Attached files
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EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - RELIABRAND INC. | exhibit_31-1.htm |
EX-32.1 - SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - RELIABRAND INC. | exhibit_32-1.htm |
EX-32.2 - SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER - RELIABRAND INC. | exhibit_32-2.htm |
EX-31.2 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - RELIABRAND INC. | exhibit_31-2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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
OR
o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE TRANSITION FROM _______ TO ________.
COMMISSION FILE NUMBER: 000-54300
RELIABRAND INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada | 75-3260541 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer ID No.) |
430 Banks Road, Ste 100,Kelowna, BC, Canada | V1X6A3 | |
(Address of principal executive offices) | (Zip code) |
Issuer's telephone number: (778) 478-9997
23890 Copper Hill Drive #206, Valencia CA | 91354 | |
(Former name, former address and former fiscal year, if changed since last report.)
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 | o |
Non-accelerated filer
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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 o No x
As of November 4, 2011, 59,122,500 shares of the Registrant's Common Stock were issued and outstanding.
Transitional Small Business Disclosure Format: Yes o No x
1
RELIABRAND INC.
TABLE OF CONTENTS
Page No.
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PART I
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FINANCIAL INFORMATION
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ITEM 1
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Condensed Financial Statements
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3
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Condensed Balance Sheets as of September 30, 2011 (unaudited) and June 30, 2011
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3
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Unaudited Condensed Statements of Operations for the three months ended September 30, 2011 and 2010, cumulative during development stage from February 22, 2007 (inception) through September 30, 2011
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4
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Unaudited Condensed Statements of Cash Flows for the three months ended September 30, 2011 and 2010, and cumulative during development stage from February 22, 2007 (inception) through September 30, 2011
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5-6
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Notes to Condensed Financial Statements (unaudited)
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7
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ITEM 2
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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15
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ITEM 3
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Quantitative and Qualitative Disclosures about Market Risk
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17
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ITEM 4T
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Controls and Procedures
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18
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PART II
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OTHER INFORMATION
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ITEM 2
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Unregistered Sales of Equity Securities and Use of Proceeds
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18
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ITEM 6
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Exhibits
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19
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SIGNATURE
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19
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2
RELIABRAND, INC.
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||||||||
(Formerly known as A&J Venture Capital Group, Inc.)
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(A DEVELOPMENT STAGE ENTERPRISE)
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||||||||
CONDENSED BALANCE SHEETS
|
||||||||
September 30,
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June 30,
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|||||||
2011
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2011
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|||||||
(unaudited)
|
||||||||
ASSETS
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||||||||
CURRENT ASSETS
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||||||||
Cash
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$
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63,235
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$
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29,873
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||||
Accounts receivable
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3,929
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-
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||||||
Inventory
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9,421
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9,421
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||||||
Note receivable - related party
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||||||||
(including accrued interest of $3,565) (Note 4)
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65,979
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65,136
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Deposits - utilities
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1,456
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1,456
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||||||
Prepaid expenses (Note 5)
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225,428
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34,554
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||||||
TOTAL CURRENT ASSETS
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369,448
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140,440
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||||||
OTHER ASSETS
|
||||||||
Property and equipment, net (Note 6)
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23,620
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2,642
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||||||
Intellectual and product properties (Note 7)
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143,828
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139,485
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||||||
Patents, net of amortization of $25,098 (Note 7)
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1,348,523
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1,363,581
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||||||
Product molds
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5,266
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5,266
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||||||
TOTAL OTHER ASSETS
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1,521,237
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1,510,974
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||||||
Total Assets
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$
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1,890,685
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$
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1,651,414
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||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
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$
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35,592
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$
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24,044
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||||
Accounts payable - related party
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79,494
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55,000
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||||||
Note Payable (including accrued interest of $642) (Note 8)
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193,122
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-
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Shareholder advances
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98,104
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98,766
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Accrued liabilities - related party
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1,923
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-
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TOTAL CURRENT LIABILITIES
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408,235
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177,810
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||||||
STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
Preferred stock, par value $.0001, 10,000,000
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||||||||
shares authorized, 10,000 issued and outstanding
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||||||||
September 30, 2011 and June 30, 2011
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1
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1
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||||||
Common stock, par value $.0001, 100,000,000 shares authorized,
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||||||||
59,677,000 issued and outstanding - September 30, 2011
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||||||||
59,122,500 issued and outstanding - June 30, 2011
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5,968
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5,912
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||||||
Paid in Capital
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2,148,337
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2,009,764
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||||||
(Deficit) accumulated during the development stage
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(671,856
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)
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(542,073
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)
|
||||
Total Stockholders' Equity
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1,482,450
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1,473,604
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||||||
Total Liabilities and Stockholders' Equity
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$
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1,890,685
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$
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1,651,414
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The accompanying notes are an integral part of the financial statements
3
RELIABRAND, INC.
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||||||||||||
(Formerly known as A&J Venture Capital Group, Inc.)
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(A DEVELOPMENT STAGE ENTERPRISE)
|
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UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
|
||||||||||||
Cumulative
|
||||||||||||
from
|
||||||||||||
February 22, 2007
|
||||||||||||
For the three months ended
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(Inception)
|
|||||||||||
September 30,
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to
|
|||||||||||
2011
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2010
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September 30, 2011
|
||||||||||
REVENUES
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$ | - | $ | - | $ | - | ||||||
EXPENSES
|
||||||||||||
Amortization and Depreciation
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15,426 | 5,000 | 65,505 | |||||||||
Accounting, Audit, and Legal fees
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42,199 | 18,528 | 205,640 | |||||||||
Consulting fees
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3,443 | - | 92,943 | |||||||||
Consulting fees - related parties
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43,807 | 30,000 | 173,811 | |||||||||
Rent expense
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5,634 | 1,723 | 36,569 | |||||||||
General and administrative
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17,527 | 2,847 | 91,815 | |||||||||
Consulting contract – related party
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1,923 | - | 1,923 | |||||||||
Loss on inventory
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- | - | 3,881 | |||||||||
Total expenses
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129,959 | 58,097 | 672,087 | |||||||||
NET OPERATING (LOSS)
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(129,959 | ) | (58,097 | ) | (672,087 | ) | ||||||
OTHER INCOME (EXPENSE)
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||||||||||||
Interest Income
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843 | - | 1,402 | |||||||||
Interest Expense
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(667 | ) | - | (1,171 | ) | |||||||
NET (LOSS)
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$ | (129,783 | ) | $ | (58,097 | ) | $ | (671,856 | ) | |||
NET (LOSS) PER SHARE - BASIC AND DILUTED
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* | $ | 0.01 | |||||||||
WEIGHTED AVERAGE NUMBER OF
|
||||||||||||
COMMON SHARES OUTSTANDING
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59,277,783 | 23,017,500 | ||||||||||
* less than $(.01) per share
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The accompanying notes are an integral part of the financial statements
4
RELIABRAND, INC.
|
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(Formerly known as A&J Venture Capital Group, Inc.)
|
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(A DEVELOPMENT STAGE ENTERPRISE)
|
||||||||||||
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
|
||||||||||||
Cumulative
|
||||||||||||
from
|
||||||||||||
February 22, 2007
|
||||||||||||
For the three months ended
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(Inception)
|
|||||||||||
September 30,
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to
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|||||||||||
2011
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2010
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September 30, 2011
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||||||||||
OPERATING ACTIVITIES
|
||||||||||||
Net (loss)
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$ | (129,783 | ) | $ | (58,097 | ) | $ | (671,856 | ) | |||
Adjustments to reconcile net loss to net cash used by
|
||||||||||||
operating activities:
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||||||||||||
Stock issued for services
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5,504 | 30,000 | 155,504 | |||||||||
Depreciation and amortization
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15,426 | 5,000 | 65,554 | |||||||||
Loss on obsolete inventory
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- | - | 3,881 | |||||||||
Changes in operating assets and liabilities:
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||||||||||||
Accounts receivable
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(3,929 | ) | - | (3,929 | ) | |||||||
Accrued interest - notes receivable
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(843 | ) | - | (843 | ) | |||||||
Accounts payable
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11,549 | (1,254 | ) | 12,757 | ||||||||
Accounts payable - related party
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24,494 | (2,463 | ) | 85,201 | ||||||||
Prepaid expenses
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5,280 | 7,500 | (30,730 | ) | ||||||||
Inventory
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- | - | (3,421 | ) | ||||||||
Accrued liabilities
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1,923 | - | 1,923 | |||||||||
Accrued interest – notes payable
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642 | - | 83 | |||||||||
Deferred Charges
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- | - | (40,000 | ) | ||||||||
NET CASH (USED BY) OPERATING ACTIVITIES
|
(69,737 | ) | (19,314 | ) | (425,876 | ) | ||||||
INVESTING ACTIVITIES
|
||||||||||||
Deposit on products and product molds
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(196,154 | ) | (196,154 | ) | ||||||||
Cash received from the BC Ltd. asset acquisition
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- | - | 100,000 | |||||||||
Purchase of property and equipment
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(8,222 | ) | - | (12,526 | ) | |||||||
Increase in capitalized patent costs
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(4,343 | ) | - | (4,343 | ) | |||||||
Increase in intellectual properties
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- | - | (7,141 | ) | ||||||||
NET CASH PROVIDED BY/ (USED BY) INVESTING ACTIVITIES
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(208,719 | ) | - | (120,164 | ) | |||||||
FINANCING ACTIVITIES
|
||||||||||||
Proceeds from sale of common stock
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120,000 | - | 190,693 | |||||||||
Proceeds from shareholder advances
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19,466 | - | 264,139 | |||||||||
Proceeds from notes payable
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192,480 | - | 192,480 | |||||||||
Repayment of shareholder advances
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(20,128 | ) | - | (38,037 | ) | |||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
311,818 | - | 609,275 | |||||||||
NET INCREASE (DECREASE) IN CASH
|
33,362 | (19,314 | ) | 63,235 | ||||||||
CASH, BEGINNING OF PERIOD
|
29,873 | 19,602 | - | |||||||||
CASH, END OF PERIOD
|
$ | 63,235 | $ | 288 | $ | 63,235 | ||||||
The accompanying notes are an integral part of the financial statements
5
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|||||||||||||
Past president's debt contributed to capital
|
|||||||||||||
Shareholder advances on behalf of company
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$ | - | $ | 95,312 | $ | 131,903 | |||||||
Property and equipment net of depreciation exchanged for debt
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- | - | (1,573 | ) | |||||||||
Account payable - related party contributed to capital
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- | (537 | ) | (537 | ) | ||||||||
Shareholder's debt contributed to capital
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- | (94,775 | ) | (129,793 | ) | ||||||||
$ | - | $ | - | $ | - | ||||||||
B.C. Ltd asset acquisition
|
|||||||||||||
Fair value of assets acquired
|
$ | - | $ | - | $ | 1,585,688 | |||||||
Less liabilities assumed
|
- | - | (21,034 | ) | |||||||||
Net assets acquired
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- | - | 1,564,654 | ||||||||||
Less shares issued
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- | - | (1,664,654 | ) | |||||||||
Net cash acquired
|
$ | - | $ | - | $ | (100,000 | ) | ||||||
Shares issued for website development
|
|||||||||||||
Website development
|
$ | (13,125 | ) | $ | - | $ | (13,125 | ) | |||||
Common stock issued
|
13,125 | - | 13,125 | ||||||||||
$ | - | $ | - | $ | - |
The accompanying notes are an integral part of the financial statements
6
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Interim periods
The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2011 are not necessarily indicative of results for any future period. These statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended June 30, 2011.
Reclassifications
Certain amounts in the period ended September 30, 2010 financial statements have been reclassified to conform to the current period ended September 30, 2011 presentation.
NOTE 2 – GOING CONCERN
Our financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have sustained operating losses since inception.
As of September 30, 2011 we have a working capital deficit of $38,787, and accumulated deficit of $671,856. During the period ended September 30, 2011 we had a net loss of $129,783 and cash used in operating activities of $69,737. The Company’s ability to continue in existence is dependent on its ability to develop additional sources of capital, and/or achieve profitable operations and positive cash flows. Management’s plan is to aggressively pursue its present business plan. Since inception we have funded our operations through the issuance of common stock and related party loans and advances, and will seek additional debt or equity financing as required. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 – RECENTLY ISSUED ACCOUNTING STANDARDS
In October 2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-13, "Multiple- Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force," ("ASU 2009-13"). This update provides amendments to the criteria of ASC 605, "Revenue Recognition," for separating consideration in multiple- deliverable arrangements. The amendments to this update establish a selling price hierarchy for determining the selling price of a deliverable. This Accounting Standards Update will be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Alternatively, an entity can elect to adopt this standard on a retrospective basis. The Company adopted the measurement requirements of this guidance prospectively with no impact to the financial statements.
In May 2011, the FASB issued ASU No. 2011-04 which relates to fair value measurement (FASB ASC Topic 820), which amends current guidance to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The amendments generally represent clarification of FASB ASC Topic 820, but also include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. The guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This guidance is effective during interim and annual periods beginning after December 15, 2011 and is to be applied prospectively. The adoption of this standard will not materially impact the Company's financial statement statements.
7
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 3 – RECENTLY ISSUED ACCOUNTING STANDARDS - continued
In June 2011, the FASB issued Accounting Standards Update No. 2011-5, Presentation of Comprehensive Income. This standard requires presentation of the items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive, statements of net income and other comprehensive income. The new requirements are effective for fiscal years beginning after December 15, 2011. Early adoption is permitted and full retrospective application is required. The Company does not expect a significant impact on the Company's financial positions as a result of adoption of these new requirements.
NOTE 4 – NOTES RECEIVABLE – RELATED PARTY
As of the period ended September 30, 2011, our notes receivable – related party included the following:
On May 7, 2010, 0875505 BC Ltd. (“BC Ltd”) advanced $17,413 to Watergeeks Laboratories Inc. on a non-interest, non-collateralized, payable on demand basis. The entire amount is reflected in the notes receivable balance at September 30, 2011.
On September 8, 2010, BC Ltd loaned Watergeeks Laboratories Inc. $15,000 under a note receivable bearing 8% per annum. Principle and accrued interest are due in full on September 8, 2011. In the period ended September 30, 2011, we recorded a total of $306 in accrued interest. Total accrued interest on this note at September 30, 2011 is $1,290.
On October 6, 2010, BC Ltd loaned the same company an additional $30,000 under a note receivable bearing 7% per annum. Principle and accrued interest are due in full on October 6, 2011. In the period ended September 30, 2011, we recorded a total of $537 in accrued interest. Total accrued interest on this note at September 30, 2011 is $2,275.
As of October 31, 2011, Watergeeks is in default of their $15,000 and their $30,000 notes receivable that matured on September 8, 2011 and October 6, 2011, respectively. The Company is in negotiations to amend and extend the notes to them.
NOTE 5 – PREPAID EXPENSES
Prepaid expenses consisted of the following at September 30, 2011:
Name
|
Description
|
Amount
|
|||
Thumbprint
|
Technical support fees for future periods
|
$ | 2,500 | ||
Design Mode Studios
|
October 2011 rent
|
1,774 | |||
Nova Genisis
|
Prepayment for products to be produced
|
221,154 | |||
Total
|
$ | 225,428 |
8
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 5 – PREPAID EXPENSES - continued
Prepaid expenses consisted of the following at June 30, 2011:
Name | Description | Amount | |||
McDowell Odom Law Firm
|
Prepayment retainer for legal fees
|
$ | 9,554 | ||
Nova Genisis
|
Prepayment for product molds production
|
25,000 | |||
Total
|
$ | 34,554 |
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
September 30, 2011
|
||||||||||||
Cost
|
Accumulated Depreciation
|
Net Book
Value
|
||||||||||
Website
|
$ | 15,256 | - | $ | 15,256 | |||||||
Office furniture and computer equipment
|
8,772 | 408 | 8,364 | |||||||||
Total
|
$ | 24,028 | $ | 408 | $ | 23,620 |
Depreciation was $367 for the three months ended September 30, 2011.
NOTE 7 – INTELLECTUAL PROPERTIES AND PATENTS
Patents
Patents and licenses consist of the following:
September 30, 2011
|
June 30, 2011
|
|||||||
Adiri patents
|
$ | 1,014,246 | $ | 1,014,246 | ||||
Adiri trademarks
|
359,375 | 359,375 | ||||||
Intellectual properties
|
143,828 | 139,485 | ||||||
1,517,449 | 1,513,106 | |||||||
Less accumulated amortization
|
(25,098 | ) | (10,039 | ) | ||||
$ | 1,492,351 | $ | 1,503,067 |
The Company has recorded amortization of patents expense for the period ended September 30, 2011 of $15,059 as reflected in amortization and depreciation on the accompanying Statement of Operations. In the three months ended September 30, 2011, we capitalized an additional $4,343 on intellectual properties.
9
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 8 – LOANS PAYABLE
On August 26, 2011 the Company borrowed CDN$200,000 from Gerry Dalen, one of Company’s shareholders. In connection with the above note, the Company agreed to restrictive covenants on substantially all of its assets to maintain them free of indebtedness or liens, and that we will maintain our corporate status.
As of September 30, 2011, the loans payable balance comprised of:
September 30, 2010
|
||||
Description
|
||||
Collateralized demand note to an unrelated entity bearing 4% interest per annum which matures on February 28, 2012. The interest is payable monthly until the maturity of the note.
|
$ | 192,480 | ||
$ | 192,480 | |||
Less current liabilities
|
192,480 | |||
Total long term liabilities
|
$ | -0- |
The Company owed $642 in accrued interest for the above note as of September 30, 2011.
Future maturity of our notes payable is presented in the table below:
For the years ended June 30,
|
||||
2012
|
$ | 192,480 | ||
$ | 192,480 |
NOTE 9 – RELATED PARTY TRANSACTIONS AND BALANCES
Related party transactions
On April 1, 2011 the Company entered into a consulting agreement with Brent Markus, the son of our current President, for his consulting services at a rate of $500 CAD per week. The agreement will be in effect for a period of nine months, ending on December 31, 2011, and is renewable. The agreement may be terminated by the Company at any time, or by mutual consent, without consequence.
On May 1, 2011, the Company entered into a consulting agreement with Marant Holdings Inc., a company controlled by our President and Chief Executive Officer, for his consulting services at a rate of $10,000 per month. For the period ended September 30, 2011, we recorded $30,000 in consulting fees expense in connection with this contract. As of September 30, 2011, we owe $40,000 which is included in accounts payable - related party.
As of September 30, 2011, the Company owes our President $35,000, for his previous consulting fees before the above agreement was in force, which is reflected in accounts payable – related party.
10
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 9 – RELATED PARTY TRANSACTIONS AND BALANCES - continued
Shareholder advances
In the three month period ended September 30, 2011, our current President paid operating bills totaling $19,466, and was repaid $20,128 in cash, and is still owed $3,552 which is included in accounts payable – related party. The Company also owes an additional $98,104 to our current President for previous advances through June 30, 2011.
Operating Leases
In January 2011, the Company rented office space in Canada from a related party, Design Mode Studios, on a month to month basis for approximately $800 CAD per month; beginning in February 2011 we took on more rental space within the office and began paying approximately $1,860 CAD per month. Rent expense was $5,634 and $1,723 for the three months ended September 30, 2011 and 2010, respectively.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Purchase Commitment
On September 6, 2011, we entered into a non-cancellable contract to purchase 72,000 baby bottles and components from a 3rd party supplier in the amount of $135,360, and we have prepaid $135,314 towards this commitment.
Product Molds Agreement
In June 2011, the Company entered into an agreement with Nova Genisis Ltd. to create product molds for certain types of baby bottles for $52,026. The agreement called for the Company to make a prepaid deposit of $25,000, which the Company paid on June 9, 2011. In September 2011, we entered into an additional agreement for additional product molds for $40,290. The molds were completed in the beginning of October. As of September 30, 2011, we have paid an additional $60,840 towards the molds. The entire amount paid as of September 30, 2011 is included in the prepaid expense balance at quarter-end, as the molds were not completed until October 2011.
NOTE 11 – STOCKHOLDER’S EQUITY
Stock Shares – Authorized
The Company has 100,000,000 common shares authorized at a par value of $0.0001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share. All common stock shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all the directors of the Company. There is currently only one designated class of preferred shares, “A,” see below. The holders of the preferred stock shall have such rights, preferences and privileges as may be determined by the Board of Director’s prior to the issuance of such shares. The preferred stock may be issued in such series as are designated by the Board of Director’s and the Board of Director’s may fix the number of authorized shares of preferred stock for each series and the rights, preferences, and privileges of each series
11
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 11 – STOCKHOLDER’S EQUITY - continued
Stock Shares – Authorized - continued
of preferred stock. As of the period ended September 30, 2011 and June 30, 2011, there were 59,677,000 and 59,122,500 shares of our common stock issued and outstanding, respectively. As of the period ended September 30, 2011 and June 30, 2011, there were 10,000 and 10,000 shares of our preferred stock issued and outstanding, respectively.
Common Shares – Issued and Outstanding
In the three months ended September 30, 2011, we closed several private placements for an aggregate total of $120,000, or 480,000 units consisting of one share of our common stock and one share common stock warrant to purchase shares of our common stock, with a purchase price of $0.25 per share and an expiration date for the warrants of two years from the closing.
Preferred Stock – Series A
On February 26, 2010, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series A Preferred Stock (the "Certificate of Designations") designating ten thousand (10,000) of the Company's previously authorized preferred stock.
The 10,000 Series A Preferred Stock shall have an aggregate voting power of 45% of the combined voting power of the entire Company’s shares, Common Stock and Preferred Stock as long as the Company is in existence. Each holder of the Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote.
Without the vote or consent of the holders of at least a majority of the shares of Series A Preferred Stock then outstanding, the Company may not (i) authorize, create or issue, or increase the authorized number of shares of, any class or series of capital stock ranking prior to or on a parity with the Series A Preferred Stock, (ii) authorize, create or issue any class or series of common stock of the Company other than the Common Stock, (iii) authorize any reclassification of the Series A Preferred Stock, (iv) authorize, create or issue any securities convertible into or exercisable for capital stock prohibited by (i) or (ii), (v) amend this Certificate of Designations or (vi) enter into any merger or reorganization, or disposal of assets involving 20% of the total capitalization of the Company.
Subject to the rights of the holders of any other series of Preferred Stock ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation and any other class or series of capital stock of the Company ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation, in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of record of the issued and outstanding shares of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock, prior and in preference to any distribution of any of the assets of the Company to the holders of Common Stock and any other series of Preferred Stock ranking junior to the Series A Preferred Stock with respect to liquidation.
12
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 11 – STOCKHOLDER’S EQUITY - continued
Preferred Stock – Series A - continued
The holders of the Series A Preferred Stock shall not be entitled to receive dividends per share of Series A Preferred Stock. The Company shall have no rights to redeem Series A Preferred Stock.
As of September 30, 2011, the Company had issued and outstanding 10,000 of Class A Preferred shares.
Stock Based Compensation
On August 31, 2011, the Company issued 2,000 restricted shares of our common stock for payment of debt owed to a legal counsel for services performed on the note payable (Note 8), in the amount of $504.
On September 22, 2011, the same legal counsel converted $2,500 in accounts payable owed to them to 10,000 restricted shares of our common stock and 10,000 stock warrants to purchase shares of our common stock at $0.25 per share, and will expire two years from the date on granting.
On August 25, 2011, the Company issued 62,500 restricted shares of our common stock for payment of website design and maintenance services performed by an unrelated third party in the amount of $15,625. The value of the maintenance services is $2,500 and will be amortized over the six months contract period with that vendor, beginning in October 2011. The value allocated to the website design is capitalized and amortized over a three year period (Note 6).
Common Stock Warrants
In connection with the above private placement and payables to common stock conversions, we valued the common stock detachable warrants granted during the period ended September 30, 2011, using the Black-Scholes method. The following weighted average assumptions were used to calculate the valued warrants: terms of two years; risk free interest rate of 0.39%; volatility of 96%; and a weighted fair value of $0.126.
A summary of the common stock warrants, exercise price of $0.25, granted during the period ended September 30, 2011 is presented below:
Number of Warrants
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||||
Balance at June 1, 2011
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- | |||
Granted
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490,000 | |||
Exercised
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- | |||
Forfeited or Expired
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- | |||
Balance at September 30, 2011
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490,000 | |||
Exercisable at September 30, 2011
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490,000 |
13
RELIABRAND, INC.
(FORMERLY A & J VENTURE CAPITAL GROUP, INC.)
(A Development Stage Enterprise)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
For the three months ended September 30, 2011 and 2010
(Unaudited)
NOTE 12 – SUBSEQUENT EVENTS
The Company evaluated subsequent events through November 17, 2011, the date the financial statements were available for issuance, noting the following events:
Pending legal action
In July 2011, the Company became aware of a claim against it by a previously contracted investor/ public relations firm. The agreement with the firm was for services to be performed and payment to be made in the Company’s common stock. The stock was issued to the firm and kept in trust, and the services were not performed in accordance with the agreement. The Company intends to contest this vigorously. Accordingly we have not made any provisions for this matter in the financial statements.
Warehouse lease
On October 4, 2011 the Company entered into a month-to-month lease agreement of a warehouse space located in Kelowna, BC. The lease, commencing on November 1, 2011 requires monthly payment of CDN $2,500 plus related taxes and a CDN $2,500 security deposit.
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ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read this section in conjunction with our financial statements and the related notes included in this Form 10-Q. Some of the information contained in this section or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business, and the other non-historical statements contained herein are forward-looking statements.
The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. Please see “Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
The following discussion and analysis of the Company’s financial condition and results of operations are based on the Company’s financial statements, which the Company has prepared in accordance with U.S. generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Plan of Operations
The Company’s strategy is to manufacture baby bottles and the related components initially and to offer those products for sale via the Company’s website or through distributors throughout the world.
Overall, during the next 12 months, we cannot predict accurately the amount of capital that we will need to accomplish our plan of operations. The amount of capital needed will vary depending on the projects that we seek. If during the next 12 months, we are unsuccessful in effectuating our plan of operations as described above, we expect to incur total expenditures of at least $500,000. In this regard and during such period; we anticipate spending $50,000 on professional fees attributable to fulfilling our reporting obligations under the federals securities laws and $50,000 on general administrative costs and expenditures associated with complying with reporting obligations. We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our marketing plan and operations. We believe that debt financing will not be an alternative for funding the marketing plan. We do not have any arrangements in place for any future equity financing. If we are required to raise additional funds, substantial dilution may result to existing shareholders. Our auditors have raised substantial doubt concerning our ability to continue as a going concern. Please see our audited financial statements contained in our Form 10-K for the period ended June 30, 2011.
Results of Operations for the Three Months Ended September 30, 2011 and the Three Months Ended September 30, 2010
We did not earn any revenues for the periods ended September 30, 2011 and 2010.
As of September 30, 2011, we had total assets of $1,890,685 and total liabilities of $408,235 compared to total assets of $1,651,414 and total liabilities of $177,810 as of June 30, 2011.
During the three months ended September 30, 2011, we incurred operating expenses in the amount of $129,959. These operating expenses were comprised of accounting, auditing and legal fees, general and administrative expenses, consulting fees, rent expenses and amortization and depreciation, compared to operating expenses of $58,097 for the three months ended September 30, 2010.
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ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
For the three months ended September 30, 2011, we expensed a total of $30,000 in consulting fees to an entity controlled by our current President. For the three months ended September 30, 2010 we expensed a total of $30,000 in consulting fees to our current President.
For the three months ended September 30, 2011, we paid rent to a related party, Design Mode Studios, of $5,634. For the three months ended September 30, 2010 we paid rent to our former President of $1,723.
We have not generated any revenue since inception and are dependent upon obtaining financing to pursue marketing and distribution activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Liquidity and Capital Resources
As of September 30, 2011, the Company had a cash balance of $63,235, and as of June 30, 2011, the Company had a cash balance of $29,873.
For the three months ended September 30, 2011, the Company raised $120,000 in a private placement of its common stock, conducted in compliance with Regulation S of the Securities Act of 1933, as amended (“Regulation S”), selling 480,000 units, with each unit consisting of one share of its common stock, par value $.0001 and one common stock purchase warrant to purchase additional shares of the Company’s common stock for a two year period from the date of issuance. The Company is utilizing the proceeds from this offering to fund its current operations.
If the Company is not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to it, this could have a material adverse effect on its business, results of operations liquidity and financial condition.
The Company presently does not have any available credit, bank financing or other external sources of liquidity, other than the net proceeds from the offering. Due to its brief history and historical operating losses, the Company’s operations have not been a source of liquidity. The Company will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, the Company may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that the Company will be successful in obtaining additional funding.
The Company will need additional investments in order to continue operations. Additional investments are being sought, but the Company cannot guarantee that it will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of the Company’s common stock and a downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to collect significant amounts owed to it, or experience unexpected cash requirements that would force it to seek alternative financing. Further, if the Company issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of the Company’s common stock. If additional financing is not available or is not available on acceptable terms, the Company will have to curtail its operations.
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates, and the recognition of revenues and expenses for the reporting periods. These estimates and assumptions are affected by management's application of accounting policies.
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ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued
Stock-based Compensation
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached in FASB ASC 505-10. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-10.
Contractual Obligations
Operating Leases
In January 2011, the Company rented office space in Canada from a related party, Design Mode Studios, on a month to month basis for approximately $800 CAD per month; beginning in February 2011 we took on more rental space within the office and began paying approximately $1,860 CAD per month. Rent expense was $5,634 and $1,723 for the three months ended September 30, 2011 and 2010, respectively.
On October 4, 2011 the Company entered into a month-to-month lease agreement of a warehouse space located in Kelowna, BC. The lease, commencing on November 1, 2011 requires monthly payment of CDN $2,500 plus related taxes and a CDN $2,500 security deposit.
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Inflation
Inflation has not materially impacted our results of operations in recent years.
ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” (as defined by Item 10 of Regulation S-K), the Company is not required to provide information required by this Item, as defined by Regulation S-K Item 305(e).
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ITEM 4T - Controls and Procedures
Disclosure controls and procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report, being September 30, 2011, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer. Based upon that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no significant changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period 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 reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Accounting Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during the three month period ended September 30, 2011 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II OTHER INFORMATION
ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds
In the three months ended September 30, 2011, we conducted a private placement for an aggregate total of $120,000, or 480,000 units consisting of one share of our common stock and one share common stock warrant to purchase shares of our common stock, with a purchase price of $0.25 per share and an expiration date of two years from the closing. The Company relied on Regulation S for the issuance of these shares as all of the shares were sold to citizens of Canada.
On August 31, 2011, the Company issued 2,000 restricted shares of our common stock for payment of debt owed to a legal counsel for services. On September 22, 2011, the same legal counsel converted $2,500 in accounts payable owed to them to 10,000 restricted shares of our common stock and 10,000 stock warrants to purchase shares of our common stock at $0.25 per share, which warrants will expire two years from the date on granting. The Company relied on Regulation S for these issuances as well.
On August 25, 2011, the Company issued 62,500 restricted shares of our common stock for payment of website design and maintenance services performed by an unrelated third party in the amount of $15,625. The value of the maintenance services is $2,500 and will be amortized over the six months contract period with that vendor, beginning in October 2011. The Company relied on Regulation S for this issuance as well.
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ITEM 6 - Exhibits
Exhibit
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Number
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Description of Exhibit
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Section 302 Certification of Chief Executive Officer
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Section 302 Certification of Chief Financial Officer
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Section 906 Certification of Chief Executive Officer
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Section 906 Certification of Chief Financial Officer
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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RELIABRAND INC.
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Date: November 17, 2011
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By:
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/s/ Antal Markus
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Name: Antal Markus
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Title: CEO, CFO
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