due to
substantial costs and expenses associated with the further development,
marketing and distribution of our software.
In the
future, our success will be dependent upon the success of our efforts to gain
market acceptance of our Mil Yearbook. If we cannot attract a significant number
of customers due to the target market not being as responsive as we anticipate,
we cannot guarantee that we will ever be successful in generating revenues to
support our operations in the future to ensure our continuation.
-12-
Because
we have not generated any significant revenue from our business and we will need
to raise funds in the near future, which may be difficult to obtain when
required, we might be forced to discontinue our business.
As of
September 30, 2011, we had a working capital
deficit of $29,958 and a total accumulated deficit of $67,765, and we anticipate
incurring costs of at least $40,000 within the next 12 months, which we hope to
raise through the sale of debt or equity securities and/or through traditional
bank funding.
Because
we have not generated any revenue from our business, we will need to raise
additional funds for the future development of our business and to be able to
respond to unanticipated requirements or expenses. We do not currently have any
arrangements for financing and we can provide no assurance to investors that we
will be able to find such financing if required. The most likely source of
future funds presently available to us will be through the sale of equity
capital. Any sale of share capital will result in dilution to existing
shareholders. Furthermore, there is no assurance that we will not incur debt in
the future, that we will have sufficient funds to repay our future indebtedness
or that we will not default on our future debts, jeopardizing our business
viability.
We may
not be able to borrow or raise additional capital in the future to meet our
needs or to otherwise provide the capital necessary to conduct business, which
might result in the loss of some or all of your investment in our common stock.
There can be no assurance that additional financing will be available to us on
terms that are acceptable. Consequently, we may not be able to proceed with our
intended business plans. Substantial additional funds will still be required if
we are to reach our goals that are outlined in this filing. Without additional
funding, we may not continue our planned business operations.
Because
we are dependent on contracting with third party firm(s) to maintain our
software for us, our operations and financial stability may be adversely
affected.
We intend
to hire a software development firm(s) to maintain our Mil Yearbook software. We
have estimated the total costs for this purpose at $8,000 (as of September 30,
2011 we had paid $3,500 of this cost). If we are unable to
contract qualified software development firm(s) to maintain our software,
whether because we cannot find them, cannot attract them to our company, or
cannot afford them, we will not be able to continue our planned business
operations.
If
we are not able to finalize the further development and marketing of our website
or if the developed website contains defects, we may not be able to generate
significant revenues and shareholders will lose their investment.
The
success of our business in part will depend on the marketing, completion and
acceptance of our website by our online target market. Achieving such acceptance
will require significant marketing investment. We have estimated the costs for
the further development of our website at $5,000.
Our
website may contain undetected design faults and software errors that are
discovered only after it has been viewed and used by customers. Any such default
or error could cause delays and further expenses and could adversely affect our
competitive position and cause us to lose potential customers or opportunities.
If this is the case, we may not generate revenues at sufficient levels to
support our operations and build our business and our business will likely
fail.
If
we are not able to find significant retail suppliers, re-sellers or
distributors, we may not be able to generate significant revenues and
shareholders may lose their investment.
The
success of our business in part will depend on developing and maintain
relationships with retail suppliers, re-sellers and/or distributors. Achieving
such acceptance will require significant time and marketing
investment.
If we are
unable to build these relationships with retail suppliers, re-sellers or
distributors to sell our software this could adversely affect our competitive
position and cause us to lose potential customers or opportunities. Also, if we
are accepted by retail suppliers, re-sellers or distributors but do not generate
revenues at sufficient levels to support our operations and build our business,
our business will fail.
-13-
Because we rely on subcontractors for
the programming and maintenance of critical elements of our website, the loss of
these services will adversely affect our operations and ability to generate
revenues.
We rely
on subcontractors for the programming and maintenance of critical elements of
our website, including integrating the billing process, tracking of the online
sales and the basic maintenance and backup of our servers. If one of these
subcontractors no longer provides service to us or there is a delay in their
services, our business may be harmed. We rely on subcontractors for the
maintenance and ongoing upgrades of the Net Profits Ten Inc. website. We also
will rely on subcontractors for tasks such as firewall protection, application
of security patches and regular backup of our servers' data.
After
contracting with these subcontractors there is no assurance that they will
continue to reliably deliver the above services. Should a subcontractor cease to
provide their services to us, our operations will be terminated until such time
as we can locate and retain a replacement subcontractor. During such time our
business will suffer.
Risks
Related to our Company
Our
executive officers control a majority of our voting securities and therefore
they have the ability to influence matters affecting our
shareholders.
Our
executive officers beneficially own approximately 83.19% of the issued and
outstanding shares of our common stock. As a result, they have the ability to
influence matters affecting our shareholders and will therefore exercise control
in determining the outcome of all corporate transactions or other matters,
including the election of Directors, mergers, consolidations, the sale of all or
substantially all of our assets, and also the power to prevent or cause a change
in control. Any investor who purchases shares will be a minority shareholder and
as such will have little to no say in the direction of the Company and the
election of Directors. Additionally, it will be difficult if not impossible for
investors to remove our current Directors, which will mean they will remain in
control of who serves as officers of the Company as well as whether any changes
are made in the Board of Directors. As a potential investor in the Company, you
should keep in mind that even if you own shares of the Company's common stock
and wish to vote them at annual or special shareholder meetings, your shares
will likely have little effect on the outcome of corporate decisions. Because
our executive officers control such shares, investors may find it difficult to
replace our management if they disagree with the way our business is being
operated.
Because
our executive officers and Directors live outside of the United States, you may
have no effective recourse against them for misconduct and may not be able to
enforce judgment and civil liabilities against them. Investors may not be able
to receive compensation for damages to the value of their investment caused by
wrongful actions by our Directors and officers.
Both of
our Directors and officers live outside of the United States.
Mr. Gilad
David, our President, Treasurer and Director, is a citizen and a resident of
Israel, and all or a substantial portion of his assets are located outside of
the United States.
Mr. Fouad
Dasuka, our Director, is a citizen and a resident of Israel, and all or a
substantial portion of his assets are located outside of the United
States.
As a
result, it may be difficult for investors to enforce within the United States
any judgments obtained against our Directors or officers, or obtain judgments
against them outside of the United States that are predicated upon the civil
liability provisions of the securities laws of the United States or any state
thereof. Investors may not be able to receive compensation for damages to the
value of their investment caused by wrongful actions by our Directors and
officers.
Our
officers and Directors lack experience in and with publicly-traded
companies.
While we
rely heavily on Mr. Gilad David, our President, Treasurer and Director and Mr.
Fouad Dasuka, our Director, they have no experience serving as an officer or
Director of a publicly-traded company, or experience with the reporting
requirements which public companies are subject to. Consequently, our
operations, earnings and ultimate financial success could suffer irreparable
harm due to their ultimate lack of experience with publicly-traded companies in
general.
-14-
Because
we have two Directors, deadlocks may occur in our board’s decision-making
process, which may delay or prevent critical decisions from being
made.
Since we
currently have an even number of Directors, deadlocks may occur when such
Directors disagree on a particular decision or course of action. Our Articles of
Incorporation and By-Laws do not contain any mechanisms for resolving potential
deadlocks. While our Directors are under a duty to act in the best interest of
our company, any deadlocks may impede the further development of our business in
that such deadlocks may delay or prevent critical decisions regarding our
development.
Because
our executive officers are unable to devote their services to our company on a
full time basis, the performance of our business may suffer, our business could
fail and investors could lose their entire investment.
Mr. Gilad
David, our President, Treasurer and a Director, currently devotes approximately
20 to 25 hours per week to our company.
Mr. Fouad
Dasuka, our Director, currently devotes 20 to 25 hours a week to our
company.
We depend
heavily on the services of our executive officers and Directors. As a
result, the management of our company could under-perform, our business could
fail and investors could lose their entire investment.
Shareholders
who hold unregistered shares of our common stock are subject to resale
restrictions pursuant to Rule 144, due to our status as a “shell
company.”
Pursuant
to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is
defined as a company that has no or nominal operations; and, either no or
nominal assets; assets consisting solely of cash and cash equivalents; or assets
consisting of any amount of cash and cash equivalents and nominal other
assets. As such, we are a “shell company”
pursuant to Rule 144, and as such, sales of our securities pursuant to Rule 144
are not able to be made until 1) we have ceased to be a “shell company”; 2) we
are subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, and have filed all of our required periodic reports for at least the
previous one year period prior to any sale pursuant to Rule 144; and a period of
at least twelve months has elapsed from the date “Form 10 information”
has been filed with the Commission reflecting the Company’s status as a
non-“shell
company.” Because none of our non-registered securities can be
sold pursuant to Rule 144, until at least a year after we cease to be a “shell company”, any
non-registered securities we sell in the future or issue to consultants or
employees, in consideration for services rendered or for any other purpose will
have no liquidity until and unless such securities are registered with the
Commission and/or until a year after we cease to be a “shell company” and
have complied with the other requirements of Rule 144, as described
above. As a result, it may be harder for us to fund our operations
and pay our consultants with our securities instead of
cash. Furthermore, it will be harder or us to raise funding through
the sale of debt or equity securities unless we agree to register such
securities with the Commission, which could cause us to expend additional
resources in the future. Our status as a “shell company” could
prevent us from raising additional funds, engaging consultants, and using our
securities to pay for any acquisitions (although none are currently planned),
which could cause the value of our securities, if any, to decline in value or
become worthless.
Because
our executive officers have no experience or technical training in the
development, maintenance and marketing of internet websites or in operating
businesses that license software or services over the internet, we are likely to
make inexperienced or uninformed decisions that will have bad results for
us.
Our
executive officers have no experience or technical training in the development,
maintenance and marketing of internet websites or in operating businesses that
market software or services over the internet. Due to their lack of
experience and knowledge in these areas, our executive officers could make the
wrong decisions regarding the development, operation and marketing of our
website and the operation of our business, which could lead to irreparable
damage to our business. Consequently, our operations could suffer
irreparable harm from mistakes made by our executive officers and we may have to
suspend or cease operations, which could cause investors to lose their entire
investment.
-15-
Because
we depend heavily on our executive officers, the loss of either person will
have a substantial negative effect on our business and may cause our business to
fail.
We depend
entirely on our executive officers for all of our operations. The loss of either
person will have a substantial negative effect on us and may cause our business
to fail. Our executive officers did not receive any compensation for their
services and it is highly unlikely that they will receive any compensation
unless and until we generate substantial revenues.
We do not
have any employment agreements or maintain key person life insurance policies on
our executive officers. If our executive officers do not devote sufficient time
towards our business, we may never be able to effectuate our business
plan.
Shareholders
may be diluted significantly through our efforts to obtain financing and satisfy
obligations through the issuance of additional shares of our common
stock.
We have
no committed source of financing. Wherever possible, our Board of Directors will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of restricted shares of
our common stock. Our Board of Directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued shares
of common stock. In addition, if a trading market develops for our common stock,
we may attempt to raise capital by selling shares of our common stock, possibly
at a discount to market. These actions will result in dilution of the ownership
interests of existing shareholders, may further dilute common stock book value,
and that dilution may be material. Such issuances may also serve to enhance
existing management’s ability to maintain control of the Company because the
shares may be issued to parties or entities committed to supporting existing
management.
Nevada
law and our articles of incorporation authorize us to issue shares of stock,
which shares may cause substantial dilution to our existing
shareholders.
We have
authorized capital stock consisting of 100,000,000 shares of common stock,
$0.0001 par value per share and 50,000,000 shares of preferred stock, $0.0001
par value per share. As of the date of this report, we have 4,808,000 shares of
common stock issued and outstanding and – 0 – shares of Preferred Stock issued
and outstanding. As a result, our Board of Directors has the ability
to issue a large number of additional shares of common stock without shareholder
approval, which if issued could cause substantial dilution to our then
shareholders. Additionally, shares of Preferred Stock may be issued
by our Board of Directors without shareholder approval with voting powers, and
such preferences and relative, participating, optional or other special rights
and powers as determined by our Board of Directors, which may be greater than
the shares of common stock currently outstanding. As a result, shares
of Preferred Stock may be issued by our Board of Directors which cause the
holders to have super majority voting power over our shares, provide the holders
of the Preferred Stock the right to convert the shares of Preferred Stock they
hold into shares of our common stock, which may cause substantial dilution to
our then common stock shareholders and/or have other rights and preferences
greater than those of our common stock shareholders. Investors should keep in
mind that the Board of Directors has the authority to issue additional shares of
common stock and Preferred Stock, which could cause substantial dilution to our
existing shareholders. Additionally, the dilutive effect of any
Preferred Stock, which we may issue may be exacerbated given the fact that such
Preferred Stock may have super majority voting rights and/or other rights or
preferences which could provide the preferred shareholders with voting control
over us subsequent to this filing and/or give those holders the power to prevent
or cause a change in control. As a result, the issuance of shares of
common stock and/or Preferred Stock may cause the value of our securities to
decrease and/or become worthless.
-16-
Risks
Related to Developing our Software
Because
we may not be successful in further developing software that will achieve market
acceptance, we may not be able to achieve profitable operations.
The
success or failure of further developing and marketing the interactive military
software for fundraising, Mil Yearbook, depends in large part on its
desirability and ease of application in the target market. We cannot be sure
that our development efforts will produce software that will fulfill the needs
and appeal to the tastes of our expectant customers and clients.
The
software industry is characterized by technological change, frequent product
introductions and evolving industry standards. Our success will depend, to a
significant extent, on our ability to introduce upgrades or new software
products to satisfy an expanding range of customer needs and achieve market
acceptance.
Because we may never be able to
achieve sales revenues sufficient to become profitable, we could experience
continual losses and eventually fail in our business plan.
There can
be no assurance that our software will achieve a level of market acceptance that
will make us profitable.
We
believe that the acceptance of our software products will depend on our ability
to:
·
|
Develop
a user-friendly software product that appeals to our potential clients and
customers.
|
|
·
|
Effectively
market our software through our website as well as, resellers and
distributors.
|
|
·
|
Price
and license the software products in a manner that is appealing to
potential customers.
|
|
·
|
Develop
and maintain a favorable reputation among our potential clients and
customers.
|
|
·
|
Develop
brand recognition.
|
|
·
|
Have
the financial ability to withstand downturns in the general economic
environment or conditions that would slow the licensing of our software
products.
|
Commerce
over the internet is an emerging market that is characterized by rapid changes
in customer requirements, frequent introductions of new and enhanced products
and services, and continuing and rapid technological advancement.
To
compete successfully in this emerging market, we must continue to design,
develop, and sell new and enhanced software and services that provide
increasingly higher levels of performance and reliability at an acceptable and
reasonable cost.
The
software and services must take advantage of technological advancements and
changes, and respond accordingly to new and changing customer requirements. Our
success in designing, developing, and selling such software and services will
depend on a variety of factors, including:
|
·
|
Success
of promotional and marketing efforts.
|
|
·
|
The
identification of market demands for new or upgraded software and
services.
|
|
·
|
Timely
implementation of software and services offering.
|
|
·
|
Software
and service performance.
|
|
·
|
Cost-effectiveness
of software and service.
|
We
license the right to software which forms the framework for our Mil Yearbook
software from RN Consulting, which is owned by Ruthy Navon, our promoter, and
which software our current Mil Yearbook software is dependent on.
On
October 11, 2010, the Company entered into a Licensing Agreement, which was
amended in December 2010 (the “Licensing
Agreement”), with RN Consulting Services, d/b/a YearBook Alive Software,
an entity controlled by Ruthy Navon, our promoter (as described below) and
former Secretary (“RN
Consulting”). The Licensing Agreement amended, replaced and
superseded a prior Reseller Agreement entered into between RN Consulting (in the
name of Yearbook Alive Software) and the Company on or around March 1,
2008. Pursuant to
-17-
the
Licensing Agreement, RN Consulting agreed to provide us an exclusive, limited,
non-transferable (except in connection with the sale of our products) license to
use, market, sell and distribute certain software which RN
Consulting
owns, which allows users to create and burn interactive digital memories on
CD/DVD (the “Technology”) in
software and products we sell and plan to sell to the Military (the “License”). “Military” is defined
in the Licensing Agreement as military personnel, servicepersons, persons in the
military reserves; persons in training for a career in and/or service in the
military (including cadets and the ROTC (Reserve Officers’ Training Corp);
military organizations (located throughout the world), organizations with
functions similar to the military such as the coast guard, national guard or
foreign legion; and current, former or retired military
personnel. Pursuant to the Licensing Agreement, no fees are due to RN
Consulting under the License until July 31, 2011, subsequent to which we agreed
to pay RN Consulting 10% of any of our net sales (i.e., total sales after taxes)
related to the use of the Technology, payable monthly in arrears during the term
of the License. The License terminates immediately upon the
termination of the Licensing Agreement.
In the
event the Licensing Agreement is terminated for any reason, we could lose the
rights to the License, which could force us to cease selling our Mil Yearbook
software, which would cause a material adverse effect on the Company, could
force the Company to suspend or curtail its operations and could cause any
investment in the Company to become worthless.
Pursuant
To The License, We Are Only Allowed To Market And Sell Our Software To Military
Customers.
As
described above, we received a License to use certain technology as a result of
the Licensing Agreement. Pursuant to the Licensing Agreement, we are
only allowed to market and sell our software to Military (as defined above)
customers. Additionally, pursuant to the Licensing Agreement, and in
an effort to avoid conflicts of interest and competition between the Company and
RN Consulting, we agreed to refer any non-Military customers or potential
customers to RN Consulting and RN Consulting agreed to refer any Military
customers or potential customers to us. As such, we will not be able
to offer our software to any non-Military customers, which may limit the overall
market for our software and products and limit our ability to compete with and
against competitors which offer their software and products to all segments of
the marketplace. Furthermore, we may miss out on potential
cross-promotional opportunities as a result of our requirement to only sell to
Military customers. Due to such requirements, our overall results of
operations and future growth may be limited, and we may be forced to curtail or
abandon our business plan.
Protecting
our Proprietary Technology and Other Intellectual Property Rights
If
we are unable to protect our proprietary technology and other intellectual
property rights, or our licensing partners are unable to protect the
intellectual property which we license, our ability to compete in the
marketplace may be substantially reduced.
If we are
unable to protect our intellectual property and/or if our licensing partners are
unable to protect the intellectual property which we license, our competitors
could use our intellectual property to market software similar to ours, which
could decrease demand for our software, thus decreasing our revenues. We plan to
rely on a combination of copyright, trademark and trade secret laws to protect
our intellectual property rights. These protections may not be adequate to
prevent our competitors from copying or reverse-engineering our interactive
digital software.
In
addition, our competitors may independently develop technologies that are
substantially equivalent or superior to our technology. To protect our trade
secrets and other proprietary information, we plan to require employees,
consultants, advisors and collaborators to enter into confidentiality
agreements. These agreements may not provide meaningful protection for our trade
secrets, know-how or other proprietary information in the event of any
unauthorized use, misappropriation or disclosure of such trade secrets, know-how
or other proprietary information. Existing copyright laws afford only limited
protection for our intellectual property rights and may not protect such rights
in the event competitors independently develop similar software products.
Policing unauthorized use of our products is very difficult, and litigation
could become necessary in the future to enforce our intellectual property
rights. Any policing or litigation could be time consuming and expensive to
resolve or prosecute, result in substantial diversion of management attention
and resources, and materially harm our business or financial
condition.
-18-
If
a third party asserts that we infringed upon its proprietary rights, we could be
required to redesign our software, pay significant royalties or enter into
license agreements.
Although
presently we are not aware of any such claims, a third party may assert that our
technology or technologies of entities we acquire or license violates its
intellectual property rights. As the number of software products in our market
increases and the functionality of those software products further overlap, we
believe that infringement claims will become more common. Any claims against us,
regardless of their merit, could:
·
|
Be
Expensive and time consuming to defend.
|
|
·
|
Result
in negative publicity.
|
|
·
|
Force
us to stop licensing our software products that incorporate the challenged
intellectual property.
|
|
·
|
Require
us to redesign our software products.
|
|
·
|
Require
us to enter into royalty or licensing agreements in order to obtain the
right to use necessary technologies, which may not be available on terms
acceptable to us, if at all.
|
We
believe that any successful challenge to our use of a trademark or domain name
could substantially diminish our ability to conduct business in a particular
market or jurisdiction and thus decrease any revenues and result in possible
losses to our business.
Regulatory
and Legal Risks
Because
marketing and making our software product available on the internet may expose
us to regulatory and legal issues, we may be forced out of
business.
A range
of exposures may exist due to how we intend to market our software. If we create
and utilize a web site and sell through the retail industry, as we plan to do,
online access through a company-operated web site and retail regulations
requires careful consideration of legal and regulatory compliance requirements
and issues. This may require extensive legal services that may become an
increased cost component when considering the development of our software and
technologies.
Risks
Related To Competition
We
face competition from other businesses or competitors that currently market
interactive fundraising software.
Competition
will possibly come not only from those who deliver their products through
traditional retail establishments but also from those who deliver their products
and software through the internet. Our competitors will possibly have longer
operating histories, greater brand recognition, larger marketing budgets and
installed customer bases. In addition, these companies are able to field
full-time, directly employed sales personnel to better cover certain markets and
customers. They may also invest greater resources in the development of
technology, content and research which will allow them to react to market
changes faster, putting us at a possible competitive disadvantage.
Some
of our competitors may have significantly more financial resources, which could
allow them to develop software that could render our software
inferior.
Our
competition may have software or may develop software that will render our
software inferior. We will likely need to obtain and maintain certain advantages
over our competitors in order to be competitive, which require resources. There
can be no assurance that we will have sufficient financial resources to maintain
our research and development, marketing, sales and customer support efforts on a
competitive basis, or that we will be able to make the improvements necessary to
maintain a competitive advantage with respect to our software
products.
-19-
Risks
Related to Our Securities
Because
there is no public market for our common stock, our stockholders may not be able
to resell their shares at or above the price at which they purchased their
shares, or at all.
Our
common stock was approved for quotation on the Over-The-Counter Bulletin Board
in February 2011, however, there is currently no market for our common stock and
we can provide no assurance that a market will develop. If for any reason a
public trading market does not develop, purchasers of our shares may have
difficulty selling their common stock should they desire to do
so.
Even if a
trading market develops, we cannot predict how liquid that market might become.
The trading price of our common stock is likely to be highly volatile and could
be subject to wide fluctuations in price in response to various factors, some of
which are beyond our control.
These
factors include:
·
|
Quarterly
variations in our results of operations or those of our
competitors;
|
|
·
|
Announcements
by us or our competitors of acquisitions, new software products,
significant contracts, commercial relationships or capital
commitments;
|
|
·
|
Disruption
to our operations;
|
|
·
|
Commencement
of, or our involvement in, litigation;
|
|
·
|
Any
major change in our board or management;
|
|
·
|
Changes
in governmental regulations or in the status of our regulatory approvals;
and
|
|
·
|
General
market conditions and other factors, including factors unrelated to our
own operating performance.
|
In
addition, the stock market in general has experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of such public companies. These broad market and industry factors
may seriously harm the market price of our common stock, regardless of our
actual operating performance. In addition, in the past, following periods of
volatility in the overall market and the market price of a company’s securities,
securities class action litigation has often been instituted against these
companies. This type of litigation, if instituted against us, could
result in substantial costs and a diversion of our management’s attention and
resources.
Because
future sales by our stockholders could cause the stock price to decline, our
investors may lose money on the purchase of our stock.
No
predictions can be made of the effect, if any, that market sales of shares of
our common stock or the availability of such shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of significant
amounts of our common stock could adversely affect the prevailing market price
of the common stock, as well as impair our ability to raise capital through the
issuance of additional equity securities.
State
securities laws may limit secondary trading, which may restrict the states in
which you can sell our shares.
If you
purchase shares of our common stock you may not be able to resell the shares in
any state unless and until the shares of our common stock are qualified for
secondary trading under the applicable securities laws of such state, or there
is confirmation that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in such state. There can
be no assurance that we will be successful in registering or qualifying our
common stock for secondary trading, or identifying an available exemption for
secondary trading in our common stock in every state. If we fail to register or
qualify, or to obtain or verify an exemption for the secondary trading of, our
common stock in any particular state, the shares of common stock could not be
offered or sold to, or purchased by, a resident of that state. In the event that
a significant number of states refuse to permit secondary trading in our common
stock, the market for the common stock will be limited which could drive down
the market price of our common stock and reduce the liquidity of the shares of
our common stock and limit a stockholder's ability to resell shares of our
common stock at all or at current market prices, which could increase a
stockholder's risk of losing some or all of his investment.
-20-
Because
we are subject to the “Penny Stock” rules
the level of trading activity in our stock may be reduced.
If a
trading market does develop for our stock, it is likely we will be subject to
the regulations applicable to "Penny Stock." The
regulations of the SEC promulgated under the Exchange Act that require
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. The SEC regulations define penny
stocks to be any non-NASDAQ equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. Unless an exception is
available, those regulations require the broker-dealer to deliver, prior to any
transaction involving a penny stock, a standardized risk disclosure schedule
prepared by the SEC, to provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, monthly account statements showing the market
value of each penny stock held in the purchaser’s account, to make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a stock that becomes
subject to the penny stock rules. Consequently, these penny stock rules may
affect the ability of broker-dealers to trade our securities. We believe that
the penny stock rules discourage market investor interest in and limit the
marketability of our common stock.
In
addition to the "penny
stock" rules promulgated by the Securities and Exchange Commission, the
FINRA has adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the FINRA believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your
ability to buy and sell our stock.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item
3. Defaults Upon Senior Securities
None.
Item
4. (Removed and Reserved)
Item
5. Other Information
None.
-21-
Item 6. Exhibits.
Exhibit No.
|
Description
|
|
3.1
(1)
|
Articles
of Incorporation
|
|
3.2
(1)
|
Bylaws
|
|
10.1
(1)
|
Programmer
Agreement
|
|
10.2
(2)
|
Independent
Contractor Agreement with Ruthy Navon
|
|
10.3
(3)
|
Licensing
Agreement with RN Consulting Services, d/b/a Yearbook Alive
Software
|
|
10.4
(4)
|
First
Addendum to License Agreement
|
|
31*
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32*
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
* Filed
herewith.
(1) Filed
as exhibits to the Company’s Registration Statement on Form S-1, filed with the
Commission on June 25, 2010, and incorporated herein by reference.
(2) Filed
as an exhibit to the Company’s Registration Statement on Form S-1/A, filed with
the Commission on August 13, 2010, and incorporated herein by
reference.
(3) Filed
as an exhibit to the Company’s Registration Statement on Form S-1/A, filed with
the Commission on October 27, 2010, and incorporated herein by
reference.
(4) Filed
as an exhibit to the Company’s Registration Statement on Form S-1/A, filed with
the Commission on December 16, 2010, and incorporated herein by
reference.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
NET
PROFITS TEN INC.
|
|||
Dated:
November 10, 2011
|
By:
|
/s/ Gilad David | |
Gilad
David
|
|||
President, Treasurer and Director | |||
(Principal
Executive Officer, Principal Financial Officer and Principal Accounting
Officer)
|
-22-