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EX-5.1 - OPINION OF ANSLOW & JACLIN, LLP - Ultimate Rack, Inc.fs12012a2ex5i_ultimaterack.htm
EX-23.1 - CONSENT OF LI & COMPANY, PC - Ultimate Rack, Inc.fs12012a2ex23i_ultimaterack.htm
As filed with the Securities and Exchange Commission on August 31, 2012
Registration No. 333-179188


==================================
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
================================== 
 
ULTIMATE RACK, INC.
(Exact Name of Registrant in its Charter)
 
Nevada
 
3949
 
45-4078710
(State or other Jurisdiction of Incorporation)
 
(Primary Standard Industrial Classification Code)
 
(IRS Employer Identification No.)
 
331 Valley Mall Pkway #215
East Wenatchee, Washington 98802
Phone: 509-393-3526
 (Address and Telephone Number of Registrant’s Principal Executive Offices and Principal Place of Business)
 
CSC Services of Nevada, Inc.
502 East John Street
Carson City, NV 89706
 (Name, Address and Telephone Number of Agent for Service)
 
Copies of communications to:
Gregg E. Jaclin, Esq.
Anslow & Jaclin, LLP
195 Route 9 South, Suite204
Manalapan, NJ 07726
Tel. No.: (732) 409-1212
Fax No.: (732) 577-1188
 
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration Statement number of the earlier effective registration statement for the same offering. o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.o
 
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
 
 
 

 
                
CALCULATION OF REGISTRATION FEE
 
Title of Each Class Of Securities to be Registered
 
Amount to be
Registered (1)
   
Proposed Maximum
Aggregate
Offering Price
per share (2)
   
Proposed Maximum
Aggregate
Offering Price
   
Amount of
Registration fee (3)
 
                         
Common Stock, $0.001 par value per share
   
4,350,000
   
$
0.03
   
$
130,500.00
   
$
14.96
 
 
(1) This Registration Statement covers the resale by our selling shareholders of up to 4,350,000 shares of common stock previously issued to such selling shareholders.
 
(2) The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(a). Our common stock is not traded on any national exchange and in accordance with Rule 457; the offering price was determined by the price of the shares that were sold to our shareholders in a private placement memorandum. The price of $0.03 is a fixed price at which the selling security holders may sell their shares until our common stock is quoted on the OTCBB at which time the shares may be sold at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.
 
(3) Previously paid.
 
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
 
 
 

 
 
PRELIMINARY PROSPECTUS
Subject to completion, dated August 31, 2012
 
Ultimate Rack, Inc.
 
4,350,000 SHARES OF COMMON STOCK
 
The selling security holders named in this prospectus are offering all of the shares of common stock offered through this prospectus.  We will not receive any proceeds from the sale of the common stock covered by this prospectus.
 
Our common stock is presently not traded on any market or securities exchange. The selling security holders have not engaged any underwriter in connection with the sale of their shares of common stock.  Common stock being registered in this registration statement may be sold by selling security holders at a fixed price of $0.03 per share until our common stock is quoted on the OTC Bulletin Board (“OTCBB”) and thereafter at a prevailing market prices or privately negotiated prices or in transactions that are not in the public market. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority (“FINRA”), which operates the OTCBB, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares of the selling security holders.
 
We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 2 to read about factors you should consider before buying shares of our common stock.
 
Please note that the Company is a shell company in accordance with the Securities Act of 1933. Accordingly, the securities sold in this offering can only be resold through registration under the Securities Act of 1933; Section 4(l), if available, for non-affiliates; or by meeting the conditions of Rule 144(i).
 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
  
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission (“SEC”) is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
The Date of This Prospectus is:  ________, 2012
 
 
 

 
 
TABLE OF CONTENTS
 
 
 
PAGE
Prospectus Summary
1
Summary Financials
2
Risk Factors
2
Special Note Regarding Forward-Looking Statements
  7
Use of Proceeds
7
Determination of Offering Price
8
Dilution
8
Selling Shareholders
8
Plan of Distribution
9
Description of Securities to be Registered
10
Interests of Named Experts and Counsel
11
Description of Business
11
Description of Property
13
Legal Proceedings
14
Market for Common Equity and Related Stockholder Matters
14
Index to Financial Statements
F-1
Management Discussion and Analysis of Financial Condition and Financial Results
15
Plan of Operations
15
Executive Compensation
17
Security Ownership of Certain Beneficial Owners and Management
18
Transactions with Related Persons, Promoters and Certain Control Persons
18
 
 
 

 
 
ITEM 3.  Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges.
 
PROSPECTUS SUMMARY
 
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements, before making an investment decision. In this Prospectus, the terms “Company,” “we,” “us” and “our” refer to Ultimate Rack, Inc.
 
Overview
 
We were incorporated in the State of Nevada on July 19, 2010 as Ultimate Rack, Inc. and are based in Wenatchee, WA. We are a development stage company and have not yet commenced operations. However, we are proceeding with our stated business plan to build and market for sale a vehicle mounted rack for bicycles. We have begun taking certain steps in furtherance of our business plan, including the design of the Company’s main product, the ultimate rack.
 
An ultimate rack is designed to hold up to four bicycles at one time. The rack is designed to fit into 1/4”, 2”, or 2 1/2” trailer hitch receivers, which are the three most common trailer hitch receiver sizes used on cars and light trucks. The Company intends to have its bicycle racks made in China and then shipped to a U.S. warehouse located in the state of Washington. The Company has received price quotes from Chinese manufacturers to produce its product. Our present stage of product development is limited to the design and manufacture of a prototype and the writing of our business plan. In order to implement our business plan and commence operations, we must take the following chronological steps: i) raise an additional $132,616, ii) draft and execute agreements with a manufacturer; iii) lease approximately 1,500 square feet of warehouse space, iv) create and design a website, v) create and design business cards and brochures, vi) market our website, vii) market our product to wholesalers.
 
We do not consider ourselves to be a blank check company and we do not have any plan, arrangement, or understanding to engage in a merger or acquisition with any other entity. Additionally, we have a specific business plan and have moved forward with our business operations. Specifically, while in the development stage, we are proceeding with our business plan by perfecting the design of our main product, the ultimate rack.
 
As of the date of this filing, our cash on hand is $29,607. We currently require $1,100 per month to sustain our minimal operations. At this rate, absent revenues or additional financing, we expect to have enough cash on hand to be able to sustain operations for the next twenty-six (26) months. In order to implement our business plan and fund our business operations, we estimate needing an additional $132,616 over the next twelve months and $24,000 each year thereafter in order to sustain our operations as a public company. We expect to fund our business operations by generating revenue. If we are unable to generate revenue, it is unlikely that we will be able to implement our business plan effectively. After this registration statement goes effective, we hope to raise additional capital by selling equity in additional offerings to investors. However, we do not have any plans in place to raise capital through additional offerings and we do not have any additional prospective investors at this time.
 
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
 
Where You Can Find Us
 
Our principal executive office is located at 331 Valley Mall Pkwy #215, East Wenatchee, Washington 98802
and our telephone number is 509-393-3526.
 
Terms of the Offering
 
The selling shareholders named in this prospectus are offering all of the shares of common stock offered through this prospectus. The selling stockholders are selling shares of common stock covered by this prospectus for their own account.
 
We will not receive any of the proceeds from the resale of these shares. The offering price of $0.03 was determined by the price shares were sold to our shareholders in a private placement memorandum and is a fixed price at which the selling security holders may sell their shares until our common stock is quoted on the OTC Bulletin Board, at which time the shares may be sold at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares for the selling security holders.
 
 
1

 
 
Summary of Consolidated Financial Information
 
The following summary financial data should be read in conjunction with “Management’s Discussion and Analysis,” “Plan of Operation” and the Financial Statements and Notes thereto, included elsewhere in this prospectus. The statement of operations and balance sheet data as of and for the fiscal year ended October 31, 2011 are derived from our audited financial statements. The statement of operations and balance sheet data as of and for the interim period ended April 30, 2012 are derived from our unaudited interim financial statements. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our financial statements and the related notes included in this prospectus.
 
Statement of Operations:
 
   
For the fiscal year ended
October 30, 2011
   
Six Months ended
April 30, 2012
   
For the period from July 16, 2010
(Inception) to
April 30, 2012
 
Revenues
  $ --     $ --     $ --  
Professional fees
    --       19,943       19,943  
Salary & wages – officers
    --       --       15,000  
General & administrative
    713       88       801  
Total operating expenses
    713       20,031       35,744  
Net loss
  $ (713 )   $ (20,031 )   $ (35,744 )
Net loss per common share - basic and diluted
  $ (0.00 )   $ (0.00 )   $ (0.00 )
 
Balance Sheet Data:
           
   
October 31, 2011
   
April 30, 2012
 
             
Cash
 
$
32,045
   
$
29,382
 
Prepaid expenses
 
$
12,000
   
$
--
 
Total assets
 
$
44,045
   
$
29,382
 
Total current liabilities
 
$
--
   
$
5,368
 
Total stockholders' equity
 
$
44,045
   
$
24,014
 
 
RISK FACTORS
 
The shares of our common stock being offered for resale by the selling security holders are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the following factors relating to our business and prospects. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all or part of your investment.  You should carefully consider the risks described below and the other information in this process before investing in our common stock.
 
Risks Related to Our Business
 
WE HAVE A LIMITED OPERATING HISTORY IN WHICH TO EVALUATE OUR BUSINESS.
 
We were incorporated in Nevada on July 19, 2010.  We have no revenue to date and have a limited operating history upon which an evaluation of our future success or failure can be made. We estimate needing approximately $132,616 in order to fund our business operations for the next twelve months. In addition, we estimate needing approximately $24,000 each year thereafter in order to be able to sustain our continued business operations as a public company. If we are unable to generate the sufficient revenues needed to sustain our business operations, we may have to delay or cease the implementation of our business strategy.
 
 
2

 
 
OUR AUDITOR HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
 
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has generated no revenue. Specifically the Company, while in the development stage, is proceeding with its business plan by working on the design of the Company’s main product, the ultimate rack. . If we cannot obtain sufficient funding, we may have to delay or cease the implementation of our business strategy.
 
WE HAVE LIMITED OPERATING HISTORY AND FACE MANY OF THE RISKS AND DIFFICULTIES FREQUENTLY ENCOUNTERED BY DEVELOPMENT STAGE COMPANIES.
 
We are a development stage company, and to date, our development efforts have been focused primarily on the development and marketing of our business model. We have limited operating history for investors to evaluate the potential of our business development. We have not built our customer base and our brand name. In addition, we also face many of the risks and difficulties inherent in gaining market share as a new company:
 
·        Develop an effective business plan;
·        Meet customer standards;
·        Attain customer loyalty;
 
Our future will depend on our ability to bring our service to the market place, which requires careful planning of providing a product that meets industry standards without incurring unnecessary cost and expense.
 
WE NEED ADDITIONAL CAPITAL TO DEVELOP OUR BUSINESS.  IF WE FAIL TO OBTAIN ADDITIONAL CAPITAL WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.
 
The development of our services will require the commitment of substantial resources to implement our business plan. Currently, we have no established bank-financing arrangements. Therefore, it is likely that we will need to seek additional financing through subsequent future private offering of our equity securities, or through strategic partnerships and other arrangements with corporate partners.
  
At this time, we do not have any plans in place to raise capital through additional offerings and we do not have any prospective investors.  We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us. The sale of additional equity securities will result in dilution to our stockholders. The occurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants that would restrict our operations. If adequate additional financing is not available on acceptable terms, we may not be able to implement our business development plan or continue our business operations.
 
OUR OFFICERS AND DIRECTORS HOLD APPROXIMATELY 77.52% OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY AND HAVE SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS THAT MAY NOT BE IN THE BEST INTEREST OF ALL OTHER STOCKHOLDERS
 
Our officers and directors control approximately 77.52% of our current outstanding shares of voting common stock. They may be able to exert significant control over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This concentration of ownership may expedite approvals of company decisions, or have the effect of delaying or preventing a change in control or be in the best interests of all our stockholders.
  
WE MAY ENCOUNTER SUBSTANTIAL COMPETITION IN OUR BUSINESS AND OUR FAILURE TO COMPETE EFFECTIVELY MAY ADVERSELY AFFECT OUR ABILITY TO GENERATE REVENUE.
 
We believe that existing and new competitors will continue to improve their products and to introduce new products with competitive price and performance characteristics. We expect that we will be required to continue to invest in our product to compete effectively in our markets. Our competitors could develop a more efficient product which could have a material adverse effect on our business, results of operations and financial condition.
 
 
3

 
 
 
THE LACK OF PUBLIC COMPANY EXPERIENCE OF OUR MANAGEMENT TEAM COULD ADVERSELY IMPACT OUR ABILITY TO COMPLY WITH THE REPORTING REQUIREMENTS OF U.S. SECURITIES LAWS.
 
Our Chief Executive Officer (“CEO”) lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002. Our CEO has never been responsible for managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance and reporting requirements, including establishing and maintaining internal controls over financial reporting.  Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934 which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company would be in jeopardy in which event you could lose your entire investment in our company. 
 
OUR PRESIDENTAND SECRETARY HAVE FULL TIME JOBS WHICH MAY INTERFERE WITH THEIR RESPONSIBILITIES TO US.
 
Sean Arizmendi, our President, and Fabian Arizmendi, our Secretary, each have full-time jobs elsewhere. Sean Arizmendi devotes 10 hours per week to the Company and Fabian Arizmendi devotes 5 hours per week to the Company. It is possible that our plan of operations may be materially delayed due to their limited work schedule with us.
 
OUR FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF SHAWN ARIZMENDI. WITHOUT HIS CONTINUED SERVICE, WE MAY BE FORCED TO INTERRUPT OR EVENTUALLY CEASE OUR OPERATIONS.
 
We are presently dependent to a great extent upon the experience, abilities and continued services of Shawn Arizmendi, our President and Chief Executive Officer and Fabian Arizmendi, our Secretary. We currently do not have an employment agreements with either Shawn Arizmendi or Fabian Arizmendi. The loss of their services could have a material adverse effect on our business, financial condition or results of operation.
 
OUR PRESIDENT AND SECRETARY DO NOT HAVE ANY EXPERIENCE IN THE BICYCLE RACK OR RELATED INDUSTRIES.

Sean Arizmendi, our President, and Fabian Arizmendi, our Secretary, do not have any experience in the bicycle rack or related industries.  Accordingly, they do not have certain skills or business contacts that would be useful for running such a business.  They may have difficulty implementing the Company’s business plan, and even if they are able to implement such plan, the Company may never become profitable due to such lack of experience.
 
THE COMPANY MAY DEPEND ON COMPONENT AND PRODUCT MANUFACTURING PROVIDED BY THIRD PARTIES LOCATED OUTSIDE OF THE U.S.
 
The Company is contemplating entering into a manufacturing agreement with a third-party manufacturer located in China. While this arrangement may lower operating costs, it also may reduce the Company’s direct control over production and distribution. It is uncertain what effect such diminished control will have on the quality or quantity of products, or the Company’s flexibility to respond to changing conditions. In addition, the Company will rely on the third-party manufacturer to properly assemble its product. However, the Company may remain responsible to the consumer for warranty service in the event of product defects. Any unanticipated product defect or warranty liability, whether pursuant to arrangements with contract manufacturers or otherwise, could materially adversely affect the Company’s reputation, financial condition and operating results. Further, if manufacturing or logistics in the China location is disrupted for any reason, including but not limited to, natural disasters, information technology system failures, military actions or economic, business, labor, environmental, public health, or political issues, the Company’s financial condition and operating results could be materially adversely affected.
 
WE COULD BE SUBJECT TO PERSONAL INJURY, PROPERTY DAMAGE, PRODUCT LIABILITY, WARRANTY, ENVIRONMENTAL AND OTHER CLAIMS INVOLVING ALLEGEDLY DEFECTIVE PRODUCTS THAT WE SUPPLY.
 
From time to time the Company may be involved in lawsuits or other claims arising in the course of business, including those related to products liability, relating to the design, manufacture or distribution of our products.  Actual or claimed defects in the products we supply may result in our being named as a defendant in lawsuits asserting potentially large claims. We may incur losses relating to these claims, including costs associated with defending against them. Commencement of these lawsuits against us could reduce our sales and decrease our profitability. We may be unable to retain adequate liability insurance to cover such claims.
 
WE HAVE NOT FILED FOR PATENTS OR ANY OTHER INTELLECTUAL PROPERTY PROTECTION.
 
The Company has not applied for or obtained patents, or any form of intellectual property protection for its products. Therefore competitors may copy or replicate our product without any legal ramifications. If we do not file for IP protection, we increase the risk that competitors may copy our product, resulting in increased competition which could have a material adverse effect on the Company’s financial condition and operating results.
  
 
4

 
 
Risk Related To Our Capital Stock
 
WE MAY NEVER PAY ANY DIVIDENDS TO SHAREHOLDERS.
 
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
 
The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
 
OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE CORPORATE RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS.  
 
Our articles of incorporation and applicable Nevada law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person’s written promise to repay us if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us which we will be unable to recoup.
 
We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develops.    
 
THE OFFERING PRICE OF THE COMMON STOCK WAS DETERMINED BASED ON THE PRICE OF OUR PRIVATE OFFERING, AND THEREFORE SHOULD NOT BE USED AS AN INDICATOR OF THE FUTURE MARKET PRICE OF THE SECURITIES. THEREFORE, THE OFFERING PRICE BEARS NO RELATIONSHIP TO OUR ACTUAL VALUE, AND MAY MAKE OUR SHARES DIFFICULT TO SELL.
 
Since our shares are not listed or quoted on any exchange or quotation system, the offering price of $0.03 per share for the shares of common stock was determined based on the price of our private offering. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market. The offering price bears no relationship to the book value, assets or earnings of our company or any other recognized criteria of value. The offering price should not be regarded as an indicator of the future market price of the securities.
 
WE ARE DEEMED A "SHELL COMPANY" AND AS SUCH OUR SHARES MAY NOT BE SALEABLE UNDER RULE 144 AND WE ARE SUBJECT TO ADDITIONAL REPORTING AND DISCLOSURE REQUIREMENTS.

The Securities and Exchange Commission ("SEC") adopted Rule 405 of the Securities Act and Exchange Act Rule 12b-2 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. As we have limited assets and no revenues, we are considered to be a shell company.  As a shell company, our shares of common stock cannot be resold under Rule 144 of the Securities Act of 1933.  Our shares would only be able to resold through a registration statement declared effective by the SEC or by meeting the conditions of Rule 144(i).

Shell companies are prohibited from using a Form S-8 registration statement pursuant to employee compensation plans. Additionally, shell companies are required to provide more detailed disclosure on a Form 8-K upon completion of a transaction that causes it to cease being a shell company. If an acquisition is undertaken (of which we have no current intention of doing), we must file a current report on Form 8-K containing the information required pursuant to Regulation S-K within four business days following completion of the transaction together with financial information of the acquired entity. In order to assist the SEC in the identification of shell companies, we are also required to check a box on Form 10-Q and Form 10-K indicating that we are a shell company. To the extent that we are required to comply with additional disclosure because we are a shell company, we may be delayed in executing any mergers or acquiring other assets that would cause us to cease being a shell company.
 
YOU WILL EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST BECAUSE OF THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK AND OUR PREFERRED STOCK.
 
In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate of 400,000,000 shares of capital stock consisting of 200,000,000 shares of common stock, par value $0.001 per share, and 200,000,000 shares of preferred stock, par value $0.001 per share.
 
We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock or other securities may create downward pressure on the trading price of our common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes, including at a price (or exercise prices) below the price at which shares of our common stock are currently quoted on the OTCBB.
 
 
5

 
 
 
WE MAY INCUR SIGNIFICANT COSTS TO BE A PUBLIC COMPANY TO ENSURE COMPLIANCE WITH U.S. CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS AND WE MAY NOT BE ABLE TO ABSORB SUCH COSTS.
 
We may incur costs totaling approximately $13,200 per year related to our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. In addition, we may not be able to absorb these costs of being a public company which will negatively affect our business operations.

WE ARE AN “EMERGING GROWTH COMPANY,” AND ANY DECISION ON OUR PART TO COMPLY ONLY WITH CERTAIN REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO “EMERGING GROWTH COMPANIES” COULD MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS.
 
We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.  We have elected to opt in to the extended transition period for complying with the revised accounting standards.
 
BECAUSE WE HAVE ELECTED TO DEFER COMPLIANCE WITH NEW OR REVISED ACCOUNTING STANDARDS, OUR FINANCIAL STATEMENT DISCLOSURE MAY NOT BE COMPARABLE TO SIMILAR COMPANIES.
 
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of our election, our financial statements may not be comparable to companies that comply with public company effective dates.
 
OUR STATUS AS AN “EMERGING GROWTH COMPANY” UNDER THE JOBS ACT OF 2012 MAY MAKE IT MORE DIFFICULT TO RAISE CAPITAL AS AND WHEN WE NEED IT.
 
Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it.  Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry.  If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
 
OUR COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH MAY BE SUBJECT TO RESTRICTIONS ON MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES.
 
If our common stock becomes quoted in the secondary market, we will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.
  
 
6

 
 
Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
 
THERE IS NO ASSURANCE OF A PUBLIC MARKET OR THAT OUR COMMON STOCK WILL EVER TRADE ON A RECOGNIZED EXCHANGE. THEREFORE, YOU MAY BE UNABLE TO LIQUIDATE YOUR INVESTMENT IN OUR STOCK.
 
There is no established public trading market for our common stock. Our shares have not been listed or quoted on any exchange or quotation system. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTCBB, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.
 
WE MAY BE EXEMPT FROM THE REPORTING OBLIGATIONS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT AND THEREFORE MAY NOT HAVE TO PROVIDE INVESTORS WITH PERIODIC REPORTS AS MAY BE REQUIRED PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT, FOLLOWING THE FORM 10K REQUIRED FOR THE FISCAL YEAR IN WHICH OUR REGISTRATION STATEMENT IS EFFECTIVE.
 
The requirement for an issuer that has filed a registration statement to file pursuant to Section 15(d) of the Securities Exchange Act is suspended for any fiscal year, except for the fiscal year in which such registration statement becomes effective, if, at the beginning of the fiscal year, the issuer has fewer than 300 shareholders. We currently have fewer than 300 shareholders and expect to maintain a fewer than 300 shareholder base. If we do continue to have fewer than 300 shareholders, we will be exempt from the filing requirements as required pursuant to Section 13 of the Securities Exchange Act and will not be required to file any periodic reports, including Form 10Q and 10K filings, with the SEC subsequent to the Form 10K required for the fiscal year in which our registration statement is effective. Further, disclosures in our Form 10K that we will be required to file for the fiscal year in which our registration statement is effective, is less extensive than the disclosures required of fully reporting companies. Specifically, we are not subject to disclose in our Form 10K risk factors, unresolved staff comments, or selected financial data, pursuant to Items 1A, 1B, 6, respectively.

UNTIL WE REGISTER A CLASS OF OUR SECURITIES UNDER SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, WE WILL ONLY BE SUBJECT TO THE PERIODIC REPORTING OBLIGATIONS IMPOSED BY SECTION 15(D) OF THE EXCHANGE ACT.
 
Until such time as we register a class of our securities under Section 12 of the Securities Exchange Act, we will only be subject to the periodic reporting obligations imposed by Section 15(d) of the Exchange Act. Accordingly, we will not be subject to the proxy rules, Section 16 short-swing profit provisions, beneficial ownership reporting, the bulk of the tender offer rules and the reporting requirements of Section 13 of the Exchange Act.
 
AS A SMALLER REPORTING COMPANY, OUR MANAGEMENT WILL BE REQUIRED TO PROVIDE A REPORT ON THE EFFECTIVENESS OF OUR INTERNAL CONTROLS OVER FINANCIAL REPORTING, BUT WILL NOT BE REQUIRED TO PROVIDE AN AUDITOR’S ATTESTATION REGARDING SUCH REPORT AND MANAGEMENT’S REPORT NEED NOT BE PROVIDED UNTIL OUR SECOND ANNUAL REPORT. THEREFORE POTENTIAL INVESTORS MAY NOT BE MADE AWARE OF ANY ASSESSED WEAKNESS THAT COULD RESULT IN A MISSTATEMENT TO OUR FINANCIAL STATEMENTS.
 
As a smaller reporting company, our management will be required to provide a report on the effectiveness of our internal controls over financial reporting, but will not be required to provide an auditor’s attestation regarding such report and management’s report need not be provided until our second annual report.  Investors should be aware of the risk that management may assess and render the Company’s internal controls ineffective which could have a material adverse effect on the Company’s financial condition or result of operations and such information is not required to be disclosed to investors.
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
The information contained in this report, including in the documents incorporated by reference into this report, includes some statement that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our and their management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
 
The forward-looking statements contained in this report are based on current expectations and beliefs concerning future developments. There can be no assurance that future developments actually affecting us will be those anticipated. These that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the following forward-looking statements involve a number of risks, or other assumptions.
 
Item 4.  Use of Proceeds
 
The selling stockholders are selling shares of common stock covered by this prospectus for their own account. We will not receive any of the proceeds from the resale of these shares. We have agreed to bear the expenses relating to the registration of the shares for the selling security holders.
 
 
7

 
 
Item 5.  Determination of Offering Price
 
Since our common stock is not listed or quoted on any exchange or quotation system, the offering price of the shares of common stock was determined by the price of the common stock that was sold to our security holders pursuant to an exemption under Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated under the Securities Act of 1933.
 
The offering price of the shares of our common stock does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market.
 
Although our common stock is not listed on a public exchange, we will be filing to obtain a listing on the OTCBB concurrently with the filing of this prospectus. In order to be quoted on the OTCBB, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.
 
In addition, there is no assurance that our common stock will trade at market prices in excess of the initial offering price as prices for the common stock in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity.
 
Item 6.  Dilution
 
The common stock to be sold by the selling shareholders are provided in the “Selling Security Holders” section is common stock that is currently issued. Accordingly, there will be no dilution to our existing shareholders.
 
Item 7.  Selling Security Holders
 
The common shares being offered for resale by the selling security holders consist of the 4,350,000 shares of our common stock held by 39 shareholders. Such shareholders include the holders of the 4,350,000 shares sold in our private offering pursuant to Regulation D Rule 506 completed in March 2011 at an offering price of $0.01.
 
The following table sets forth the name of the selling security holders, the number of shares of common stock beneficially owned by each of the selling stockholders as of August 30, 2012 and the number of shares of common stock being offered by the selling stockholders. The shares being offered hereby are being registered to permit public secondary trading, and the selling stockholders may offer all or part of the shares for resale from time to time. However, the selling stockholders are under no obligation to sell all or any portion of such shares nor are the selling stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the selling stockholders.
 
 
8

 
 
Name
 
Shares Beneficially
Owned Prior
To Offering
   
Shares
to be Offered
   
Amount Beneficially
Owned After
Offering
   
Percent Beneficially
Owned After
Offering
 
Maria Arizmendi (1)
   
150,000
     
150,000
     
0
     
*
 
Jasen Bertram
   
80,000
     
80,000
     
0
     
*
 
Cami Bilderback
   
80,000
     
80,000
     
0
     
*
 
Ronald Bruneau
   
100,000
     
100,000
     
0
     
*
 
Debbie Denig
   
125,000
     
125,000
     
0
     
*
 
Cameron Dunnett
   
150,000
     
150,000
     
0
     
*
 
Adam D. Easley (2)
   
100,000
     
100,000
     
0
     
*
 
Cory Easley (2)
   
125,000
     
125,000
     
0
     
*
 
Leonardo Esparza
   
125,000
     
125,000
     
0
     
*
 
Zachery Faulkner
   
100,000
     
100,000
     
0
     
*
 
Sinoma Finch
   
125,000
     
125,000
     
0
     
*
 
Shelley Fonville
   
100,000
     
100,000
     
0
     
*
 
Shanna M. Forney
   
150,000
     
150,000
     
0
     
*
 
Rachelle R. Grk
   
100,000
     
100,000
     
0
     
*
 
Kristyl L. Heath
   
100,000
     
100,000
     
0
     
*
 
Eric Hernandez
   
100,000
     
100,000
     
0
     
*
 
Duane Holzerland
   
150,000
     
150,000
     
0
     
*
 
Christina K. Hull
   
150,000
     
150,000
     
0
     
*
 
Tonee R. Jackson
   
150,000
     
150,000
     
0
     
*
 
Gerilyn Kaye
   
150,000
     
150,000
     
0
     
*
 
Jennifer Lee
   
100,000
     
100,000
     
0
     
*
 
Adan Longoria Jr. (3)
   
80,000
     
80,000
     
0
     
*
 
Elias J. Longoria (3)
   
100,000
     
100,000
     
0
     
*
 
Sophia D. Longoria (3)
   
80,000
     
80,000
     
0
     
*
 
Marco Martinez
   
100,000
     
100,000
     
0
     
*
 
Andrew Mercer (4)
   
100,000
     
100,000
     
0
     
*
 
Dorothy Mercer (4)
   
150,000
     
150,000
     
0
     
*
 
Jeffrey N. Moore
   
100,000
     
100,000
     
0
     
*
 
Feliz M. Morgan
   
100,000
     
100,000
     
0
     
*
 
Dena Mullin
   
100,000
     
100,000
     
0
     
*
 
Shawn O’Flaherty
   
100,000
     
100,000
     
0
     
*
 
Shemnon Patterson
   
100,000
     
16,000
     
0
     
*
 
Barbara M. Rawson
   
100,000
     
100,000
     
0
     
*
 
Irma Reyes
   
80,000
     
80,000
     
0
     
*
 
Richard Ryan
   
50,000
     
50,000
     
0
     
*
 
Jill Sundberg
   
100,000
     
100,000
     
0
     
*
 
Teresa Thomas
   
100,000
     
100,000
     
0
     
*
 
Heng Touch
   
150,000
     
150,000
     
0
     
*
 
Bruce Wright
   
150,000
     
150,000
     
0
     
*
 
 
(1) Maria Arizmendi is the mother of the Company’s president, Shawn Arizmendi
(2) Adam D. Easley and Cory Easley are brothers
(3) Adan Longoria Jr., Elias J. Longoria, and Sophia D. Longoria are brothers and sister
(4) Andrew Mercer and Dorothy Mercer are husband and wife
 
There are no agreements between the company and any selling shareholder pursuant to which the shares subject to this registration statement were issued.
 
To our knowledge, none of the selling shareholders or their beneficial owners:
 
-
has had a material relationship with us other than as a shareholder at any time within the past three years; or
-
has ever been one of our officers or directors or an officer or director of our predecessors or affiliates 
-  
are broker-dealers or affiliated with broker-dealers. 
 
Item 8.  Plan of Distribution
 
The selling security holders may sell some or all of their shares at a fixed price of $0.03 per share until our shares are quoted on the OTCBB and thereafter at prevailing market prices or privately negotiated prices. Prior to being quoted on the OTC Bulletin Board, shareholders may sell their shares in private transactions to other individuals. Although our common stock is not listed on a public exchange, we will be filing to obtain a listing on the OTCBB concurrently with the filing of this prospectus. In order to be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. However, sales by selling security holder must be made at the fixed price of $0.03 until a market develops for the stock.
 
 
9

 
 
Once a market has developed for our common stock, the shares may be sold or distributed from time to time by the selling stockholders, who may be deemed to be underwriters, directly to one or more purchasers or through brokers or dealers who act solely as agents, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, which may be changed. The distribution of the shares may be effected in one or more of the following methods:
 
·
ordinary brokers transactions, which may include long or short sales;
·
transactions involving cross or block trades on any securities or market where our common stock is trading, market where our common stock is trading;
·
through direct sales to purchasers or sales effected through agents;
·
through transactions in options, swaps or other derivatives (whether exchange listed or otherwise); or
·
any combination of the foregoing;
 
In addition, the selling stockholders may enter into hedging transactions with broker-dealers who may engage in short sales, if short sales were permitted, of shares in the course of hedging the positions they assume with the selling stockholders. The selling stockholders may also enter into option or other transactions with broker-dealers that require the delivery by such broker-dealers of the shares, which shares may be resold thereafter pursuant to this prospectus. To our best knowledge, none of the selling security holders are broker-dealers or affiliates of broker dealers.
 
We will advise the selling security holders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling security holders and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling security holders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling security holders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
 
Brokers, dealers, or agents participating in the distribution of the shares may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). Neither the selling stockholders nor we can presently estimate the amount of such compensation. We know of no existing arrangements between the selling stockholders and any other stockholder, broker, dealer or agent relating to the sale or distribution of the shares. We will not receive any proceeds from the sale of the shares of the selling security holders pursuant to this prospectus. We have agreed to bear the expenses of the registration of the shares, including legal and accounting fees, and such expenses are estimated to be approximately $20,000.00.
 
Notwithstanding anything set forth herein, no FINRA member will charge commissions that exceed 8% of the total proceeds of the offering.
 
Item 9.  Description of Securities to be Registered
 
General
 
We are authorized to issue an aggregate number of 400,000,000 shares of capital stock, of which 200,000,000 shares are common stock, $0.001 par value per share, and there are 200,000,000 preferred shares, $0.001 par value per share authorized.
 
Common Stock
 
We are authorized to issue 200,000,000 shares of common stock, $0.001 par value per share. Currently we have 19,350,000 shares of common stock issued and outstanding. 
 
Each share of common stock shall have one (1) vote per share for all purpose. Our common stock does not provide a preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights. Our common stock holders are not entitled to cumulative voting for election of Board of Directors.
 
Preferred Stock
 
We are authorized to issue 200,000,000 shares of preferred stock, $0.001 par value per share.  Currently we have no shares of preferred stock issued and outstanding.
 
 
10

 
 
Dividends
 
We have not paid any cash dividends to our shareholders.  The declaration of any future cash dividends is at the discretion of our board of directors and depends  upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions.  It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
 
Warrants
 
There are no outstanding warrants to purchase our securities.
 
Options
 
There are no outstanding options to purchase our securities.
 
Transfer Agent and Registrar
 
Currently we do not have a stock transfer agent.
 
Item 10.  Interests of Named Experts and Counsel
 
The financial statements included in this prospectus and the registration statement have been audited by Li & Company, PC to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
 
The validity of the common stock offered by this prospectus will be passed upon for us by Anslow & Jaclin, LLP, Manalapan, New Jersey. No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
 
Anslow & Jaclin, LLP, 195 Route 9 South, Suite 204, Manalapan, New Jersey 07726, telephone (732) 409-1212 has acted as our legal counsel.
 
Item 11.  Information about the Registrant
 
DESCRIPTION OF BUSINESS
 
Overview
 
We were incorporated in the State of Nevada on July 19, 2010 as Ultimate Rack, Inc. and are based in Wenatchee, WA. We are a development stage company and have not yet commenced operations. However, we are proceeding with our stated business plan to build and market for sale a vehicle mounted rack for bicycles. We have begun taking certain steps in furtherance of our business plan, including the design of the Company’s main product, the ultimate rack. We have reserved the domain name ultimaterack.net, but have not yet created our website.
 
An ultimate rack is designed to hold up to four bicycles at one time. The rack is designed to fit into 1/4”, 2”, or 2 1/2” trailer hitch receivers, which are the three most common trailer hitch receiver sizes used on cars and light trucks. The Company intends to have its bicycle racks made in China and then shipped to a U.S. warehouse located in the state of Washington. The Company has received price quotes from Chinese manufacturers to produce its product. Our present stage of product development is limited to the design and manufacture of a prototype and the writing of our business plan. In order to implement our business plan and commence operations, we must take the following chronological steps: i) raise an additional $132,616, ii) draft and execute agreements with a manufacturer; iii) lease approximately 1,500 square feet of warehouse space, iv) create and design a website, v) create and design business cards and brochures, vi) market our website, vii) market our product to wholesalers. Of the $132,616 needed in additional capital, $25,016 is related to COGS, $18,000 for rent, $18,000 for marketing, $29,500 for professional fees, and $42,100 for SG&A.
 
We do not consider ourselves to be a blank check company and we do not have any plan, arrangement, or understanding to engage in a merger or acquisition with any other entity. Additionally, we have a specific business plan and have moved forward with our business operations. Specifically, while in the development stage, we are proceeding with our business plan by perfecting the design of our main product, the ultimate rack.
 
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
 
 
11

 
 
Business Strategy and Objectives
 
The company intends to have its bicycle racks made in China and ship them to Washington State to a warehouse the company intends to lease for distribution to stores and to direct buyer's. The company has received estimates from manufacturers in China to manufacture its bicycle racks but has not yet entered into any agreements with any manufacturers.
 
Products and Services
 
An ultimate rack is designed to hold up to four bicycles at one time. The rack is designed to fit into 1/4”, 2”, or 2 1/2” trailer hitch receivers, which are the three most common trailer hitch receiver sizes used on cars and light trucks. The Company intends to have its bicycle racks made in China and then shipped to a U.S. warehouse located in the state of Washington. The Company has received price quotes from Chinese manufacturers to produce its product.

The 6" long cradle that secures a bicycle to the rack by its top bar is padded with a durable foam padding to prevent scratches to the bicycle. A bicycle is placed on the lower portion of the cradle which is a rounded shaped channel and then the top portion of the cradle which also has rounded shaped channels is placed on top of the top bar of the bicycle and then secured down by hand with four giant winged bolts. This process does not require tools and is very fast. The winged bolt design is one with very large "t-handles" that offer comfort as well as good leverage to ensure that the bike do not come loose during transport.

The lower horizontal bar (tow bar) that fits into the vehicles tow receiver folds down to allow access to the rear of the vehicle and to make it easier to store. We have designed the tow bar to have a capacity tongue weight of 400lbs. The tow bar extends past the bicycles to allow it to act as an extension of the vehicles receiver so a vehicle can tow a trailer and use the bike rack at the same time. The tow bar will have a rating of 3,500 lbs. The tow bar is 30" long has a 3/4" hole for a tow ball to be mounted. The main frame of the bicycle rack is made of strong 2" hollow round steel.
 
Our product design has been completed. Through research and observation, we were able to discern that the vast majority of tow bars manufactured have identical measurements and steel gauge. We designed our tow bars comparable to those of other manufacturers and tested it internally by suspending heavy bikes having overweight people bouncing on them, onto the racks. We will not take further testing, nor will we seek independent certification.
 
We have not have and currently do not have plans to obtain intellectual property protection for our products.

 
12

 
 
Material State and Local Regulations

We do not expect any governmental regulations to have an impact on any of our planned business operations. New laws or regulations may impact our ability to market our bicycle racks in the future. However, we are not aware of any pending laws or regulations that would presently have an impact on our business.
 
Competition
 
We currently have no operations and are not yet competing with any of the companies in our industry. If we commence operations, we will have many competitors. Most of our competitors are large well established companies. The following companies are some of the largest well known in the business that we would have to compete against: Thule Inc., Yakima Products Inc., Sport Rack Inc., Bell Sports Inc. Since we have designed and built our prototype based on research of industry norms, we believe that our product will be competitive with the products offered by our competitors. However, since we are a startup company and do not have comparable resources available to us, we expect our competitors to have an extreme competitive advantage over us due to their more substantial means, market recognition and stage of business development. 
 
Employees
 
As of August 31, 2012, we have two (2) employees. Our President spends approximately 10 hours per week on Company matters and our Secretary, Fabian Arizmendi, spends approximately 5 hours per week on Company matters.
 
DESCRIPTION OF PROPERTY
 
Our principal executive office is located at 331 Valley Mall Pkway #215, East Wenatchee, Washington 98802.
Our telephone number is 509-393-3526. We have not yet leased warehouse space.
 
 
13

 
 
LEGAL PROCEEDINGS
 
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
 
Pursuant to Item 401 (f) of Regulation S-K there are no events that occurred during the past ten (10) years that are material to an evaluation of the ability or integrity of any director, person nominated to become a director or executive officer of the registrant:
 
·
No petition  under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
   
·
The registrant has not been convicted in a criminal proceeding and is not named subject of a pending criminal proceeding
 
·
Such registrant was not the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
   
o  
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
o  
Engaging in any type of business practice; or
o  
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
 
·
Such registrant was not the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in Regulation S-K, Item 401 paragraph (f)(3)(i) entitled Involvement in Certain Legal Proceedings , or to be associated with persons engaged in any such activity;
   
·
Such registrant was not 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 reversed, suspended, or vacated;
   
·
Such registrant was not found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
 
·
Such registrant was not the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
 
  o  
Any Federal or State securities or commodities law or regulation; or
o  
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
o  
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
 
·
Such registrant was not the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
 
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
There is presently no public market for our shares of common stock. We anticipate applying for quoting of our common stock on the OTCBB upon the effectiveness of the registration statement of which this prospectus forms apart. However, we can provide no assurance that our shares of common stock will be quoted on the OTCBB or, if quoted, that a public market will materialize.
 
Holders of Capital Stock
 
As of August 30, 2012 we have 41 holders of our common stock.
 
Rule 144 Shares
 
As of the date of this registration statement, we do not have any shares of our common stock that are currently available for sale to the public in accordance with the volume and trading limitations of Rule 144.
 
Stock Option Grants
 
We do not have any stock option plans.
 
Registration Rights
 
We have not granted registration rights to the selling shareholders or to any other persons.
 
 
14

 
 
ULTIMATE RACK, INC.
FINANCIAL STATEMENTS
 
 
Ultimate Rack, Inc.
 
October 31, 2011 and 2010
 
Index to the Financial Statements
 
 
Contents Page(s)
   
Report of Independent Registered Public Accounting Firm  F-2
   
Balance sheets at October 31, 2011 and 2010  F-3
   
Statements of operations for the fiscal year ended October 31, 2011, for the period from July 19, 2010 (inception) through October 31, 2010, and the period from July 19, 2010 (inception) through October 31, 2011  F-4
   
Statement of stockholders’ equity for the period from July 19, 2010 (inception) through October 31, 2011  F-5
   
Statements of cash flows for the fiscal year ended October 31, 2011, for the period from July 19, 2010 (inception) through October 31, 2010, and the period from July 19, 2010 (inception) through October 31, 2011  F-6
   
Notes to the financial statements  F-7
   
Interim financial statements for the six months ended April 30, 2012 and 2011 and for the period from July 19, 2010 (inception) through April 30, 2012 (Unaudited)  F-15
 
 
F-1

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Ultimate Rack, Inc.
(A Development Stage Company)
East Wenatchee, Washington
 
We have audited the accompanying balance sheets of Ultimate Rack, Inc., a development stage company (the “Company”) as of October 31, 2011 and 2010 and the related statements of operations, stockholders’ equity and cash flows for the fiscal year ended October 31, 2011, for the period from July 19, 2010 (inception) through October 31, 2010, and the period from July 19, 2010 (inception) through October 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2011 and 2010 and the results of its operations and its cash flows for the fiscal year ended October 31, 2011, for the period from July 19, 2010 (inception) through October 31, 2010, and the period from July 19, 2010 (inception) through October 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had an accumulated deficit at March 31, 2012 and had a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
/s/Li & Company, PC
Li & Company, PC
 
Skillman, New Jersey
July 30, 2012
 
 
F-2

 
 
Ultimate Rack, Inc.
(A Development Stage Company)
Balance Sheets
                 
                 
   
October 31, 2011
   
October 31, 2010
 
             
                 
Assets
               
Current Assets
               
Cash  
$
32,045
   
$
-
 
Prepaid expenses    
12,000
     
-
 
                 
Total current assets    
44,045
     
-
 
                 
Total Assets  
$
44,045
   
 $
-
 
                 
Liabilities and Stockholders' Equity
               
Current Liabilities
               
Accounts payable
 
$
-
   
$
-
 
                 
Total current liabilities    
-
     
-
 
                 
Stockholders' Equity
               
Preferred Stock: $0.001 par value: 200,000,000 shares authorized;
               
none issued or outstanding    
-
     
-
 
Common stock: $0.001 par value: 200,000,000 shares authorized;
               
19,350,000 and 15,000,000 shares issued and outstanding, respectively    
19,350
     
15,000
 
Additional paid-in capital
   
40,408
     
-
 
Deficit accumulated during the development stage
   
(15,713
)    
(15,000
)
                 
  Total Stockholders' Equity    
44,045
     
-
 
                 
 Total Liabilities and Stockholders' Equity  
$
44,045
   
$
-
 
 
See accompanying notes to the financial statements.
 
 
F-3

 
 
Ultimate Rack, Inc.
 
(A Development Stage Company)
 
Statements of Operations
 
                   
         
For the Period from
   
For the Period from
 
         
July 19, 2010
   
July 19, 2010
 
   
For the Fiscal Year
Ended
   
(inception)
through
   
(inception)
through
 
   
October 31, 2011
   
October 31, 2010
   
October 31, 2011
 
                   
                   
 Revenue
  $ -     $ -     $ -  
                         
 Operating Expenses
                       
 Salary and wages - officers     -       15,000       15,000  
 General and administrative     713       -       713  
                         
 Total operating expenses     713       15,000       15,713  
                         
 Loss before Income Taxes
    (713 )     (15,000 )     (15,713 )
                         
 Income Tax Provision
    -       -       -  
                         
 Net Loss
  $ (713 )   $ (15,000 )   $ (15,713 )
                         
                         
 Net loss per common share
                       
  - Basic and Diluted   $ (0.00 )   $ (0.00 )        
                         
 Weighted average common shares outstanding
                       
  - Basic and Diluted     15,083,520       15,000,000          
 
See accompanying notes to the financial statements.
 
 
F-4

 
 
Ultimate Rack, Inc.
 
(A Development Stage Company)
 
Statement of Stockholders' Equity
 
For the period from July 19, 2010 (inception) through October 31, 2011
 
   
                               
   
Common Stock, $0.001 Par Value
          Deficit Accumulated        
   
Number of Shares
   
Amount
   
Additional
Paid-in Capital
   
 during the
Development Stage
   
Total Stockholders'
Deficit
 
                               
 July 19, 2010 ( inception )
    -     $ -     $ -     $ -     $ -  
                                         
Issuance of common shares as compensation valued
                                 
 at $0.001 per share upon formation
    15,000,000       15,000                       15,000  
                                         
 Net loss
                            (15,000 )     (15,000 )
                                         
 Balance October 31, 2010
    15,000,000       15,000       -       (15,000 )     -  
                                         
 Capital contribution
                    1,258               1,258  
                                         
 Issuance of common shares for cash
                                       
 at $0.001 per share on October 24, 2011
    4,350,000       4,350       39,150               43,500  
                                         
 Net loss
                            (713 )     (713 )
                                         
 Balance, October 31, 2011
    19,350,000     $ 19,350     $ 40,408     $ (15,713 )   $ 44,045  
 
See accompanying notes to the financial statements.
 
 
F-5

 
 
Ultimate Rack, Inc.
 
(A Development Stage Company)
 
Statements of Cash Flows
 
                   
         
For the Period from
   
For the Period from
 
   
For the Fiscal Year
   
July 19, 2010
   
July 19, 2010
 
   
Ended
   
(inception) through
   
(Inception) through
 
   
October 31, 2011
   
October 31, 2010
   
October 31, 2011
 
                   
                   
 Cash Flows from Operating Activities
                 
 Net loss
  $ (713 )   $ (15,000 )   $ (15,713 )
 Adjustments to reconcile net loss to net cash used in operating activities:                        
 Common shares issued for compensation and services
    -       15,000       15,000  
 Changes in operating assets and liabilities:
                       
 Prepaid expenses
    (12,000 )     -       (12,000 )
                         
 Net Cash Used in Operating Activities
    (12,713 )     -       (12,713 )
                         
 Cash Flows from Financing Activities
                       
 Sale of common shares for cash
    43,500       -       43,500  
 Capital contribution
    1,258       -       1,258  
                         
 Net Cash Provided by Financing Activities
    44,758       -       44,758  
                         
 Net Change in Cash
    32,045       -       32,045  
                         
 Cash - beginning of period
    -       -       -  
                         
 Cash - end of period
  $ 32,045     $ -     $ 32,045  
                         
 Supplemental disclosure of cash flow information:
                       
 Interest paid
  $ -     $ -     $ -  
                         
 Income tax paid
  $ -     $ -     $ -  
 
See accompanying notes to the financial statements.
 
 
F-6

 
 
Ultimate Rack, Inc.
(A Development Stage Company)
October 31, 2011 and 2010
Notes to the Financial Statements
 
 
Note 1 - Organization and Operations
 
Ultimate Rack, Inc.
 
Ultimate Rack, Inc. (the “Company”) was incorporated on July 19, 2010 under the laws of the State of Nevada.  The Company plans to develop and distribute bike-rack systems.
 
Note 2 - Summary of Significant Accounting Policies
 
Basis of Presentation
 
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
 
Development Stage Company
 
The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced.  All losses accumulated since inception have been considered as part of the Company's development stage activities.
 
Use of Estimates and Assumptions
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 as well as the reported amount of revenues and expenses during the reporting period.
 
The Company’s significant estimates and assumptions include the fair value of financial instruments; revenue recognized or recognizable; income tax rate, income tax provision, deferred tax assets and valuation allowance of deferred tax assets; and the assumption that the Company will be a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
 
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
 
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
 
Actual results could differ from those estimates.
 
 
F-7

 
 
Fair Value of Financial Instruments
 
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
 
Level 1
 
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2
 
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3
 
Pricing inputs that are generally observable inputs and not corroborated by market data.
 
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
 
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
 
The carrying amounts of the Company’s financial assets and liabilities, such as cash and prepaid expenses approximate their fair values because of the short maturity of these instruments.
 
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
 
It is not, however, practical to determine the fair value of advances from stockholder, if any, due to their related party nature.
 
Fiscal Year-End
 
The Company elected October 31st as its fiscal year-end date.
 
Cash Equivalents
 
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
 
Related Parties
 
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
 
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
 
 
F-8

 
 
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include:  a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
 
Commitment and Contingencies
 
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
 
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
 
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
 
Revenue Recognition
 
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
 
Stock-Based Compensation for Obtaining Employee Services
 
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.  If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
 
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:
 
 
F-9

 
 
·
Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding.  Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 
·
Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
 
·
Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 
·
Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
 
The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.
 
Income Tax Provision
 
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification.  Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
 
 
F-10

 
 
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.  Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
 
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
 
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
 
Uncertain Tax Positions
 
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the fiscal year ended October 31, 2011 or for the period from July 19, 2010 (inception) through October 31, 2010.
 
Net Income (Loss) per Common Share
 
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants.
 
There were no potentially dilutive common shares outstanding for the fiscal year ended October 31, 2011 or for the period from July 19, 2010 (inception) through October 31, 2010.
 
Cash Flows Reporting
 
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
 
Subsequent Events
 
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
 
 
F-11

 
 
Recently Issued Accounting Pronouncements
 
FASB Accounting Standards Update No. 2011-05
 
In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.
 
The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.
 
FASB Accounting Standards Update No. 2011-08
 
In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.
 
The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.
 
FASB Accounting Standards Update No. 2011-10
 
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: Derecognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.
 
The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.
 
FASB Accounting Standards Update No. 2011-11
 
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.
 
The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.
 
 
F-12

 
 
FASB Accounting Standards Update No. 2011-12
 
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-12 “Comprehensive Income:  Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). This Update is a deferral of the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. FASB is to going to reassess the costs and benefits of those provisions in ASU 2011-05 related to reclassifications out of accumulated other comprehensive income. Due to the time required to properly make such a reassessment and to evaluate alternative presentation formats, the FASB decided that it is necessary to reinstate the requirements for the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05.
 
All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.
 
Other Recently Issued, but Not Yet Effective Accounting Pronouncements
 
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
 
Note 3 – Going Concern
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
 
As reflected in the accompanying financial statements, the Company had a deficit accumulated during the development stage at October 31, 2011, a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
While the Company is attempting to commence operations and generate sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations.  Management intends to raise additional funds by way of a private or public offering.  Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate sufficient revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
 
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
Note 4 – Stockholders’ Equity
 
Shares Authorized
 
Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Four Hundred Million (400,000,000) shares of which Two Hundred Million (200,000,000) shares shall be Preferred Stock, par value $0.001 per share, and Two Hundred Million (200,000,000) shares shall be Common Stock, par value $0.001 per share.
 
Common Stock
 
On July 19, 2010, upon formation, the Company issued an aggregate of 15,000,000 shares of its common stock to the founders of the Company valued at par or $15,000 as compensation.
 
On October 24, 2011, the Company sold 4,350,000 shares of common stock at $0.01 per share to thirty nine (39) individuals, or $43,500 in aggregate for cash.
 
 
F-13

 
 
Capital Contribution
 
During the fiscal year ended October 31, 2011, a significant stockholder of the Company contributed $1,258 to additional paid-in capital.
 
Note 5 – Related Party Transactions
 
Free Office Space
 
The Company has been provided office space by its Chief Executive Officer at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statement.
 
Note 6 – Income Tax Provision
 
Deferred Tax Assets
 
At October 31, 2011, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $15,713 that may be offset against future taxable income through 2031.  No tax benefit has been recorded with respect to these net operating loss carry-forwards in the accompanying consolidated financial statements as the management of the Company believes that the realization of the Company’s net deferred tax assets of approximately $5,342 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by the full valuation allowance.
 
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards.  The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realization.  The valuation allowance increased approximately $242 and $5,100 for the fiscal year ended October 31, 2011 and for the period from July 19, 2010 (inception) through October 31, 2010, respectively.
 
Components of deferred tax assets at October 31, 2011 and 2010 are as follows:
 
   
October 31, 2011
   
October 31, 2010
 
Net deferred tax assets – Non-current:
               
                 
Expected income tax benefit from NOL carry-forwards
 
$
5,342
   
$
5,100
 
                 
Less valuation allowance
   
(5,342
)
   
(5,100
)
                 
             
Deferred tax assets, net of valuation allowance
 
$
-
   
$
-
 
 
Income Tax Provision in the Consolidated Statements of Operations
 
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
 
   
For the Fiscal
Year Ended
October 31, 2011
   
For the Period from July 19, 2010 (inception) through October 31, 2010
 
                 
Federal statutory income tax rate
   
34.0
%
   
34.0
%
                 
Increase (reduction) in income taxes resulting from:
               
                 
Net operating loss (“NOL”) carry-forwards
   
(34.0
)
   
(34.0
)
                 
             
Effective income tax rate
   
0.0
   
0.0
 
Note 7 – Subsequent Events
 
The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent events to be disclosed.
 
 
F-14

 

Ultimate Rack, Inc.
 
(A Development Stage Company)
 
Balance Sheets
 
             
             
   
April 30, 2012
   
October 31, 2011
 
   
(Unaudited)
       
             
Assets
           
Current Assets
           
Cash
  $ 29,382     $ 32,045  
Prepaid expenses
    -       12,000  
                 
Total current assets
    29,382       44,045  
                 
 Total Assets
  $ 29,382     $ 44,045  
                 
Liabilities and Stockholders' Equity
               
  Current Liabilities
               
Accounts payable
  $ 5,368     $ -  
                 
 Total current liabilities
    5,368       -  
                 
Stockholders' Equity
               
Preferred Stock: $0.001 par value: 200,000,000 shares authorized;
               
none issued or outstanding
    -       -  
Common stock: $0.001 par value: 200,000,000 shares authorized;
               
19,350,000 shares issued and outstanding
    19,350       19,350  
Additional paid-in capital
    40,408       40,408  
Deficit accumulated during the development stage
    (35,744 )     (15,713 )
                 
 Total Stockholders' Equity
    24,014       44,045  
                 
Total Liabilities and Stockholders' Equity
  $ 29,382     $ 44,045  
 
See accompanying notes to the financial statements.
 
 
F-15

 
 
Ultimate Rack, Inc.
 
(A Development Stage Company)
 
Statements of Operations
 
                   
               
For the Period from
 
   
For the Six Months
   
For the Six Months
   
July 19, 2010
 
   
Ended
   
Ended
   
(inception) through
 
   
April 30, 2012
   
April 30, 2011
   
April 30, 2012
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                   
 Revenue
  $ -     $ -     $ -  
                         
 Operating Expenses
                       
 Professional fees
    19,943       -       19,943  
 Salary and wages - officers
    -       -       15,000  
 General and administrative
    88       -       801  
                         
 Total operating expenses
    20,031       -       35,744  
                         
 Loss before Income Taxes
    (20,031 )     -       (35,744 )
                         
 Income Tax Provision
    -       -       -  
                         
 Net Loss
  $ (20,031 )   $ -     $ (35,744 )
                         
                         
 Net loss per common share
                       
  - Basic and Diluted
  $ (0.00 )   $ -          
                         
 Weighted average common shares outstanding
                       
  - Basic and Diluted
    19,350,000       15,000,000          
 
See accompanying notes to the financial statements.
 
 
F-16

 
 
Ultimate Rack, Inc.
 
(A Development Stage Company)
 
Statement of Stockholders' Equity
 
For the period from July 19, 2010 (inception) through April 30, 2012
 
   
                               
   
Common Stock, $0.001 Par Value
          Deficit Accumulated        
   
Number of Shares
   
Amount
   
Additional
Paid-in Capital
   
 during the
 Development Stage
   
Total Stockholders'
Deficit
 
                               
 July 19, 2010 ( inception )
    -     $ -     $ -     $ -     $ -  
                                         
Issuance of common shares as compensation valued
                                 
 at $0.001 per share upon formation
    15,000,000       15,000       -               15,000  
                                         
 Net loss
                    -       (15,000 )     (15,000 )
                                         
 Balance October 31, 2010
    15,000,000       15,000       -       (15,000 )     -  
                                         
 Capital contribution
                    1,258               1,258  
                                         
 Issuance of common shares for cash
                                       
 at $0.001 per share on October 24, 2011
    4,350,000       4,350       39,150               43,500  
                                         
 Net loss
                            (713 )     (713 )
                                         
 Balance, October 31, 2011
    19,350,000       19,350       40,408       (15,713 )     44,045  
                                         
 Net loss
                            (20,031 )     (20,031 )
                                         
 Balance, April 30, 2012
    19,350,000     $ 19,350     $ 40,408     $ (35,744 )   $ 24,014  
 
See accompanying notes to the financial statements.
 
 
F-17

 
 
Ultimate Rack, Inc.
 
(A Development Stage Company)
 
Statements of Cash Flows
 
                   
               
For the Period from
 
   
For the Six Months
   
For the Six Months
   
July 19, 2010
 
   
Ended
   
Ended
   
(inception) through
 
   
April 30, 2012
   
April 30, 2011
   
April 30, 2012
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                   
 Cash Flows from Operating Activities
                 
 Net loss
  $ (20,031 )   $ -     $ (35,744 )
 Adjustments to reconcile net loss to net cash used in operating activities:                        
 Common shares issued for compensation and services                     15,000  
 Changes in operating assets and liabilities:
                       
 Prepaid expenses
    12,000       -       -  
Accounts payable
    5,368       -       5,368  
                         
 Net Cash Used in Operating Activities
    (2,663 )     -       (15,376 )
                         
 Cash Flows from Financing Activities
                       
 Sale of common shares for cash
    -       (1,258 )     43,500  
 Capital contribution
    -       1,258       1,258  
                         
 Net Cash Provided by Financing Activities
    -       -       44,758  
                         
 Net Change in Cash
    (2,663 )     -       29,382  
                         
 Cash - beginning of period
    32,045       -       -  
                         
 Cash - end of period
  $ 29,382     $ -     $ 29,382  
                         
 Supplemental disclosure of cash flow information:
                       
 Interest paid
  $ -     $ -     $ -  
                         
 Income tax paid
  $ -     $ -     $ -  
 
See accompanying notes to the financial statements.
 
 
F-18

 
 
Ultimate Rack, Inc.
(A Development Stage Company)
April 30, 2012 and 2011
Notes to the Financial Statements
(Unaudited)
 
Note 1 - Organization and Operations
 
Ultimate Rack, Inc.
 
Ultimate Rack, Inc. (the “Company”) was incorporated on July 19, 2010 under the laws of the State of Nevada.  The Company plans to develop and distribute a proprietary bike-racking system.
 
Note 2 - Summary of Significant Accounting Policies
 
Basis of Presentation – Unaudited Interim Financial Information
 
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented.  Unaudited interim results are not necessarily indicative of the results for the full fiscal year.  These financial statements should be read in conjunction with the consolidated financial statements of the Company for the fiscal year ended October 31, 2011 and notes thereto contained in the information filed as part of the Company’s Registration Statement on Form S-1, of which this Prospectus is a part.
 
Development Stage Company
 
The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced.  All losses accumulated since inception have been considered as part of the Company's development stage activities.
 
Use of Estimates and Assumptions
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 as well as the reported amount of revenues and expenses during the reporting period.
 
The Company’s significant estimates and assumptions include the fair value of financial instruments; revenue recognized or recognizable; income tax rate, income tax provision, deferred tax assets and valuation allowance of deferred tax assets; and the assumption that the Company will be a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
 
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
 
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
 
Actual results could differ from those estimates.
 
 
F-19

 
 
Fair Value of Financial Instruments
 
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
 
Level 1
 
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2
 
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3
 
Pricing inputs that are generally observable inputs and not corroborated by market data.
 
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
 
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
 
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accounts payable, approximate their fair values because of the short maturity of these instruments.
 
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
 
It is not, however, practical to determine the fair value of advances from stockholder, if any, due to their related party nature.
 
Fiscal Year-End
 
The Company elected October 31st as its fiscal year-end date.
 
Cash Equivalents
 
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
 
Related Parties
 
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
 
 
F-20

 
 
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
 
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include:  a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
 
Commitment and Contingencies
 
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
 
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
 
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
 
Revenue Recognition
 
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
 
Stock-Based Compensation for Obtaining Employee Services
 
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.    If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
 
 
F-21

 
 
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:
 
·
Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding.  Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 
·
Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
 
·
Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 
·
Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
 
The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.
 
Income Tax Provision
 
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification.  Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
 
 
F-22

 
 
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.  Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
 
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
 
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
 
Uncertain Tax Positions
 
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the interim period ended April 30, 2012 or 2011.
 
Net Income (Loss) per Common Share
 
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (lo