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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended February 29, 2012
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT 1934
For the transition period from ___________ to ___________
Commission file number: 333-167743
Amwest Imaging Incorporated
(Exact name of registrant as specified in its charter)
Nevada 27-2336038
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
815 John St. Suite 150
Evansville, IN 47713
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (812) 250-4210
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $0.01 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section
232.405) during the preceding 12 months. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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 Act): Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant was approximately $13,000 as of the last
business day of the registrant's most recently completed second fiscal quarter,
based upon the closing sale price on the Over-the-Counter Bulletin Board
reported for such date. Shares of common stock held by each officer and director
and by each person who owns 10% or more of the outstanding common stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of June 28, 2012, the Registrant had 532,560,000 outstanding shares of its
common stock, $0.001 par value.
Documents incorporated by reference: none
AMWEST IMAGING INCORPORATED
FORM 10-K
TABLE OF CONTENTS
PART I
FORWARD-LOOKING STATEMENT 3
ITEM 1. BUSINESS 3
ITEM 1A. RISK FACTORS 6
ITEM 1B. UNRESOLVED STAFF COMMENTS 15
ITEM 2. PROPERTIES 16
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. MINE SAFETY DISCLOSURES 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 16
ITEM 6. SELECTED FINANCIAL DATA 17
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 22
ITEM 9A(T). CONTROLS AND PROCEDURES 22
ITEM 9B. OTHER INFORMATION 23
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 23
ITEM 11. EXECUTIVE COMPENSATION 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS 27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE 28
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 29
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 29
SIGNATURES 30
FINANCIAL STATEMENTS F-1
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PART I
INTRODUCTORY NOTE
FORWARD-LOOKING STATEMENTS
Certain statements made in this Annual Report on Form 10-K are "forward-looking
statements" regarding the plans and objectives of management for future
operations. Such statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties. Our plans and objectives are based, in part,
on assumptions involving judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond our control. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein particularly in view of the current state of our operations, the
inclusion of such information should not be regarded as a statement by us or any
other person that our objectives and plans will be achieved. Factors that could
cause actual results to differ materially from those expressed or implied by
such forward-looking statements include, but are not limited to, the factors set
forth herein under the headings "Business," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Factors".
We undertake no obligation to revise or update publicly any forward-looking
statements for any reason. The terms "we", "our", "us", or any derivative
thereof, as used herein refer to Amwest Imaging Incorporated
ITEM 1. BUSINESS
Amwest Imaging Incorporated ("AMWI" or the "Company") is a technology company
whose primary business is providing relationship-building tools and processes
that help any business cultivate profitable relationships with customers, all
through web based solutions. Our Company is always working on new internet based
technology. Our current portfolio consists of My Restaurant
Web,(www.myrestaurantweb.com), Lok Drop (www.LokDrop.com), Zip Clik
(www.ZipClik.com)
The Company derives its revenue by charging basic monthly fees for the use of
these website tools and services, which all three of these technologies are
currently creating revenue for the Company. The Company's goal is to provide
high end turnkey solutions to both businesses and private users of the internet.
MY RESTAURANT WEB
This web based solution specifically addresses the needs of restaurants that
desire a website with a strong emphasis of marketing and attracting new
customers. The primary component of this web based solution, an on-demand fold
out turn-key website for immediate use. The websites designed are highly
advanced, niche creations that exceed the needs of small businesses in the
target markets. Following the website creation, design, and listing online, the
client can utilize additional online tools to develop a marketing plan for its
customer base implementing SMS technology ("texting") and email marketing which
is a must-have in today's social networking environment.
We expect to expand the technology in the coming months to service several other
industries.
LOK DROP
Lok Drop Online Storage provides a secure digital safe deposit box enabling
entities to access, store, share and backup digital information in a secure,
private and encrypted location. It can be used to access and share critical data
from anywhere in the world.
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ZIP CLIK
Zip Clik provides Encryption Software for Skype & Other Voice Over Internet
Protocol (VOIP) Software. Zip Clik software works by providing our own
encryption at the time you start your VOIP conversation on any service. The
encrypted version is then sent to the individual you are talking to, and then
our software decrypts it back into voice as they receive it. This entire process
is done instantly without any delay. More importantly is the fact that Skype
works with the courts to decrypt any conversation they deem necessary which
means the encryption does not protect your privacy and conversations.
FORMATION HISTORY
Amwest Imaging Incorporated (the "Company") was incorporated in the State of
Nevada on April 7, 2010.
The Company's original principal business objective was to provide document
digitization services to businesses. On September 6, 2011, registrant completed
the transactions of the Share Exchange Agreement of September 6, 2011, between
Amwest Imaging Incorporated, a Nevada corporation, and the shareholders of
Instant Website Technology Inc. ("IWTI"). Accordingly, registrant acquired all
of the issued and outstanding shares of Instant Website Technology Inc., in
exchange for the issuance in the aggregate of 157,560,000 shares of common stock
of the registrant. As a result of the Share Exchange Agreement, Instant Website
Technology Inc., Inc. became a wholly-owned subsidiary of registrant.
Amwest acquired from Instant Website Technology Inc. the rights to all
technology related to www.myrestaurantweb.com, including but not limited to the
Uniform Resource Locator ("URL") and the website development tools; however no
employees were retained post merger, the accounting system was not transitioned,
there were no bank accounts provided, and there were minimal recurring customers
as the majority of the historical revenue came from a one-time sale of the
technology and custom software development. It was determined that the assets
acquired from Instant Website Technology Inc. did not constitute a business as
there were several significant missing elements in the transferred assets that
would be necessary to operate a business, including the ability to collect
payments from the internet site.
FUTURE PRODUCTS - SALES AND MARKETING STRATEGIES
Our objective is to become a leading provider of web design services for small
to medium-sized businesses. Key elements of our strategy include:
Continue to Target the Small and Medium-Sized Business Market Segment. We
believe the small and medium-sized business market offers us the best
opportunity to continue building a leading national web services company. We
believe this is an attractive market because it is large and because these
businesses need a comprehensive, affordable solution to their web design
services requirements. Our web design services meet critical business needs of
these businesses that they often do not have the time, resources, or technical
skills to fulfill themselves.
Expanding our marketing and customer service through alliances such as the joint
venture agreements executed with eMarketing Team Holdings, LLC. This alliance
was put in place to allow the Company to quickly increase customer serve to
MyRestaurantWeb clients, increase our sales and reduce overall operating costs.
It will no longer be necessary for the Company to build the infrastructure to
handle billing, technical, or design calls. Based on the use of eMarketing Team
Holdings' Business to Business ("B2B") Internet Lead Technology and generating
the estimated 500 leads per day, we have estimated that we could have 10,000
customers using the MyRestaurantWeb platform within 12 months of full operation.
Developing or Acquiring Complementary Services and Technologies. We market and
sell web services that are essential to an effective Internet presence such as
local and regional lead generation, search engine optimization, web site search
tools, affiliate marketing networks, and web analytics. While we intend to
provide many of these services through our relationships with other vendors or
contractors, we will seek opportunities to internally develop some or all of
these services and products.
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Expanding our Distribution Channels. To sell our web services and products cost
efficiently, we plan to establish strategic marketing relationships with
organizations that have strong brand recognition with small and medium-sized
businesses. We also plan to undertake marketing and sales activities so that a
larger proportion of our customers are acquired through increased direct sales
and new reseller programs.
Selling Additional Services and Products to Existing Customers. As customers
build their Internet presence, we believe that we can demonstrate the value of
the additional premium services and products we offer, which can increase our
average revenue per customer and improve our revenue growth. For example, we can
provide paid search and e-commerce capabilities to our current customers' web
sites, enabling additional sources of revenue for them while also contributing
to a measurable return on their investment.
Strengthening Customer Retention. We are dedicated to enhancing customer
retention and building lasting relationships with our customers. We believe it
is critical to customer retention to target small and medium-sized businesses
that already understand the value of the Internet to their success. Improving
customer retention also requires maximizing customer loyalty. Therefore, we are
focused on customer satisfaction, consistent communication, web service and
product enhancements, and high quality customer service. Additionally, we
believe that by educating our existing and prospective customers about the value
of our services to their businesses we can build lasting customer relationships.
COMPETITION AND BARRIERS TO ENTRY
There are several companies offering web-based solutions, but the following 2
have a niche in the restaurant/hospitality industry:
Open Table, Inc., (stock symbol "OPEN" on the NASDAQ) utilizes similar
technologies and platforms as AMWI, but their function is to get out information
about various restaurants then allow users to make online reservations.
Intuit Inc. (stock symbol "INTU" on the NASDAQ) purchased Homestead Technologies
Inc. for $170 million. Homestead offers two ecommerce solutions to customers of
its webhosting services: users can add a PayPal shopping cart to its basic
service, or they can use Homestead Storefronts, which is based on eBay's
ProStores technology.
With relatively low development costs, a high number of substitutes and an
industry that is known for collaboration the barrier to entry is low. It is
important for the Company to differentiate our product with industry specific
features, focus on the importance of maintaining an easy to use product that has
very few issues once the customer is using the product and remain a low cost
provider of our services.
EMPLOYEES
At February 29, 2012, the Company had 1 full time employee. Our employee is not
represented by a collective bargaining arrangement.
The Company does not carry key person life insurance on any of its Directorial
personnel. The loss of the services of any of its executive officers or other
directors could have a material adverse effect on the business, results of
operations and financial condition of the Company. The Company's future success
also depends on its ability to retain and attract highly qualified technical and
managerial personnel.
There can be no assurance that the Company will be able to retain its key
managerial and technical personnel or that it will be able to attract and retain
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additional highly qualified technical and managerial personnel in the future.
The inability to attract and retain the technical and managerial personnel
necessary to support the growth of the Company's business, due to, among other
things, a large increase in the wages demanded by such personnel, could have a
material adverse effect upon the Company's business, results of operations and
financial condition.
PRINCIPAL OFFICES
Our offices are located at 815 John Street, Suite 150, Evansville, Indiana. We
have a Lease Agreement which expires on December 2014 for approximately 5,000
square feet at a monthly rental of $2,300. We are responsible, with others, for
common area maintenance. We believe that the space is adequate for our current
operations and additional space is available, if required, at approximately the
same cost and expense.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below. Our business, financial
condition, results of operations or cash flows could be materially adversely
affected by any of the events or circumstances described in these risks. The
valuation for the Company could also decline due to any of these events or
circumstances, and you may lose all or part of your investment. This document
also contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of several factors, including the risks
faced by us described below and elsewhere in this Annual Report. In assessing
these risks, you should also refer to the other information contained in this
Annual Report, including our financial statements and related notes.
RISKS RELATED TO OUR BUSINESS
THE COMPANY HAS A LIMITED OPERATING HISTORY
The Company is in the expansion stage and accordingly, the Company's business is
subject to the risks inherent in the transition to a large-scale business.
Failure by the Company to develop the ability to consistently provide high
quality products and services to its clients would have a material adverse
effect on the Company's business, operating results and financial condition. To
address these risks, the Company must, among other things, respond to
competitive developments, attract and motivate qualified personnel, develop
market acceptance for its products, establish effective distribution channels,
effectively manage growth and continue to improve its proprietary technologies
and successfully commercialize products incorporating such technologies. In
addition, the Company's limited operating history makes forecasting difficult.
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS ISSUED AN UNQUALIFIED
OPINION WITH AN EXPLANATORY PARAGRAPH TO THE EFFECT THAT THERE IS SUBSTANTIAL
DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
Our independent registered public accounting firm has issued an unqualified
opinion with an explanatory paragraph to the effect that there is substantial
doubt about our ability to continue as a going concern. This unqualified opinion
with an explanatory paragraph could have a material adverse effect on our
business, financial condition, results of operations and cash flows. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and Footnotes to our financial
statements for the fiscal year ended February 29, 2012, included elsewhere in
this filing.
We have no committed sources of capital and do not know whether additional
financing will be available when needed on terms that are acceptable, if at all.
This going concern statement from our independent registered public accounting
firm may discourage some investors from purchasing our stock or providing
alternative capital financing. The failure to satisfy our capital requirements
will adversely affect our business, financial condition, results of operations
and prospects.
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Unless we raise additional funds, either through the sale of our securities or
one or more collaborative arrangements, we will not have sufficient funds to
continue operations. Even if we take these actions, they may be insufficient,
particularly if our costs are higher than projected or unforeseen expenses
arise.
THE SUCCESS OF OUR BUSINESS DEPENDS ON CONTINUED GROWTH OF THE INTERNET AS A
BUSINESS TOOL FOR SMALL AND MEDIUM-SIZED BUSINESSES.
Expansion in the sales of our web services and products will depend on the
continued acceptance of the Internet as a communications and commerce platform
for small and medium-sized businesses. The use of the Internet as a business
tool could be adversely affected by delays in the development or adoption of new
standards and protocols to handle increased demands of Internet activity,
security, reliability, cost, ease-of-use, accessibility, and quality of service.
The performance of the Internet and its acceptance as a business tool have been
harmed in the past by viruses, worms, and similar malicious programs, and the
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure. If for any reason the Internet does
not remain a widespread communications medium and commercial platform or
businesses do not continue to become Internet enabled and maintain an online
presence, the demand for our services and products would be significantly
reduced, thereby significantly affecting our sales and the success of our
business.
IF ECONOMIC OR OTHER FACTORS NEGATIVELY AFFECT THE SMALL AND MEDIUM-SIZED
BUSINESS SECTORS, OUR CUSTOMERS MAY BECOME UNWILLING OR UNABLE TO PURCHASE OUR
WEB SERVICES AND PRODUCTS, WHICH MAY CAUSE OUR REVENUE TO DECLINE AND IMPAIR OUR
ABILITY TO OPERATE PROFITABLY.
Our existing and target customers are small and medium-sized businesses. These
businesses are more likely to be significantly affected by economic downturns
than larger, more established businesses. Additionally, these customers often
have limited discretionary funds, which they may choose to spend on items other
than our Web services and products. If small and medium-sized businesses
experience economic hardship, they may be unwilling or unable to expend
resources to develop their Internet presences, which would negatively affect the
overall demand for our services and products and could cause our revenue to
decline.
OUR OPERATING RESULTS ARE DIFFICULT TO PREDICT AND FLUCTUATIONS IN OUR
PERFORMANCE MAY RESULT IN VOLATILITY IN THE MARKET PRICE OF OUR COMMON STOCK.
Due to our limited operating history, our evolving business model, and the
unpredictability of our emerging industry, our operating results are difficult
to predict. We expect to experience fluctuations in our operating and financial
results due to a number of factors, such as:
our ability to retain and increase sales to existing customers, attract new
customers, and satisfy our customers' requirements;
the renewal rates for our services;
changes in our pricing policies;
the introduction of new services and products by us or our competitors;
our ability to hire, train and retain members of our sales force;
the rate of expansion and effectiveness of our sales force;
technical difficulties or interruptions in our services;
general economic conditions;
additional investment in our services or operations; and
our success in maintaining and adding strategic marketing relationships.
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WE FACE INTENSE AND GROWING COMPETITION. IF WE ARE UNABLE TO COMPETE
SUCCESSFULLY, OUR BUSINESS WILL BE SERIOUSLY HARMED.
The market for our web services and products is competitive and has relatively
low barriers to entry. Our competitors vary in size and in the variety of
services they offer. We encounter competition from a wide variety of company
types, including:
web site design and development service and software companies;
Internet service providers and application service providers;
Internet search engine providers;
Local business directory providers; and
web site domain name providers and hosting companies.
In addition, due to relatively low barriers to entry in our industry, we expect
the intensity of competition to increase in the future from other established
and emerging companies. Increased competition may result in price reductions,
reduced gross margins, and loss of market share, any one of which could
seriously harm our business. We also expect that competition will increase as a
result of industry consolidations and formations of alliances among industry
participants.
Moreover, many of our current competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources, and
greater brand recognition and, we believe, a larger installed base of customers.
These competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements. They may be able to devote
greater resources to the promotion and sale of their services and products than
we can. If we fail to compete successfully against current or future
competitors, our revenue could increase less than anticipated, or even decline,
and our business could be significantly harmed.
OUR FAILURE TO ESTABLISH BRAND AWARENESS TO EITHER AMWEST OR INSTANT WEBSITE
TECHNOLOGY, INC., WITHIN A SHORT PERIOD OF TIME COULD COMPROMISE OUR ABILITY TO
COMPETE AND TO GROW OUR BUSINESS.
As a result of the anticipated increase in competition in our market, and the
likelihood that some of this competition will come from companies with
established brands, we believe brand name recognition and reputation will become
increasingly important. Our planned strategy which includes relying
significantly on third-party strategic marketing relationships to find new
customers may impede our ability to build brand awareness, as our customers may
mistakenly believe our web services and products will be those of the parties
with which we have strategic marketing relationships. If we do not continue to
build brand awareness, we could be placed at a competitive disadvantage to
companies whose brands are more recognizable than ours.
IF WE CANNOT ADAPT TO TECHNOLOGICAL ADVANCES OUR SERVICES AND PRODUCTS MAY
BECOME OBSOLETE AND OUR ABILITY TO COMPETE WOULD BE IMPAIRED.
Changes in our industry occur very rapidly, including changes in the way the
Internet operates or is used by small and medium-sized businesses and their
customers. As a result, our web services and products could become obsolete
within a short time period. The introduction of competing products employing new
technologies and the evolution of new industry standards could render our
existing products or services obsolete and unmarketable. To be successful, our
web services and products must keep pace with technological developments and
evolving industry standards, address the ever-changing and increasingly
sophisticated needs of our customers, and achieve market acceptance. If we are
unable to develop new web services or products, or enhancements to our web
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services or products, on a timely and cost-effective basis, or if new web
services or products or enhancements do not achieve market acceptance, our
business would be seriously harmed.
PROVIDING WEB SERVICES AND PRODUCTS TO SMALL AND MEDIUM-SIZED BUSINESSES
DESIGNED TO ALLOW THEM TO INTERNET-ENABLE THEIR BUSINESSES IS A NEW AND EMERGING
MARKET; IF THIS MARKET FAILS TO DEVELOP, WE WILL NOT BE ABLE TO GROW OUR
BUSINESS.
Our success depends on a significant number of small and medium-sized business
outsourcing web site design, hosting, and management as well as adopting other
online business solutions. The market for our web services and products is
relatively new and untested. Custom web site development has been the
predominant method of Internet enablement, and small and medium-sized businesses
may be slow to adopt our template-based web services and products. Further, if
small or medium-sized businesses determine that having an Internet presence is
not giving their businesses an advantage, they would be less likely to purchase
our web services and products. If the market for our web services and products
fails to grow or grows more slowly than we currently anticipate, or if our web
services and products fail to achieve widespread customer acceptance, our
business would be seriously harmed.
WE MAY NEED ADDITIONAL FINANCING TO SUPPORT OUR BUSINESS GROWTH, IF WE DO NOT
OBTAIN THIS FINANCING, OUR GROWTH MAY BE IMPAIRED.
We intend to continue to make investments to support our business growth and may
require additional funds to respond to business challenges, including the need
to develop new services and products or enhance our existing web services,
enhance our operating infrastructure and acquire complementary businesses and
technologies.
In order to expand our business operations, we anticipate that we may have to
raise additional funding. If we are not able to raise the capital necessary to
fund our business expansion objectives, we may have to delay the implementation
of our business plan. We do not currently have any arrangements for other
financing.
IF WE ARE UNABLE TO OBTAIN KEY PERSONAL OR RETAIN JASON GERTEISEN, THIS MAY
COMPROMISE OUR ABILITY TO SUCCESSFULLY MANAGE OUR BUSINESS AND PURSUE OUR GROWTH
STRATEGY.
We depend on the services of our sole director and officer, Jason Gerteisen, for
the future success of our business. The loss of his services could have an
adverse effect on our business, financial condition and results of operations.
We do not carry any key personnel life insurance policies on Jason Gerteisen and
we do not have a contract for his services.
OUR SOLE OFFICER AND DIRECTOR OWNS CONTROLLING INTEREST IN OUR OUTSTANDING
SHARES OF STOCK AND THEREFORE HAS CONTROL OVER ALL OF OUR CORPORATE DECISIONS.
HE MAY MAKE BUSINESS DECISIONS THAT ARE DISADVANTAGEOUS TO OUR MINORITY
SHAREHOLDERS.
Jason Gerteisen has a controlling interest in our shares of common stock.
Accordingly, he will have significant influence in determining the outcome of
all corporate transactions or other matters, including the election of
directors, mergers, consolidations and the sale of all or substantially all of
our assets, as well as the power to prevent or cause a change in control. The
interests of Jason Gerteisen may differ from the interests of the other
investors and may result in corporate decisions that are disadvantageous to
other shareholders.
GOVERNMENT REGULATION INVOLVING THE TRANSMISSION OF INFORMATION OVER THE
INTERNET IS EVOLVING AND WE MAY FACE LIABILITY IN CONNECTION WITH THE
INFORMATION THAT WE USE OR TRANSMIT USING OUR SERVICES AND PRODUCTS.
The legal framework that applies to the Internet is continually evolving. Laws
relating to the Internet have been, and likely will continue to be, enacted that
address issues of privacy, security, pricing, taxation, quality and substance of
services and products, and other issues. Because our web services and products
allow customers to transmit information over the Internet on their own web
sites, and because we develop many of these web sites, we may be found to be
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liable for any improper information that our customers transmit. We may face
liability for defamation, negligence, copyright, patent or trademark
infringement, and other claims based on the nature and content of the materials
being transmitted by our web services. Although we retain discretion to cancel
the web services being provided to customers if we learn such content is being
transmitted, there can be no guarantee that our customers will refrain from such
transmission or that we will not be deemed responsible for the content being
transmitted or hosted using our web services or products. Government regulations
also could affect the cost of communicating on the Internet and could negatively
affect the demand for our web services and products, and our business could
thereby be harmed.
WE WERE A "SHELL COMPANY" AND WE WERE REQUIRED TO PROVIDE CERTAIN INFORMATION TO
THE PUBLIC PURSUANT TO THE EXCHANGE ACT. WE ARE RESPONSIBLE FOR THE ADEQUACY AND
ACCURACY OF ALL OF OUR DISCLOSURES.
The Securities and Exchange Commission adopted Rule 405 of the Securities Act
and Rule 12b-2 of the Exchange Act which defines a shell company as a registrant
that has no or nominal operations, and either (a) no or nominal assets; (b)
assets consisting solely of cash and cash equivalents; or (c) assets consisting
of any amount of cash and cash equivalents and nominal other assets. At the time
that we acquired Instant Website Technology, Inc., we were a shell company. The
rules prohibit shell companies from using a Form S-8 to register securities
pursuant to employee compensation plans. However, the rules do not prevent us
from registering securities pursuant to registration statements. Additionally,
the rule regarding Form 8-K requires shell companies to provide more detailed
disclosure upon completion of a transaction that causes it to cease being a
shell company.
The Securities and Exchange Commission adopted a new Rule 144 effective February
15, 2008, which makes resales of restricted securities by shareholders of a
shell company more difficult. See discussion in Risk Factors titled 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."
SHAREHOLDERS WHO HOLD UNREGISTERED SHARES OF OUR COMMON STOCK ARE SUBJECT TO
RESALE RESTRICTIONS PURSUANT TO RULE 144, DUE TO OUR PRIOR STATUS AS A "SHELL
COMPANY."
Pursuant to Rule 144 of the Securities Act, we were a "shell company." As such,
sales of our unregistered 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 Exchange Act 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 one 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 SEC 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 for us to raise funding through the sale of debt or equity securities
unless we agree to register such securities with the Securities and Exchange
Commission, which could cause us to expend additional resources in the future.
JASON GERTEISEN HAS NO EXPERIENCE RELATED TO PUBLIC COMPANY MANAGEMENT. AS A
RESULT, WE MAY BE UNABLE TO MANAGE OUR PUBLIC REPORTING REQUIREMENTS.
Our operations depend entirely on the efforts of our sole officer and director.
While he has expertise with which we will rely upon to grow and manage our
business operations, he has no experience related to public company management
or as a principal accounting officer. Because of this, we may be unable to
develop and manage our public reporting requirements. There is no assurance that
we will overcome these obstacles.
10
YOU WILL NOT RECEIVE DIVIDEND INCOME FROM AN INVESTMENT IN THE SHARES AND AS A
RESULT, THE PURCHASE OF THE SHARES SHOULD ONLY BE MADE BY AN INVESTOR WHO DOES
NOT EXPECT A DIVIDEND RETURN ON THE INVESTMENT.
We have never declared or paid a cash dividend on our shares nor will we in the
foreseeable future. We currently intend to retain future earnings, if any, to
finance the operation and expansion of our business. Accordingly, investors who
anticipate the need for immediate income from their investments by way of cash
dividends should refrain from purchasing any of our securities. As we do not
intend to declare dividends in the future, you may never see a return on your
investment and you indeed may lose your entire investment.
OUR SHARES OF COMMON STOCK ARE DEEMED TO BE "PENNY STOCKS" WITH A POTENTIAL
LIMITED TRADING MARKET.
Our shares of common stock will, in all likelihood, be subject to the "penny
stock rules" adopted pursuant to Section 15(g) of the Exchange Act. The penny
stock rules apply to non-NASDAQ companies whose common stock trades at less than
$5.00 per share or companies which have tangible net worth of less than
$5,000,000 ($2,000,000 if the company has been operating for three or more
years). Such rules require, among other things, that brokers who trade "penny
stock" to persons other than" established customers" complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote and other information under certain circumstances.
Many brokers have decided not to trade "penny stock" because of the requirements
of the penny stock rules and, as result, the number of broker-dealers willing to
act as market makers in such securities is limited. In the event that we remain
subject to the "penny stock rules" for any significant period, there may develop
an adverse impact on the market, if any, for our securities. Because our
securities are subject to the "penny stock rules," investors will find it more
difficult to dispose of our securities. Further, for companies whose securities
are traded in the "Pink Sheets" and/or in the Over-the-Counter Bulletin Board
System, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain
coverage for significant news events because major wire services, such as the
Dow Jones News Service, generally do not publish press releases about such
companies, and (iii) to obtain needed capital.
FUTURE SALES OF RESTRICTED SHARES COULD DECREASE THE PRICE A WILLING BUYER WOULD
PAY FOR SHARES OF OUR COMMON STOCK, COULD CAUSE OUR PRICE TO DECLINE AND COULD
IMPAIR OUR ABILITY TO RAISE CAPITAL.
Future sales of common stock by Jason Gerteisen or other unregistered shares of
stock under exemptions from registration or through a subsequent registered
offering could materially adversely affect the market price of our common stock
and could materially impair our future ability to raise capital through an
offering of equity securities. We are unable to predict the effect, if any, that
market sales of these shares, or the availability of these shares for future
sale, will have on the prevailing market price of our common stock at any given
time.
WE WILL INCUR PROFESSIONAL FEES IN CONNECTION WITH BEING A REPORTING COMPANY
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
The Company is subject to the reporting requirements of the Exchange Act and as
such, we are required to file Form 10-Ks, Form 10-Qs and Form 8-Ks and other
reports with the SEC. We will incur professional fees (i.e., attorney, auditors
and filing agents) in connection with the preparation and filing of such reports
and we currently anticipate such costs to range from $30,000 to $50,000 per
year. If we are unable to file such reports, we will be delinquent in our
filings which could adversely affect the marketability of our shares of common
interest.
THE COMPANY IS IN A HIGHLY COMPETITIVE INDUSTRY
Competition in the market for providing e-commerce software and other software
applications is intense. The Company's software products face competition from
many larger, more established companies. In addition, other companies could seek
to introduce competing products or services and increased competition could
result in a decrease in the price charged by the Company's competitors for their
products and services or reduce demand for the Company's products and services,
which would have a material adverse effect on the Company's business, operating
results and financial condition. There can be no assurance that the Company will
11
be able to compete successfully with its existing or potential competitors,
which may have substantially greater financial, technical, and marketing
resources, longer operating histories, greater name recognition or more
established relationships in the industry than the Company. If any of these
competitors provide competitive software products and services to the
marketplace in the future, the Company cannot be sure that it will have the
resources or expertise to compete successfully.
THE COMPANY WILL NEED FURTHER PRODUCT DEVELOPMENT
Although the Company currently has certain software products, additional ongoing
development is necessary to continue to enhance the quality, efficiency and
reliability of the Company's software product offerings, in addition to the
development of new products. If the Company were unable to continue to develop
and install market leading software products, then the Company's business,
operating results and financial condition would be materially adversely
affected.
THE GROWTH OF THE MARKET FOR OUR SERVICES DEPENDS ON THE DEVELOPMENT AND
MAINTENANCE OF THE INTERNET INFRASTRUCTURE.
Our business is based on delivering services over the Internet, and the success
of our business therefore depends on the development and maintenance of a sound
Internet infrastructure. This includes maintenance of a reliable network
backbone with the necessary speed, data capacity and security, as well as timely
development of complementary products such as high-speed modems, for providing
reliable Internet access and services. Our ability to increase the speed and
scope of our services is limited by, and depends upon, the speed and reliability
of both the Internet and our network infrastructure.
INTERNET-RELATED STOCK PRICES ARE ESPECIALLY VOLATILE AND THIS VOLATILITY MAY
DEPRESS OUR STOCK PRICE OR CAUSE IT TO FLUCTUATE SIGNIFICANTLY.
The stock market, and the trading prices of Internet-related companies in
particular, have been notably volatile. This volatility is likely to continue in
the short-term and is not necessarily related to the operating performance of
affected companies. This broad market and industry volatility could
significantly reduce the price of our common stock at any time, without regard
to our operating performance.
THE COMPANY HAS LOSSES FROM OPERATIONS; NO ASSURANCES OF PROFITABILITY
Amwest Imaging Technology Incorporated had losses before tax benefit of
approximately $306,000 for the fiscal year ended February 29, 2012, and losses
before tax benefit of approximately $29,000 for the fiscal year ended February
28, 2011, and there can be no assurance that the Company will not incur
additional losses in the future. The Company's operating expenses have increased
as the business has grown and can be expected to increase significantly because
of expansion efforts. There is no assurance that the Company will be able to
generate sufficient revenue to meet its operating expenditures or to operate
profitably.
SUBSTANTIAL ALTERATION OF THE COMPANY'S CURRENT BUSINESS AND REVENUE MODEL
The Company's present business and revenue model represents the current view of
the optimal business and revenue structure, which is to derive revenues and
achieve profitability in the shortest period. There can be no assurance that
current models will not be altered significantly or replaced with an alternative
model that is driven by motivations other than near-term revenues and/or
profitability (for example, building market share before the Company's
competitors). Any such alteration or replacement of the business and revenue
model may ultimately result in the deferring of certain revenues in favor of
potentially establishing larger market share. The Company cannot assure that any
adjustment or change in the business and revenue model will prove to be
successful.
THE COMPANY MAY NOT BE ABLE TO MANAGE GROWTH AND INTERNAL EXPANSION
The Company has not yet undergone the significant managerial and internal
expansion that the Company expects will occur, and the Company's inability to
manage growth could hurt the results of operations. Expansion of operations will
12
be required to address anticipated growth of the Company's customer base and
market opportunities. Expansion will place a significant strain on the Company's
management, operational and financial resources. Currently, the Company has a
limited number of employees. The Company will need to improve existing
procedures and controls as well as implement new transaction processing,
operational and financial systems, procedures and controls to expand, train and
manage the Company's employee base. The Company's failure to manage growth
effectively could have a damaging effect on the Company's business, results of
operations and financial condition.
THE COMPANY DEPENDS ON KEY MANAGEMENT; LOSS OF KEY MANAGEMENT COULD HAVE A
MATERIAL ADVERSE EFFECT ON OPERATIONS
The Company's success depends in part upon retaining the services of certain
executive officers, software developers and other key employees. In addition,
because of the Company's rapid pace of growth, the Company is also dependent on
its ability to recruit, retain and motivate personnel with technical, marketing,
sales and managerial skills. If the Company loses key personnel or is unable to
recruit qualified personnel, the ability to manage the day-to-day aspects of the
business will be weakened. The Company's operations and prospects depend in
large part on the performance of the senior management team. The loss of the
services of one or more members of the senior management team could have a
material adverse effect on the business, financial condition and results of
operation. Because the senior management team has exceptional experience with
the Company and in the industry, it would be difficult to replace them without
adversely effecting the Company's business operations.
THE COMPANY'S ABILITY TO COMPETE AND PURSUE STRATEGIC ALTERNATIVES COULD BE
JEOPARDIZED IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR
INFRINGE ON INTELLECTUAL PROPERTY RIGHTS OF OTHERS
We rely on a combination of copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. We also
enter into confidentiality or license agreements with our employees, consultants
and corporate partners and control access to and distribution of our products,
documentation and other proprietary information. Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to copy or otherwise
obtain and use our products or technology. Monitoring unauthorized use of our
products is difficult and we cannot be certain that the steps we have taken will
prevent unauthorized use of our technology, particularly in foreign countries
where the laws may not protect our proprietary rights as fully as in the United
States. If competitors are able to use our technology, our ability to compete
and pursue strategic alternatives effectively could be harmed. Litigation may be
necessary to enforce our intellectual property rights. Any such litigation could
result in substantial costs and diversion of resources and could have a material
adverse affect on our business, operating results and financial condition.
Our industry is characterized by the existence of a large number of patents and
frequent claims and related litigation regarding patents and other intellectual
property rights. In the course of our business, we may receive claims of
infringement or otherwise become aware of potentially relevant patents or other
intellectual property rights held by other parties. We evaluate the validity and
applicability of these intellectual property rights, and determine in each case
whether we must negotiate licenses or cross-licenses to incorporate or use the
proprietary technologies in our products.
Any parties asserting that our products infringe upon their proprietary rights
would require us to defend ourselves, and possibly our customers, manufacturers
or suppliers against the alleged infringement. Regardless of their merit, these
claims could result in costly litigation and subject us to the risk of
significant liability for damages. Such claims would likely be time consuming
and expensive to resolve, would divert management time and attention and would
put us at risk to:
* Stop selling, incorporating or using our products that incorporate the
challenged intellectual property;
* Obtain from the owner of the intellectual property right a license to
sell or use the relevant technology, which license may not be
available on reasonable terms, or at all;
* Redesign those products that use such technology; or
* Accept a return of products that use such technologies.
13
If we are forced to take any of the foregoing actions, our business may be
seriously harmed.
In addition, we license public domain software and proprietary technology from
third parties for use in our existing products, as well as new product
development and enhancements. We cannot be assured that such licenses will be
available to us on commercially reasonable terms in the future, if at all. The
inability to maintain or obtain any such license required for our current or
future products and enhancements could require us to substitute technology of
lower quality or performance standards or at greater cost, either of which could
adversely impact the competitiveness of our products.
THE COMPANY MAY NEED SUBSTANTIAL, ADDITIONAL FINANCING
There is no guarantee that the Company will be able to obtain financing required
to continue to expand the business or that the present funding sources will
continue to extend terms under which the Company can operate efficiently. If the
Company is unable to secure financing under favorable terms, the Company may be
adversely affected. There is no assurance that the Company will continue to be
able to maintain financing on acceptable terms.
The Company's continued viability depends on the Company's ability to raise
capital. Changes in economic, regulatory or competitive conditions may lead to
cost increases. Management may also determine that it is in the Company's best
interest to expand more rapidly than currently intended, to expand marketing
activities, to develop new or enhance existing services or products, to respond
to competitive pressures or to acquire complementary services, businesses or
technologies. In any such case or other change of circumstance, additional
financing will be necessary. If additional financing is required, there can be
no assurances that the Company will be able to obtain such additional financing
on terms acceptable to us and at times required by us, if at all. In such event,
the Company may be required to materially alter the Company's business plan or
curtail all or a part of the Company's expansion plans.
VOLATILITY OF THE MARKET PRICE OF THE COMPANY'S STOCK
The market price of the Company's common stock may be volatile, which could
cause the value of your investment to decline. Any of the following factors
could affect the market price of our common stock:
* Changes in earnings estimates and outlook by financial analysts;
* Our failure to meet financial analysts' and investors' performance
expectations;
* Changes in market valuations of other transportation and logistics
companies; or
* General market and economic conditions.
In addition, many of the risks described elsewhere in this "Risk Factors"
section could adversely affect the stock price. The stock markets have
experienced price and volume volatility that have affected many companies' stock
prices. Stock prices for many companies have experienced wide fluctuations that
have often been unrelated to the operating performance of those companies. These
types of fluctuations may affect the market price of our common stock.
FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH
SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002 COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS AND OPERATING RESULTS. IN ADDITION, CURRENT AND POTENTIAL
STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR FINANCIAL REPORTING, WHICH COULD HAVE
A MATERIAL ADVERSE EFFECT ON OUR STOCK PRICE.
Effective internal controls are necessary for us to provide reliable financial
reports and effectively prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, our operating results could be harmed. We are required
to document and test our internal control procedures in order to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual
management assessments of the effectiveness of our internal controls over
financial reporting. During the course of our testing, we may identify
deficiencies which we may not be able to remediate in time for compliance with
the requirements of Section 404. In addition, if we fail to maintain the
adequacy of our internal controls, as such standards are modified, supplemented
or amended from time to time; we may not be able to ensure that we can conclude
14
on an ongoing basis that we have effective internal controls over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to
achieve and maintain an effective internal control environment could also cause
investors to lose confidence in our reported financial information, which could
have a material adverse effect on our stock price.
We cannot provide assurance as to the result of these efforts. We cannot be
certain that any measures we take will ensure that we implement and maintain
adequate internal controls in the future. Any failure to implement required new
or improved controls, or difficulties encountered in their implementation, could
harm our operating results or cause us to fail to meet our reporting obligations
IF WE FAIL TO SUCCESSFULLY ADDRESS THE CHALLENGES, RISKS AND UNCERTAINTIES
ASSOCIATED WITH OPERATING AS A PUBLIC COMPANY, OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION WOULD BE MATERIALLY HARMED.
We have and will continue to incur a significant increase in costs as a result
of operating as a public company, and our management has and will be required to
devote substantial time to new compliance initiatives. Until recently we had
never operated as a public company. In preparation for and since reporting as a
public company, we have and expect to continue to incur significant legal,
accounting and other expenses that we did not incur as a non-reporting company.
In addition, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as well
as new rules subsequently implemented by the Securities and Exchange Commission
(the "SEC") and various stock exchanges, has imposed many new requirements on
public companies, including requiring changes in corporate governance practices.
Our management and other personnel have and will continue to devote a
substantial amount of time to these new compliance procedures.
As a public company, we are now subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Sarbanes-Oxley Act and the rules promulgated by the SEC, in response to the
Sarbanes-Oxley Act. The Exchange Act requires, among other things, that we file
annual, quarterly and current reports with respect to our business and financial
condition. The Sarbanes-Oxley Act requires, among other things, that we maintain
effective disclosure controls and procedures and internal controls for financial
reporting.
If we or our independent registered public accounting firm identifies
deficiencies in our internal controls that are deemed to be material weaknesses,
the market price of our stock could decline and we could be subject to sanctions
or investigations by SEC or other regulatory authorities, which would entail
expenditure of additional financial and management resources.
These rules and regulations could also make it more difficult for us to attract
and retain qualified independent members of our Board of Directors.
Additionally, we have found these rules and regulations make it more difficult
and more expensive for us to obtain director and officer liability insurance. We
have, and may be required once again, to accept reduced policy limits and/or
coverage or incur substantially higher costs to obtain the same or similar
coverage.
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Staff of the Securities and Exchange Commission has reviewed our Amendment
No. 2 to our Form 8-K initially filed September 7, 2011, filed January 27, 2012
and our Form 10-Q for the Quarterly Period ended November 30, 2011, filed
January 17, 2012 and certain of our press releases and the Staff has issued
certain comments. In response to these comments, we may be required to further
amend each of these reports and file additional reports to include certain
disclosures on an additional Form 8-K. Certain of the responses to the comments
may be addressed in this Form 10-K. In the event that we determine that certain
of the comments do not apply to the disclosed facts and circumstance or if we
determine that an amendment is not appropriate, we will appropriately advise the
Staff of the Securities and Exchange Commission. Until we respond and until the
Staff has reviewed our responses and amendments, or either, we are deemed to
have unresolved Securities and Exchange Commission Staff comments.
15
ITEM 2. PROPERTIES
The Company does not own any property at the present time and has no agreements
to acquire any property. Our executive offices are located at 815 John Street
Suite 150, Evansville, IN 47113. We believe that this space is adequate for our
needs at this time, and we believe that we will be able to locate additional
space in the future, if needed, on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
We are not currently a party to any pending legal proceedings. In the ordinary
course of business, we may become a party to various legal proceedings generally
involving contractual matters, infringement actions, product liability claims
and other matters.
From time to time, claims are made against us in the ordinary course of our
business, which could result in litigation. Claims and associated litigation are
subject to inherent uncertainties and unfavorable outcomes could occur, such as
monetary damages, fines, penalties or injunctions prohibiting us from selling
one or more products or engaging in other activities. The occurrence of an
unfavorable outcome in any specific period could have a material adverse effect
on our results of operations for that period or future periods.
ITEM 4. MINE SAFETY DISCLOSURES
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock was traded from November 7, 2011, to present on the Over-the-
Counter Bulletin Board under the trading symbol "AMWI." The following table sets
forth the range of reported high and low sales prices of our common stock during
the periods indicated. Such quotations reflect prices between dealers in
securities and do not include any retail mark-up, mark-down or commission, and
may not necessarily represent actual transactions. Trading in our common stock
should not be deemed to constitute an "established trading market."
High Low
---- ---
For the year ending February 29, 2012:
First Quarter $ 0.00 $ 0.00
Second Quarter $ 0.00 $ 0.00
Third Quarter $ 2.05 $ 0.07
Fourth Quarter $ 1.39 $ 0.04
TRANSFER AGENT
Our transfer agent is Pacific Stock Transfer Company located at 4045 South
Spencer Street, Suite 403, Las Vegas, NV 89119, and telephone number (702)
361-3033.
HOLDERS
As of February 29, 2012 there were 92 shareholders of record of our common
stock.
DIVIDEND POLICY
We have not declared or paid any dividends and do not intend to pay any
dividends in the foreseeable future to the holders of our common stock. We
intend to retain future earnings, if any, for use in the operation and expansion
of our business. Any future decision to pay dividends on common stock will be at
the discretion of our board of directors and will depend on our financial
condition, results of operations, capital requirements and other factors our
board of directors may deem relevant.
16
STAND-ALONE GRANTS
Our board of directors may grant common share purchase options or warrants to
selected directors, officers, employees, consultants and advisors in payment of
goods or services provided by such persons on a stand-alone basis outside of any
of our Plans. The terms of these grants may be individually negotiated.
RECENT SALES OF UNREGISTERED SECURITIES
There were no sales of our common stock for cash during the year ended February
29, 2012
RECENT REPURCHASES OF COMMON STOCK
There were no repurchases of our common stock during the year ended February 29,
2012.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Securities
Exchange Act 1934, as amended, and are not required to provide the information
under this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes appearing elsewhere in this Report. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. The actual results may differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including, but
not limited to, those which are not within our control.
OVERVIEW
Amwest Imaging Incorporated ("AMWI" or the "Company") is a technology company
whose primary business is providing relationship-building tools and processes
that help any business cultivate profitable relationships with customers, all
through web based solutions. Our Company is always working on new internet based
technology. Our current portfolio consists of My Restaurant Web,
(www.myrestaurantweb.com), Lok Drop (www.LokDrop.com), Zip Clik
(www.ZipClik.com)
The Company derives its revenue by charging basic monthly fees for the use of
these website tools and services, which all three of these technologies are
currently creating revenue for the Company. The Company's goal is to provide
high end turnkey solutions to both businesses and private users of the internet.
MY RESTAURANT WEB
This web based solution specifically addresses the needs of restaurants that
desire a website with a strong emphasis of marketing and attracting new
customers. The primary component of this web based solution, an on-demand fold
out turn-key website for immediate use. The websites designed are highly
advanced, niche creations that exceed the needs of small businesses in the
target markets. Following the website creation, design, and listing online, the
client can utilize additional online tools to develop a marketing plan for its
customer base implementing SMS technology ("texting") and email marketing which
is a must-have in today's social networking environment.
We expect to expand the technology in the coming months to service several other
industries.
LOK DROP
Lok Drop Online Storage provides a secure digital safe deposit box enabling
entities to access, store, share and backup digital information in a secure,
private and encrypted location. It can be used to access and share critical data
from anywhere in the world.
17
ZIP CLIK
Zip Clik provides Encryption Software for Skype & Other Voice Over Internet
Protocol (VOIP) Software. Zip Clik software works by providing our own
encryption at the time you start your VOIP conversation on any service. The
encrypted version is then sent to the individual you are talking to, and then
our software decrypts it back into voice as they receive it. This entire process
is done instantly without any delay. More importantly is the fact that Skype
works with the courts to decrypt any conversation they deem necessary which
means the encryption does not protect your privacy and conversations.
RESULTS OF OPERATIONS
REVENUES
Our primary source of revenue was derived from our offering of website
marketing, on a monthly subscription basis or offering on-line data storage. The
Company derives its revenue by charging a basic monthly fee for anyone wanting
to build, develop and maintain a website or wanting to store data on-line.
Following the website creation, design, and listing online, the client can
utilize additional online tools to develop a marketing plan for its customer
base implementing SMS technology ("texting") and email marketing which is a
must-have in today's social networking environment. We charge our customers on a
monthly service program. Our program is designed to help our customers marketing
efforts through website technology developed. We do not pre-bill our customers
on annual or other basis, instead we bill on monthly basis, through credit card
or direct payments, for the purpose of limiting our liabilities. We have
considered annual payment programs to help cash flows; however that policy has
not been instituted.
For the year ended February 29, 2012 and February 28, 2011 the revenue was
approximately $970 and $0, respectively. The Company has just started operations
and is now actively marketing its products. The Company expects revenues to
significantly increase in the future.
COST OF SALES
Costs of sales, which consist primarily of labor, license amortization, software
amortization and technology, increased by approximately $29,959, or 100%, to
approximately $29,959 for the year ended February 29, 2012, as compared to no
cost of sales for the year ended February 28, 2011. As operations only started
in November of 2011, the expense is primarily the amortization of the license
agreement with Bion.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were approximately $317,839 for the
year ended February 29, 2012, compared to $29,230 for the year ended February
28, 2011, an increase of $347,069. The prior year expenses were primarily start
up costs to form the corporation and the expenses for the year ended February
29, 2012 are primarily related to the start up of operations.
NET LOSS
Net loss for the year ended February 29, 2012 increased by $276,817 to
$306,047from $29,230 for the year ended February 28, 2011. The increase in net
loss is primarily due to the increases in general and administrative expenses
and interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations primarily through sales of its online
products and services, sales of its common stock, the issuance of convertible
promissory notes, unsecured promissory notes and license agreements.
18
Our historical revenues have not been sufficient to sustain our operations. We
have not achieved profitability since inception and we expect to continue to
incur net losses and negative cash flow from operations until we can produce
sufficient revenues to cover our costs, which are not expected for several
years. Our profitability will require the successful commercialization of our
online products and services and any future software or services we develop. No
assurances can be given when this will occur.
The Asher note payable was issued in January of 2012 and is a convertible
promissory note for $42,500. The note pays interest at 8% per annum, and
principal and accrued interest is due on the maturity date of October 19, 2012.
The conversion option price associated with the note has a 45 percent discount
to the market price of the stock. The market price is based on the average of
the two lowest trading prices during a fifteen day period prior to conversion.
The note is convertible at any time after 180 days.
The Advanced Capital management note payable was issued in December of 2011 for
$45,000. The note pays no interest unless in default, and principal is due on
the maturity date of December 6, 2012.
The Shareholder note payable was issued in December of 2012 for $25,000. The
note pays interest at 1% per annum, and principal and accrued interest is due on
the maturity date of December 15 19, 2012.
Shareholder advances are considered payable on demand and are non-interest
bearing. The Company owed $10,000 to a shareholder as of February 29, 2012,
respectively. No interest has been accrued or imputed on these debts, as
management believes that interest expense would be immaterial.
Any future financing may result in substantial dilution to existing
shareholders, and future debt financing, if available, may include restrictive
covenants or may require us to grant a lender a security interest in any of our
assets not already subject to an existing security interest. To the extent that
we attempt to raise additional funds through third party collaborations and/or
licensing arrangements, we may be required to relinquish some rights to our
technologies or products currently in various stages of development, or grant
licenses or other rights on terms that are not favorable to us. Any failure by
us to timely procure additional financing or investment adequate to fund our
ongoing operations, including planned product development initiatives and
commercialization efforts, will have material adverse consequences on our
financial condition, results of operations and cash flows.
We will be dependent upon our existing cash of $34,728 at February 29, 2012,
product sales and additional debt and equity issuances to finance our operations
through the next 12 months. We must raise additional capital in the amount of
approximately $500,000 net of expenses, during the next twelve months in order
to fund our working capital requirements in accordance with our existing plans
through 2013. If we are unable to raise these funds, we may be required to delay
our development plans, and curtail our expenditures.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. For the year ended February 29, 2012,
the Company incurred a net loss of $306,047. As of February 29, 2012, the
Company has an accumulated deficit of $335,277. The Company used $105,339 and
$28,933 of cash from operations during 2012 and 2011, respectively, which was
funded by proceeds from issuance of debt and stock. There is no assurance that
such financing will be available in the future. In view of these matters, there
is substantial doubt that the Company will continue as a going concern.
The Company's ability to continue as a going concern is highly dependent on our
ability to obtain additional sources of cash flow sufficient to fund our working
capital requirements. However, there can be no assurance that the Company will
be successful in its efforts to secure such cash flow. Any failure by us to
timely procure additional financing or investment adequate to fund our ongoing
operations, including planned product development initiatives and
commercialization efforts, will have material adverse consequences on our
financial condition, results of operations and cash flows.
19
The financial statements of the Company do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts and
classifications of liabilities that might be necessary should the Company be
unable to continue as a going concern.
STATEMENTS OF CASH FLOWS
Cash and cash equivalents as of February 29, 2012 was approximately $34,728
compared to approximately $20,067as of February 28, 2011. Cash is primarily used
to fund our working capital requirements.
Net cash used in operating activities was approximately $105,339 for the year
ended February 29, 2012 compared to approximately $28,933 for the same period in
2011.
Net cash provided by financing activities was approximately $120,000 for the
year ended February 29, 2012 compared to approximately $49,000 for the same
period in 2011. During the year ended February 29, 2012, we received net
proceeds of $120,000 from the issuance of debt.
ECONOMY AND INFLATION
We have not experienced any significant cancellation of orders due to the
downturn in the economy and only a small number of customer requested delays in
delivery or production of orders in process.
Our management believes that inflation has not had a material effect on our
results of operations
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that are reasonably likely to
have a current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the accompanying financial statements and related disclosures
in conformity with U.S. GAAP requires us to make judgments, assumptions and
estimates that affect the amounts reported in the accompanying financial
statements and the accompanying notes. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and related
disclosure of contingent assets and liabilities. When making these estimates and
assumptions, we consider our historical experience, our knowledge of economic
and market factors and various other factors that we believe to be reasonable
under the circumstances. Actual results could differ from these estimates.
Management has discussed the selection of critical accounting policies and
estimates with our Board of Directors, and the Board of Directors has reviewed
our disclosure relating to critical accounting policies and estimates in this
annual report on Form 10-K. The following critical accounting policies are
significantly affected by judgments, assumptions and estimates used in the
preparation of the financial statements:
THE SIGNIFICANT ACCOUNTING POLICIES FOLLOWED ARE:
SOFTWARE DEVELOPMENT COSTS AND CAPITAL TECHNOLOGY
The Company accounts for software development costs in accordance with several
accounting pronouncements, including FASB ASC 730, Research and Development,
FASB ASC 350-40, Internal-Use Software, FASB 985-20, Costs of Computer Software
to be Sold, Leased, or Marketed and FASB ASC 350-50, Website Development Costs.
The Company has capitalized the cost of the technology license purchased from an
unrelated third party. At the time of purchase the technology was available to
be marketed. As such additional costs to customize, modify and betterment to the
existing product was charged to expense as it was incurred Capitalized software
costs are stated at cost. The estimated useful life of costs capitalized is
evaluated for each specific project and is currently being amortized over five
years. Amortization is computed on a straight line basis. The carrying amount of
all long-lived assets is evaluated periodically to determine if adjustment to
20
the amortization period or the unamortized balance is warranted. Based upon its
most recent analysis, the Company believes that no impairment of the proprietary
software existed at February 29, 2012 or February 28, 2011.
Expenditures for software development costs incurred and expensed for the years
ended February 29, 2012 and February 28, 2011 was approximately $15,000 and none
respectively.
REVENUE RECOGNITION
The Company recognizes revenue on arrangements in accordance with FASB ASC No.
605, Revenue Recognition. In all cases, revenue is recognized only when the
price is fixed or determinable, persuasive evidence of an arrangement exists,
the service is performed and collectability is reasonably assured.
Consideration for future services are made by customers in advance of those
services being provided. All accounts are currently on a month to month service,
therefore revenue is recognized ratably over the period that the services are
subscribed, the current month. The Company does not offer annual or other term
agreements; therefore there is no unearned portion or deferral of revenue.
Services are billed in advance of the period those services are provided.
The Company has not issued guarantees or other warrantees on the advertising
subscription success or results. The Company has not experienced any refund
requests or committed to any adjustments for terminated subscriptions. The
Company does not believe that there is any required liability.
IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS
Long-lived and intangible assets are reviewed for impairment whenever events or
changes in circumstances indicate that the book value of the asset may not be
recoverable. The Company periodically evaluates whether events and circumstances
have occurred that indicate possible impairment. When impairment indicators
exist, the Company uses market quotes, if available or an estimate of the future
undiscounted net cash flows of the related asset or asset group over the
remaining life in measuring whether or not the asset values are recoverable.
There have been no significant impairments of long-lived and intangible assets
during the two-year period ended February 29, 2012.
TAXES
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
resulting from temporary differences. Such temporary differences result from
differences in the carrying value of assets and liabilities for tax and
financial reporting purposes. The deferred tax assets and liabilities represent
the future tax consequences of those differences, which will either be taxable
or deductible when the assets and liabilities are recovered or settled.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
As of February 29, 2012, the Company had no unrecognized tax benefits or related
interest and penalties. We will include future interest and penalties associated
with any unrecognized benefits within provision for income taxes on the
Statements of Operations, if applicable. We do not anticipate any unrecognized
benefits in the next 12 months that would result in a material change to our
financial position.
RECENT ACCOUNTING PRONOUNCEMENTS
For a description of recent accounting standards, including the expected dates
of adoption and estimated effects, if any, on our financial statements, see
"Note 3: Significant Accounting Policies: Recent Accounting Standards" in Part
II, Item 8 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and the related notes begin on Page F-1, which are
included in this Annual Report on Form 10-K.
21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A(T). CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our President and our Chief Accounting Officer, we carried out an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Management conducted its evaluation based on the framework in INTERNAL CONTROL
OVER FINANCIAL REPORTING GUIDANCE FOR SMALLER PUBLIC COMPANIES issued by the
Committee on Sponsoring Organizations of the Treadway Commission (COSO). Based
upon such evaluation, the President and Chief Accounting Officer have concluded
that, as of the end of such period, the Company's disclosure controls and
procedures were not effective as required under Rules 13a-15(e) and 15d-15(e)
under the Exchange Act. This conclusion by the Company's President and Chief
Accounting Officer does not relate to reporting periods after February 29, 2012.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated and
communicated to management, including our President and Chief Accounting
Officer, or persons performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS
Our disclosure controls and procedures are designed to provide reasonable, not
absolute, assurance that the objectives of our disclosure control system are
met. Because of inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues, if any, within
a company have been detected. Based on their evaluation as of the end of the
period covered by this report, management concluded that our disclosure controls
and procedures were sufficiently effective to provide reasonable assurance that
the objectives of our disclosure control system were met.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act) of the Company. Internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America.
The Company's internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on the financial statements.
22
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of the Company's annual or interim financial
statements will not be prevented or detected on a timely basis.
The Chief Accounting Officer has determined that material weaknesses exist
during the year ended February 29, 2012, due to the lack of an independent Audit
Committee, financial disclosure controls, as well as a lack of segregation of
duties, i.e. all of the accounting tasks are performed by a single individual.
Currently, the Company's President reviews all transactions. Until the Company
raises additional capital, it cannot remediate these weaknesses.
We determined that our disclosure controls and procedures were ineffective at
February 29, 2012 and that we had material weaknesses in the design of our
internal control over financial reporting as of such date. We believe that we
have started the process of remediating the material weakness in our financial
reporting through the contracting with consultants to provide such services.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the SEC that permit us to
provide only management's report in this Annual Report on Form 10- K.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No change in the Company's internal control over financial reporting occurred
during the year ended February 29, 2012, that materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names and ages of all of our directors and
executive officers as of the date of this Annual Report. Also provided herein is
a brief description of the business experience of each director and executive
officer during the past five years and an indication of directorships held by
each director in other companies subject to the reporting requirements under the
Federal securities laws. All of the directors will serve until the next annual
meeting of shareholders and until their successors are elected and qualified, or
until their earlier death, retirement, resignation or removal. There are no
arrangements or understandings between any director or executive officer and any
other person pursuant to which the director or executive officer was selected.
Name Age Position
---- --- --------
Jason Gerteisen 29 President, Director
Patrick Kadlec 67 Treasurer, Director
23
DIRECTORS AND EXECUTIVE OFFICERS
The following are the Company's directors and executive officers:
Mr. Jason R. Gerteisen has been the President and Secretary of Amwest Imaging
Incorporated since August 29, 2011. Mr. Gerteisen served as Treasurer of Amwest
Imaging Incorporated from August 29, 2011 to December 12, 2011. Mr. Gerteisen is
a successful leader in sales and management, with a focus on technology and
web-based businesses. He served as Campaign Manager for Jim Tomes for Senate in
Indiana, where he designed and ran a campaign that resulted in a huge win for
the republican candidate of a seat that had been held by democrats for over 15
years. He served as Chief Executive Officer of his own tech company, Mr.
Gerteisen has guided the way for others in his industry utilizing social
marketing tools, web design, and internet marketing to help create a global
network of clients and business builders. While studying Global Business
Management at the University of Phoenix, he managed many quality and successful
projects as a Project Manager of companies in the construction industry. He
serves as a Director of Amwest Imaging Incorporated.
Mr. Patrick Kadlec, of Mora, Minnesota had been a successful business consultant
since 1982, specializing in business startups and re-organizations. Mr. Kadlec
is a graduate of the University of Minnesota where he earned a Bachelors Degree
in Psychology, and also earned a Master Degree in Administration and Management
from the College of St. Thomas in St. Paul, MN. Mr. Kadlec is also a Vietnam
Veteran.
NON-EMPLOYEE DIRECTORS
The Board members serve for the latter of a period of one year or until the next
annual meeting of Company's shareholders.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of our directors or executive officers has been, during the past ten years:
(i) involved in any bankruptcy petition filed by or against such person or any
business of which such person was a general partner or executive officer, either
at the time of the bankruptcy or within two years prior to that time;
(ii) convicted of any criminal proceeding or subject to a pending criminal
proceeding (excluding traffic violations and other minor offences);
(iii) subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoined, barred, suspended or otherwise limited from involvement in
any type of business, securities, futures, commodities or banking activities;
(iv) found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated
24
(v) found by a court of competent jurisdiction in a civil action or by the
Commission to have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has not been
subsequently reverse, suspended, or vacated;
(vii) subject of, or a party to, any Federal or State judicial or administrative
order, judgment, decree, or finding, not subsequently reversed, suspended or
vacated, related to an alleged violation of securities or commodities law or
regulation; any law or regulation respecting financial institutions or insurance
companies; or any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
(viii) the subject of, or a party to, any sanction or order, not subsequently
reversed, suspending or vacated, of any self-regulatory any registered entity of
the Commodity Exchange Act or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons
associated with a member.
DIRECTOR INDEPENDENCE
We have determined that our board of directors currently has one member who
qualify as "independent" as the term is used in Item 407 of Regulation S-K as
promulgated by the SEC and as that term is defined under NASDAQ Rule
4200(a)(15). The independent director is Patrick Kadlec. On the basis of
information solicited from each director, Patrick Kadlec has no material
relationship with us and is independent within the meaning of such rules. In
making this determination, the board evaluated responses to a questionnaire
completed by each director regarding relationships and possible conflicts of
interest between each director, the company and management. In its review of
director independence, the board considered all commercial, industrial, banking,
consulting, legal, accounting, charitable, and familial relationships any
director may have with the company or management.
BOARD MEETINGS AND COMMITTEES; ANNUAL MEETING ATTENDANCE
Although we intend to establish an audit committee and compensation committee,
our board of directors has not adopted any committees to the board of directors.
Our board of directors held 2 formal meeting during the most recently completed
fiscal year. Other proceedings of the board of directors were conducted by
resolutions consented to in writing by all the directors and filed with the
minutes of the proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a meeting of the
directors are, according to the corporate laws of the State of Nevada and our
bylaws, as valid and effective as if they had been passed at a meeting of the
directors duly called and held.
At each annual meeting of shareholders, directors will be elected by the holders
of common stock to succeed those directors whose terms are expiring. Directors
will be elected annually and will serve until successors are duly elected and
qualified or until a director's earlier death, resignation or removal. Our
bylaws provide that the authorized number of directors may be changed by action
of the majority of the board of directors or by a vote of the shareholders of
our Company. Vacancies in our board of directors may be filled by a majority
vote of the board of directors with such newly appointed director to serve until
the next annual meeting of shareholders, unless sooner removed or replaced. We
currently do not have a policy regarding the attendance of board members at the
annual meeting of shareholders.
CODE OF ETHICS
We have adopted a code of ethics that applies to our officers, directors and
employees in accordance with applicable federal securities laws. We have filed a
copy of our code of ethics as an exhibit to our Annual Report on Form 10-K as
filed on February 29, 2012. This document may be reviewed by accessing our
public filings at the SEC's web site at www.sec.gov. In addition, a copy of the
code of ethics can be obtained on our website at www.amwestimagining.com. We
intend to disclose any amendments to or waivers of certain provisions of our
code of ethics in a Current Report on Form 8-K
25
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who own more than 10% of any publicly traded class of our equity
securities, to file reports of ownership and changes in ownership of our equity
securities with the SEC. Officers, directors, and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms that they file.
Based solely on the reports received and on the representations of the reporting
persons, we believe that these persons have complied with all applicable filing
requirements of Section 16(a) of the Exchange Act during fiscal 2012.
ITEM 11. EXECUTIVE COMPENSATION
The table below summarizes the total compensation earned by or paid to our
principal executive officer, our principal financial officer and each of our two
other executive officers other than our principal executive officer and
principal financial officer for the fiscal years ended February 29, 2012 and
February 28, 2011. The amounts represented in the "Options Award" column reflect
the stock compensation expense recorded pursuant to the ASC Topic 718 and does
not necessarily equate to the income that will ultimately be realized by the
named executive for such awards.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
Jason Gerteisen, 2012 $15,000 $97,000 $112,000
President and
Director
----------
(1) On September 8, 2011 Mr. Gerteisen was granted 26,000,000 shares of the
Company's restricted common stock
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE
Jason Gerteisen is currently drawing a salary of $2,500 per month and was
granted twenty six million (26,000,000) of the Company's common shares during
the year ended February 29, 2012.
OUTSTANDING EQUITY AWARDS
There were no outstanding unexercised options, unvested stocks or equity
incentive plan awards held by any of our named executive officers and
significant employees, as of February 29, 2012.
DIRECTOR COMPENSATION
The following table sets forth the compensation awarded to, earned by or paid to
the directors during the fiscal year ended February 29, 2012.
26
Change in
Pension
Value and
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Paid in Stock Option Plan Compensation All Other
Name Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
---- ------- --------- --------- --------------- ----------- --------------- --------
Patrick Kadlec -- $40,000 -- -- -- -- $40,000
----------
(1) Patrick Kadlec was granted one million (1,000,000) shares of the Company's
common stock.
We do not have a plan pursuant to which our directors are compensated and
directors currently do not receive cash compensation for their services on the
Board of Directors although they do receive stock as determined by the full
board of directors with each director abstaining from any such vote involving
himself or a member of his immediate family.
Our non-employee director is currently compensated with the issuance of stock
options, which generally become exercisable upon the date of grant, and which
generally expire on the earlier of ten years from the date of grant or up to
three years after the date that the optionee ceases to serve as a director.
Non-employee directors will be reimbursed for out-of-pocket expenses associated
with attending to our business.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
None
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of the date hereof as to each
person or group who is known to us to be the beneficial owner of more than 5% of
our outstanding voting securities and as to the security and percentage
ownership of each of our executive officers and directors and of all of our
officers and directors as a group.
Beneficial ownership is determined under the rules of the SEC and generally
includes voting or investment power over securities. The number of shares shown
as beneficially owned in the tables below are calculated pursuant to Rule
13d-3(d)(1) of the Exchange Act. Under Rule 13d-3(d)(1), shares not outstanding
that are subject to options, warrants, rights or conversion privileges
exercisable within 60 days are deemed outstanding for the purpose of calculating
the number and percentage owned by such person, but not deemed outstanding for
the purpose of calculating the percentage owned by each other person listed.
Except in cases where community property laws apply or as indicated in the
footnotes to this table, we believe that each shareholder identified in the
table possesses sole voting and investment power over all of the shares of
common stock shown as beneficially owned by the shareholder.
27
The address for each of the persons named below is 815 John Street, Suite 150
Evansville, IN 47113, unless otherwise indicated.
Applicable percentage ownership in the following table is based on approximately
532,560,000 shares of common stock outstanding as of June 25, 2012 plus, for
each individual, any securities that individual has the right to acquire within
60 days of June 25, 2012. The following table does not reflect any conversion of
notes or accrued compensation which may occur within the above-mentioned 60 day
period.
Common Stock
Beneficially
Owned Number of
Shares of Percentage
Name of Beneficial Owner Common Stock of Class
------------------------ ------------ --------
Greg Deman 53,024,400 9.98%
Jason Gerteisen 138,500,000 26.06%
Phil Kueber 29,500,000 5.55%
Patrick Kadlec 1,000,000 *
Executives and Directors
as a group of two (2) 139,500,000 26.20%
----------
* less than 1%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
In support of the Company's efforts and cash requirements, it is relying on
advances from related parties until such time that the Company can support its
operations or attains adequate financing through sales of its equity or
traditional debt financing. Amounts represent advances or amounts paid in
satisfaction of certain liabilities as they come due. The advances are
considered temporary in nature and have not been formalized by a promissory
note. Shareholder advances are considered payable on demand and is non-interest
bearing. The Company owed $10,000 to a shareholder as of February 29, 2011,
respectively. No interest has been accrued or imputed on these debts, as
management believes that interest expense would be immaterial.
The majority shareholder has pledged his support to fund continuing operations;
however there is no written commitment to this effect. The Company is dependent
upon the continued support of this member.
The Company does not have employment contracts with its key employees, including
the majority shareholder who is the Chief Executive Chief Accounting and Chief
Technical Officer.
The amounts and terms of the above transactions may not necessarily be
indicative of the amounts and terms that would have been incurred had comparable
transactions been entered into with independent third parties.
EMPLOYMENT AGREEMENTS
None
EXECUTIVE COMPENSATION AGREEMENT
None
28
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT FEES
The aggregate audit fees billed for the years ended February 29, 2012 and 2011
was $2,250 and $7,000, respectively. Audit services include the audits of the
financial statements included in the Company's annual reports on Form 10-K and
reviews of interim financial statements included in the Company's quarterly
reports on Form 10-Q.
AUDIT-RELATED FEES
None.
TAX FEES
None.
ALL OTHER FEES
None.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
No. Exhibit
--- -------
3.1 Articles of Incorporation (filed as Exhibit 3.1 to the Form S1 filed
with the SEC on June 24, 2010, and incorporated herein by reference)
3.2 By-Laws
10.1 Share Exchange Agreement for Instant Website Technology, Inc. (Filed as
Exhibit 2.1 to form 8K/A filed with the SEC on January 27, 2012, and
incorporated herein by reference)
10.2 Joint Venture Agreement with eMarketing Team Holdings
14.1 Executive Management Code of Ethics
14.2 Company Code of Ethics
31.1 Certification of Chief Executive Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
101 Interactive Data Files pursuant to Rule 405 of Regulation S-T.
29
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Amwest Imaging Incorporated
Dated: June 28, 2012 By: /s/ Jason Gerteisen
-------------------------------------
Jason Gerteisen
Chairman of the Board
President and Director
(Principal Executive Officer)
Dated: June 28, 2012 By: /s/ Jason Gerteisen
-------------------------------------
Jason Gerteisen
Chief Financial Officer and Treasurer
(Principal Accounting Officer)
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Jason Gerteisen Chairman of the Board, June 28, 2012
------------------------------- President and Director
Jason Gerteisen
/s/ Patrick Kadlec Director and Treasurer June 28, 2012
-------------------------------
Patrick Kadlec
30
AMWEST IMAGING INCORPORATED
FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011
CONTENTS
Report of Independent Registered Public Accounting Firm F-2
Financial Statements:
Balance Sheets F-3
Statements of Operations F-4
Statements of Stockholders' Deficit F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
F-1
[LOGO] Peter Messineo
Certified Public Accountant
1982 Otter Way Palm Harbor FL 34685
peter@pm-cpa.com
T 727.421.6268 F 727.674.0511
================================================================================
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Amwest Imaging Incorporated:
I have audited the balance sheets of Amwest Imaging Incorporated as of February
28, 2012 and 2011 and the related statement of operations, changes in
stockholder's equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audits to obtain reasonable assurance about whether the
financial statements were free of material misstatement. The Company was not
required to have, nor was I engaged to perform, an audit of its internal control
over financial reporting. My audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that were
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, I express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provide a reasonable basis for
my opinion.
In my opinion, the financial statements, referred to above, present fairly, in
all material respects, the financial position of Amwest Imaging Incorporated as
of February 28, 2012 and 2011, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has not generated significant revenues from operations
and is requiring traditional financing or equity funding to commence its
operating plan. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Further information and management's
plans in regard to this uncertainty were also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Peter Messineo, CPA
---------------------------------
Peter Messineo, CPA
Palm Harbor, Florida
June 25, 2012
F-2
AMWEST IMAGING INCORPORATED
BALANCE SHEETS
--------------------------------------------------------------------------------
February 29, February 28,
2012 2011
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 34,728 $ 20,067
Accounts receivable, net 173 --
Prepaid expenses and other current assets 365,000 --
Loan costs 2,120 --
---------- ----------
Total Current Assets 402,021 20,067
---------- ----------
Software, net of amortization 512,500 --
OTHER ASSETS:
Long-term portion of prepaid expenses 335,041 --
---------- ----------
Total Other Assets 335,041 --
---------- ----------
TOTAL ASSETS $1,249,562 $ 20,067
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 100,000 $ 297
Accrued interest 317 --
Current portion of notes payable 86,467 --
Derivative Liability 61,034 --
---------- ----------
Total Current Liabilities 247,818 297
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock; $0.001 par value; 5,000,000 shares authorized;
0 shares issued and outstanding -- --
Common stock, $0.001 par value; 595,000,000 shares authorized;
532,560,000 shares issued and 338,000,000 shares outstanding 532,560 338,000
Capital in excess of par value 804,461 (289,000)
Accumulated deficit (335,277) (29,230)
---------- ----------
1,001,744 19,770
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,249,562 $ 20,067
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
AMWEST IMAGING INCORPORATED
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
For the Year Ended
-----------------------------------
February 29, February 28,
2012 2011
------------ ------------
REVENUE:
Sales $ 970 $ --
------------ ------------
970 --
COST OF GOODS SOLD 29,959
------------ ------------
GROSS MARGIN (28,989) --
OPERATING EXPENSES:
Selling, general and administrative expenses 317,839 29,230
------------ ------------
TOTAL OPERATING EXPENSES 317,839 29,230
------------ ------------
LOSS FROM OPERATIONS (346,828) (29,230)
------------ ------------
OTHER EXPENSE (INCOME)
Unrealized gain on derivative (47,945) --
Interest expense 7,164 --
------------ ------------
TOTAL OTHER EXPENSE (INCOME) (40,781) --
------------ ------------
NET LOSS $ (306,047) $ (29,230)
============ ============
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.00) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
BASIC AND DILUTED 426,586,301 252,287,464
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
AMWEST IMAGING INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
Common Stock Capital in Total
-------------------- Excess of Accumulated Treasury Stockholders'
Shares Amount Par Value Deficit Stock Equity
------ ------ --------- ------- ----- ------
Balance, April 7, 2010 (date of inception) -- $ -- $ -- $ -- $ -- $ --
Shares issued for cash, $0.001 per share,
April 9, 2010 234,000,000 234,000 (225,000) -- -- 9,000
Shares issued in initial offering,
December 28, 2010 104,000,000 104,000 (64,000) -- -- 40,000
Net loss -- -- -- (29,230) -- (29,230)
------------ -------- --------- --------- -------- ----------
Balance, February 28, 2011 338,000,000 338,000 (289,000) (29,230) -- 19,770
Shares issued for the acquisition of
Instant Website Technology Inc. 157,560,000 157,560 429,940 -- -- 587,500
Stock based compensation 27,000,000 27,000 110,000 -- -- 137,000
Shares issued for Bion License 10,000,000 10,000 620,000 -- -- 630,000
Value of beneficial derivative conversion
in note payable -- -- (66,479) -- -- (66,479)
Net loss -- -- -- (306,047) -- (306,047)
------------ -------- --------- --------- -------- ----------
Balance, February 29, 2012 532,560,000 $532,560 $ 804,461 $(335,277) $ -- $1,001,744
============ ======== ========= ========= ======== ==========
Note: Retroactively restated for 26:1 forward stock split effective November 7,
2011
The accompanying notes are an integral part of these financial statements.
F-5
AMWEST IMAGING INCORPORATED
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
For the Year Ended
---------------------------------
February 29, February 28,
2012 2011
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (306,047) $ (29,230)
Adjustments to reconcile net loss to net cash and cash
equivalents provided (used) by operating activities:
Amortization 75,000 --
Stock based compensation expense 137,000 --
Non-cash amortization for Bion License 26,250 --
Unrealized gain or loss on derivative (47,945) --
Amortization of discount on convertible note payable 6,467 --
(Increase) decrease in:
Accounts receivable (173) --
Loan costs 380 --
Prepaid expenses and other assets (96,291) --
Increase (decrease) in:
Accounts payable and accrued expenses 100,020 297
---------- ----------
Net cash used by operating activities (105,339) (28,933)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used by investing activities -- --
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock -- 49,000
Proceeds from issuance of notes payable 40,000 --
Proceeds from shareholder loans 80,000 --
---------- ----------
Net cash provided by financing activities 120,000 49,000
---------- ----------
Net increase in cash and cash equivalents 14,661 20,067
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 20,067 --
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 34,728 $ 20,067
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ -- $ --
========== ==========
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of note payable with a beneficial conversion feature $ 66,479 $ --
========== ==========
Issuance of note payable with a discount equivalent to the
relative fair value of the accompanying warrant $ 42,500 $ --
========== ==========
Issuance of common stock for purchase of Instant Website Technology $ 587,500 $ --
========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
Amwest Imaging Incorporated
Notes to Financial Statements
Years Ended February 29, 2012 and February 28, 2011
1. BACKGROUND INFORMATION
Amwest Imaging Inc. ("AMWI", or the "Company") is a technology company whose
primary business is providing relationship-building tools and processes that
help any business cultivate profitable relationships with customers, all through
web based solutions. Our Company is always working on new internet based
technology. Our current portfolio consists of My Restaurant
Web,(www.myrestaurantweb.com), Lok Drop (www.LokDrop.com), Zip Clik
(www.ZipClik.com)
The Company derives its revenue by charging basic monthly fees for the use of
these website tools and services, which all three of these technologies are
currently creating revenue for the Company. The Company's goal is to provide
high end turnkey solutions to both businesses and private users of the internet.
MY RESTAURANT WEB
This web based solution specifically addresses the needs of restaurants that
desire a website with a strong emphasis of marketing and attracting new
customers. The primary component of this web based solution, an on-demand fold
out turn-key website for immediate use. The websites designed are highly
advanced, niche creations that exceed the needs of small businesses in the
target markets. Following the website creation, design, and listing online, the
client can utilize additional online tools to develop a marketing plan for its
customer base implementing SMS technology ("texting") and email marketing which
is a must-have in today's social networking environment.
We expect to expand the technology in the coming months to service several other
industries.
LOK DROP
Lok Drop Online Storage provides a secure digital safe deposit box enabling
entities to access, store, share and backup digital information in a secure,
private and encrypted location. It can be used to access and share critical data
from anywhere in the world.
ZIP CLIK
Zip Clik provides Encryption Software for Skype & Other Voice Over Internet
Protocol (VOIP) Software. Zip Clik software works by providing our own
encryption at the time you start your VOIP conversation on any service. The
encrypted version is then sent to the individual you are talking to, and then
our software decrypts it back into voice as they receive it. This entire process
is done instantly without any delay. More importantly is the fact that Skype
works with the courts to decrypt any conversation they deem necessary which
means the encryption does not protect your privacy and conversations.
FORMATION HISTORY
Amwest Imaging Incorporated (the "Company"), was incorporated in the State of
Nevada on April 7, 2010.
The Company's original principal business objective was to provide document
digitization services to businesses. On September 6, 2011, registrant completed
the transactions of the Share Exchange Agreement of September 6, 2011, between
Amwest Imaging Incorporated, a Nevada corporation, and the shareholders of
Instant Website Technology Inc. ("IWTI"). Accordingly, registrant acquired all
of the issued and outstanding shares of Instant Website Technology Inc., in
exchange for the issuance in the aggregate of 157,560,000 shares of common stock
of the registrant. As a result of the Share Exchange Agreement, Instant Website
Technology Inc., Inc. became a wholly-owned subsidiary of registrant.
F-7
Amwest acquired from Instant Website Technology Inc. the rights to all
technology related to www.myrestaurantweb.com, including but not limited to the
Uniform Resource Locator ("URL") and the website development tools; however no
employees were retained post merger, the accounting system was not transitioned,
there were no bank accounts provided, and there were minimal recurring customers
as the majority of the historical revenue came from a one-time sale of the
technology and custom software development. It was determined that the assets
acquired from Instant Website Technology Inc. did not constitute a business as
there were several significant missing elements in the transferred assets that
would be necessary to operate a business, including the ability to collect
payments from the internet site.
2. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. For the year ended February 29, 2012,
the Company incurred a net loss of approximately $306,047 and approximately
$29,230 for the year ended February 28, 2011. As of February 29, 2012, the
Company has an accumulated deficit of $335,277, positive working capital of
$154,203; however there are limited assets to fund short term operating cash
flow or service debt obligations. The Company used $105,339 and $28,933of cash
from operations during 2012 and 2011, respectively, which was funded by proceeds
from the sale of stock and proceeds from the issuance of convertible derivative
notes. There is no assurance that such financing will be available in the
future. In view of these matters, there is substantial doubt that the Company
will continue as a going concern. The Company is currently pursuing sources of
short and long-term working capital.
The Company's ability to continue as a going concern is highly dependent on our
ability to obtain additional sources of cash flow sufficient to fund our working
capital requirements. However, there can be no assurance that the Company will
be successful in its efforts to secure such cash flow. Any failure by us to
timely procure additional financing or investment adequate to fund our ongoing
operations, including planned product development initiatives and
commercialization efforts, will have material adverse consequences on our
financial condition, results of operations and cash flows.
The financial statements of the Company do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts and
classifications of liabilities that might be necessary should the Company be
unable to continue as a going concern.
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed are:
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 and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS - All cash, other than held in escrow, is maintained
with a major financial institution in the United States. Deposits with this bank
may exceed the amount of insurance provided on such deposits. Temporary cash
investments with an original maturity of three months or less are considered to
be cash equivalents.
FINANCIAL INSTRUMENTS - The Company's balance sheet includes certain financial
instruments. The carrying amounts of current assets and current liabilities
approximate their fair value because of the relatively short period of time
between the origination of these instruments and their expected realization.
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 820 "Fair Value Measurements and Disclosures" (ASC 820) defines fair value
as the exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
F-8
asset or liability in an orderly transaction between market participants on the
measurement date.. ASC 820 also establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs) and (2) an
entity's own assumptions about market participant assumptions developed based on
the best information available in the circumstances (unobservable inputs). The
fair value hierarchy consists of three broad levels, which gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy are described below:
* Level 1 - Unadjusted quoted prices in active markets that are
accessible at the measurement date for identical, unrestricted assets
or liabilities.
* Level 2 - Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets or liabilities
in active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; inputs other than quoted
prices that are observable for the asset or liability (e.g., interest
rates); and inputs that are derived principally from or corroborated
by observable market data by correlation or other means.
* Level 3 - Inputs that are both significant to the fair value
measurement and unobservable.
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of February 29, 2012. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values due to the short-term nature of these
instruments.
The Company applied ASC 820 for all non-financial assets and liabilities
measured at fair value on a non-recurring basis. The adoption of ASC 820 for
non-financial assets and liabilities did not have a significant impact on the
Company's financial statements.
As of February 29, 2012 and February 28, 2011 the fair values of the Company's
financial instruments approximate their historical carrying amount.
ACCOUNTS RECEIVABLE - The Company currently supplies their web solutions on a
monthly basis, billing on the month of services and collection on customer
accounts through credit cards or direct payments. The Company does not issue
credit on services provided, therefore has minimal accounts receivable. No
allowance for doubtful accounts is considered necessary to be established for
amounts that may not be recoverable, since there has been limited credit sales.
LONG-LIVED ASSETS - Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the book value of the asset may
not be recoverable. The Company periodically evaluates whether events and
circumstances have occurred that indicate possible impairment. When impairment
indicators exist, the Company uses market quotes, if available or an estimate of
the future undiscounted net cash flows of the related asset or asset group over
the remaining life in measuring whether or not the asset values are recoverable.
There have been no significant impairments of long-lived assets during the
two-year period ended February 29, 2012.
SOFTWARE DEVELOPMENT COSTS AND CAPITALIZATION - The Company accounts for
software development costs in accordance with several accounting pronouncements,
including FASB ASC 730, Research and Development, FASB ASC 350-40, Internal-Use
Software, FASB 985-20, Costs of Computer Software to be Sold, Leased, or
Marketed and FASB ASC 350-50, Website Development Costs. The Company has
capitalized the cost of the technology license purchased from an unrelated third
party. At the time of purchase the technology was available to be marketed. As
such additional costs to customize, modify and betterment to the existing
product was charged to expense as it was incurred Capitalized software costs are
stated at cost. The estimated useful life of costs capitalized is evaluated for
each specific project and is currently being amortized over five years.
Amortization is computed on a straight line basis. The carrying amount of all
long-lived assets is evaluated periodically to determine if adjustment to the
F-9
amortization period or the unamortized balance is warranted. Based upon its most
recent analysis, the Company believes that no impairment of the proprietary
software existed at February 29, 2012 or February 28, 2011.
Expenditures for software development costs incurred and expensed for the years
ended February 29, 2012 and February 28, 2011 was approximately $15,000 and none
respectively.
Once technological feasibility of new products or features and functions of
current products, which extend its useful life is established, the cost incurred
until release to production are capitalized and amortized over a five year
useful life. There were no amounts capitalized during the year ended February
29, 2012 and the year ended February 28, 2011, respectively. Amortization
expenses related to capitalized software and charged to operations for the year
ended February 29, 2012 and year ended February 28, 2011 were approximately
$75,000 and none respectively.
SHARE-BASED PAYMENTS - Share-based payments to employees, including grants of
employee stock or stock options are recognized as compensation expense in the
financial statements based on their fair values, in accordance with FASB ASC
Topic 718. That expense is recognized over the period during which an employee
is required to provide services in exchange for the award, known as the
requisite service period (usually the vesting period). The Company had no common
stock options or common stock equivalents granted or outstanding for all periods
presented. The company may issue shares as compensation in the future periods
for employee services.
The Company may issue restricted stock to consultants for various services. Cost
for these transactions will be measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable. The value of the common stock is to be measured at the
earlier of (i) the date at which a firm commitment for performance by the
counterparty to earn the equity instruments is reached or (ii) the date at which
the counterparty's performance is complete. The company has issue shares as
compensation in the future period for services associated with the registration
of the common shares.
REVENUE RECOGNITION - The Company recognizes revenue on arrangements in
accordance with FASB ASC No. 605, Revenue Recognition. In all cases, revenue is
recognized only when the price is fixed or determinable, persuasive evidence of
an arrangement exists, the service is performed and collectability is reasonably
assured.
Consideration for future services are made by customers in advance of those
services being provided. All accounts are currently on a month to month service,
therefore revenue is recognized ratably over the period that the services are
subscribed, the current month. The Company does not offer annual or other term
agreements; therefore there is no unearned portion or deferral of revenue.
Services are billed in advance of the period those services are provided.
The Company has not issued guarantees or other warrantees on the advertising
subscription success or results. The Company has not experienced any refund
requests or committed to any adjustments for terminated subscriptions. The
Company does not believe that there is any required liability.
ADVERTISING - The costs of advertising are expensed as incurred. Advertising
expense was approximately $11,000 and none for the years ended February 29, 2012
and February 28, 2011, respectively. Advertising expenses, when incurred are to
be included in the Company's operating expenses.
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes resulting from temporary differences. Such temporary differences
result from differences in the carrying value of assets and liabilities for tax
F-10
and financial reporting purposes. The deferred tax assets and liabilities
represent the future tax consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
As of February 29, 2012, the Company had no unrecognized tax benefits or related
interest and penalties. We will include future interest and penalties associated
with any unrecognized benefits within provision for income taxes on the
Statements of Operations, if applicable. We do not anticipate any unrecognized
benefits in the next 12 months that would result in a material change to our
financial position.
LOSS PER SHARE - Basic and diluted loss per share are computed based on the
weighted-average common shares and common share equivalents outstanding during
the period. Common share equivalents consist of stock options, warrants and
convertible notes payable. There were non common share equivalents excluded from
the computation of diluted earnings per share for the years ended February 29,
2012 and February 28 2011, respectively, because their effect is anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
Except for rules and interpretive releases of the SEC under authority of federal
securities laws and a limited number of grandfathered standards, the FASB
Accounting Standards Codification(TM) ("ASC") is the sole source of
authoritative GAAP literature recognized by the FASB and applicable to the
Company. Management has reviewed the aforementioned rules and releases and
believes any effect will not have a material impact on the Company's present or
future consolidated financial statements.
4. SOFTWARE DEVELOPMENT COSTS AND CAPITALIZATION
The Company has capitalized the cost of acquiring their technology for internal
and external use. The purchase price was valued at the agreed upon price with
the unrelated party. Newly developed software was also capitalized based on our
accounting policy. Acquired and Developed software costs consist of the
following, as of February 29, 2012:
February 29, February 28,
2012 2011
-------- --------
Acquired Software $587,500 $ --
Less accumulated amortization 75,000 --
-------- --------
$512,500 $ --
======== ========
2013 $150,000
2014 150,000
2015 150,000
2016 62,500
2017 --
thereafter --
--------
$512,500
========
F-11
5. NOTES PAYABLE
February 29, February 28,
2012 2011
-------- --------
Asher note payable $ 42,500 $ --
Advanced Capital Management note payable 45,000
Shareholder note payable 25,000
Shareholder advance 10,000
Total debt 112,500 --
-------- --------
Debt discount 36,033 --
-------- --------
Total note payable $ 86,467 $ --
======== ========
The Asher note payable was issued in January of 2012 and is a convertible
promissory note for $42,500. The note pays interest at 8% per annum, and
principal and accrued interest is due on the maturity date of October 19, 2012.
The conversion option price associated with the note has a 45 percent discount
to the market price of the stock. The market price is based on the average of
the two lowest trading prices during a fifteen day period prior to conversion.
The note is convertible at any time after 180 days.
The Advanced Capital management note payable was issued in December of 2011 for
$45,000. The note pays no interest unless in default, and principal is due on
the maturity date of December 6, 2012.
The Shareholder note payable was issued in December of 2012 for $25,000. The
note pays interest at 1% per annum, and principal and accrued interest is due on
the maturity date of December 15 19, 2012.
Share holder advances are considered payable on demand and is non-interest
bearing. The Company owed $10,000 to a shareholder as of February 29, 2012. No
interest has been accrued or imputed on these debts, as management believes that
interest expense would be immaterial.
6. DERIVATIVE LIABILITY
In January of 2012 the Company issued a convertible promissory note for $42,500.
The note pays interest at 8% per annum, and principal and accrued interest is
due on the maturity date of October 19, 2012. The conversion option price
associated with the note has a 45 percent discount to the market price of the
stock. The market price is based on the average of the two lowest trading prices
during a fifteen day period prior to conversion. The note is convertible at any
time after 180 days. As a result of the variable feature associated with the
conversion option, pursuant to ASC Topic 815, the Company bifurcated the
conversion option, and utilized the Black Scholes model to determine the fair
value of the conversion option. At the issuance date, the Company recorded a
debt discount and derivative liability of approximately$42,500 and $108,979,
respectively. The debt discount will be amortized over the life of the note, and
the Company recognized approximately $6,467 of interest expense related to
amortization of the debt discount during the year ended February 29, 2012. As of
February 29, 2012 the unamortized discount related to the note was $36,033. The
derivative liability will be adjusted to fair value each reporting period with
unrealized gain (loss) reflected in other income and expense. The unrealized
gain associated with the derivative liability was approximately $47,945 at
February 29, 2012.
Liabilities measured at fair value on a recurring basis by level within the fair
value hierarchy as of February 29, 2012 and February 28, 2011 related to the
above derivative liability are as follows:
F-12
Fair Value Fair Value
Measurements at Measurements at
February 29, 2012 (1) February 28, 2011 (1)
--------------------- ---------------------
Using Using
Level 2 Total Level 2 Total
-------- -------- -------- --------
Liabilities:
Derivative liabilities $(61,034) $(61,034) $ 0 $ 0
-------- -------- -------- --------
Total liabilities $(61,034) $(61,034) $ 0 $ 0
======== ======== ======== ========
----------
(1) The Company did not have any assets or liabilities measured at fair value
using Level 1 or Level 3 of the fair value hierarchy as of February 29,
2012 or February 28, 2011.
The Company's derivative liabilities are classified within Level 2 of the fair
value hierarchy. The Company utilizes the Black-Scholes Option Pricing Model to
value the derivative liabilities utilizing observable inputs such as the
Company's common stock price, the exercise price of the warrants, and expected
volatility, which is based on historical volatility. The Black-Scholes model
employs the market approach in determining fair value.
7. INCOME TAXES
There is no current or deferred income tax expense or benefit for the years
ended February 29, 2012 and February 28, 2011.
The provision for income taxes is different from that which would be obtained by
applying the statutory federal income tax rate to income before income taxes.
The items causing this difference are as follows:
Year ended
---------------------------------
February 29, February 28,
2012 2011
-------- --------
Tax benefit at U.S. statutory rate $ 104,056 $ 9,940
State income tax benefit, net of
federal benefit 11,232 1,061
Effect of non-deductible expenses (60) --
Employee stock-based compensation (51,608) --
Change in valuation 18,061 --
Amortization of debt discount (143) --
Change in valuation allowance (81,538) (11,001)
--------- ---------
$ -- $ --
========= =========
As of February 29, 2012 and February 28, 2011, the Company had federal and state
net operating loss carry-forwards totaling approximately $92,539 and $11,001,
respectively, which begin expiring in 2032. The Company has established a
valuation allowance to fully reserve all deferred tax assets at February 29,
2012 and February 28, 2011 because it is more likely than not that the Company
will not be able to utilize these assets. The change in the valuation allowance
for the years ended February 29, 2012 and February 28, 2011 was an increase of
$81,538 and $11,001, respectively.
As of February 29, 2012, the Company has not performed an IRC Section 382 study
to determine the amount, if any, of its net operating losses that may be limited
as a result of the ownership change percentages during 2011. However, the
Company will complete the study prior to the utilization of any of its recorded
net operating losses.
F-13
8. RELATED PARTY TRANSACTIONS
In support of the Company's efforts and cash requirements, it is relying on
advances from related parties until such time that the Company can support its
operations or attains adequate financing through sales of its equity or
traditional debt financing. Amounts represent advances or amounts paid in
satisfaction of certain liabilities as they come due. The advances are
considered temporary in nature and have not been formalized by a promissory
note. Shareholder advances are considered payable on demand and is non-interest
bearing. The Company owed $10,000 to a shareholder as of February 29, 2011,
respectively. No interest has been accrued or imputed on these debts, as
management believes that interest expense would be immaterial.
The majority shareholder has pledged his support to fund continuing operations;
however there is no written commitment to this effect. The Company is dependent
upon the continued support of this member.
The Company does not have employment contracts with its key employees, including
the majority shareholder who is the Chief Executive Chief Accounting and Chief
Technical Officer.
The amounts and terms of the above transactions may not necessarily be
indicative of the amounts and terms that would have been incurred had comparable
transactions been entered into with independent third parties.
9. EQUITY
The total number of shares of capital stock which the Company shall have
authority to issue is 595,000,000 common shares with a par value of $.001, of
which 532,560,000 have been issued to founders. The Company intends to issue
additional shares in an effort to raise capital to fund its operations. Common
shareholders will have one vote for each share held.
On October 18, 2011, the Board of Directors of the Registrant adopted a
resolution effective as of the same date to a forward stock split of the
Company's issued and outstanding shares of common stock on a one (1) old for
twenty-six (26) new basis, such that its authorized capital has increased from
75,000,000 shares of common stock with a par value of $0.001 to 600,000,000
shares of common stock with a par value of $0.001. The Effective Date of the
Forward Split was November 7, 2011. Prior year share information has been
retroactively restated for comparative purposes.
No holder of shares of stock of any class is entitled as a matter of right to
subscribe for or purchase or receive any part of any new or additional issue of
shares of stock of any class, or of securities convertible into shares of stock
of any class, whether now hereafter authorized or whether issued for money, for
consideration other than money, or by way of dividend. The Company is currently
engaged in the registration of its equity, for the purpose of raising cash
through the issuance of common shares. Subsequent to the year-end an additional
2 million shares were issued to investors for cash. The Company through its
proposed equity raise anticipates issuing an additional 2 million shares.
There are no preferred shares outstanding as of February 29, 2012. There have
been no warrants or options issued or outstanding.
10. COMMITMENTS AND CONTINGENCIES
Our offices are located at 815 John Street, Suite 150, Evansville, Indiana. We
have a Lease Agreement which expires on December 2014 for approximately 5,000
square feet at a monthly rental of $2,300. We are responsible, with others, for
common area maintenance. We believe that the space is adequate for our current
operations and additional space is available, if required, at approximately the
same cost and expense.
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Some of the officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
From time to time the Company may become a party to litigation matters involving
claims against the Company. Management believes that there are no current
matters that would have a material effect on the Company's financial position or
results of operations.
The Company is not currently a party to any pending legal proceedings. In the
ordinary course of business the Company may become a party to various legal
proceedings generally involving contractual matters, infringement actions,
product liability claims and other matters.
11. SUBSEQUENT EVENTS
The Company entered into a loan agreement in the amount of $42,500 with Asher
Enterprises as of March 16, 2012 under similar terms as the one that was that
was entered into with Asher Enterprises as of January 17, 2012. The debt is
payable in full as of December 20, 2012.
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