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EX-31.1 - NAPRODIS 10Q, CERTIFICATION 302, CEO - Naprodis, Inc.naprodisexh31_1.htm
EX-32.1 - NAPRODIS 10Q, CERTIFICATION 906, CEO/CFO - Naprodis, Inc.naprodisexh32_1.htm
EX-31.2 - NAPRODIS 10Q, CERTIFICATION 302, CFO - Naprodis, Inc.naprodisexh31_2.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)

x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2012

o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _______________

Commission File Number: 333-122009


NAPRODIS, INC.
(Exact Name of Registrant as Specified in its Charter)

Nevada
 
33-0903494
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

13250 Gregg St., Suite F, Poway, CA 92064
(Address of Principal Executive Offices)  (Zip Code)

Registrant's telephone number including area code:  (858) 486-8655

N/A
Former name, former address, and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes o     No x
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
Larger accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
o
Smaller reporting company
x

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o    No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,990,000 shares outstanding as of May 31, 2012.
 
 

 
 

 
 
 
PART I
 
Item 1.   Financial Statements

 
 
 
 
 
NAPRODIS, INC.
 
 
 
 
 
 
 
FINANCIAL STATEMENTS
 
 
For the six month period ended
 
February 29, 2012
 
 
 
 
 
 

 
 

 


 
1

 
 
 
NAPRODIS, INC.
 
BALANCE SHEET
 
as of February 29, 2012 (unaudited) and August 31, 2011
 
             
             
   
February 29,
   
August 31,
 
 
 
2012
   
2011
 
             
ASSETS            
             
Current Assets
           
Cash and cash equivalents
  $ 10,549     $ 15,726  
Accounts Receivable
    64,055       49,407  
Inventory
    120,219       126,410  
Prepaid Expenses
    6,500       -  
      201,323       191,543  
Property and equipment,
               
net of accumulated depreciation
    37,631       44,433  
Other Assets
               
Deposits
    10,159       10,159  
                 
TOTAL ASSETS
  $ 249,113     $ 246,135  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
                 
Current Liabilities
               
Bank Overdraft
  $ 10,089     $ -  
Accounts Payable and accrued expenses
    56,790       63,346  
Accrued payroll and payroll taxes
    124       13,918  
Accrued Interest
    27,518       21,217  
Customer Deposits
    3,733       2,104  
Payables to related party
    95,319       95,319  
Officer Loans
    169,485       108,732  
      363,058       304,636  
                 
Stockholders' Equity (Deficit)
               
Preferred stock, $0.001 par value,
               
10,000,000 shares authorized, 0 shares issued.
    -       -  
Common Stock, $0.001 par value, authorized
               
60,000,000 shares;  issued and outstanding:
               
4,990,000 as at February 29, 2012,
               
4,990,000 as at August 31, 2011.
    4,990       4,990  
Additional paid-in capital
    131,260       131,260  
Accumulated Deficit
    (250,195 )     (194,751 )
      (113,945 )     (58,501 )
 
               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 249,113     $ 246,135  
 
 
 
 

 
 
2

 
 
 
NAPRODIS, INC.
 
INCOME STATEMENT
 
   
                         
   
For the Three Months Ended
   
For the Six Months Ended
 
   
February 29, 28
   
February 29, 28
 
   
2012
   
2011
   
2012
   
2011
 
                         
Revenues
  $ 41,196     $ 259,146     $ 231,865     $ 518,291  
                                 
Cost of Sales, (exclusive of depreciation, included in general & administrative expenses)
    12,329       36,894       18,934       73,787  
                                 
Selling Expenses
    2,984       -       7,204       -  
                                 
General and Administrative Expenses
                         
Occupancy Costs
    31,656       34,611       64,028       69,222  
Salaries and wages
    10,571       111,350       83,604       222,700  
Freight
    3,375       25,557       22,100       51,114  
Legal and professional fees
    -       7,275       -       14,550  
Other general and administrative expenses
    21,920       74,068       84,874       125,527  
                                 
Total general and administrative expenses
    67,522       252,861       254,606       483,113  
                                 
Net (Loss) before other income and expenses
    (41,639 )     (30,609 )     (48,879 )     (38,609 )
                                 
Interest expense
    (3,961 )     (1,026 )     (6,565 )     (1,026 )
                                 
Net (Loss)
  $ (45,600 )   $ (31,635 )   $ (55,444 )   $ (39,635 )
                                 
                                 
Basic and Dilutive earnings per share
  $ (0.01 )   $ (0.01 )   $ (0.01 )   $ (0.03 )
                                 
Weighted average number of shares outstanding
    4,990,000       4,150,000       4,990,000       4,150,000  
 
 
 

 
 
3

 
 
 
NAPRODIS, INC.
 
STATEMENT OF CASH FLOWS
 
   
   
   
Six months
ended
February 29,
   
Six months
ended
February 28,
 
   
2012
   
2011
 
             
Cash Flows from Operating Activities
           
Net (Loss)
  $ (55,444 )   $ (39,635 )
Adjustments to reconcile net loss to net cash used by operations:
               
Depreciation
    6,802       4,357  
Changes in operating assets and liabilities:
               
Accounts Receivable
    (14,648 )     9,623  
Accounts Payable and accrued expenses
    (6,556 )     (2,078 )
Accrued payroll and payroll taxes
    (13,794 )     111  
Accrued Interest
    6,301       637  
Inventory
    6,191       (746 )
Prepaid expenses
    (6,500 )     -  
Customer Deposits
    1,629       -  
                 
Net Cash (used by) provided by operating activities
    (76,019 )     (27,731 )
                 
Cash Flows from Investing Activities
    -       -  
                 
Cash Flows from Financing Activities
               
Bank Overdraft
    10,089       5,797  
Proceeds (repayment) of payable to related party
    -       (3,770 )
Proceeds of loans from officers
    60,753       17,402  
                 
Net Cash provided by financing activities
    70,842       19,429  
                 
Net increase (decrease)  in cash
    (5,177 )     (8,302 )
                 
Cash and cash equivalents, beginning of period
    15,726       8,840  
                 
Cash and cash equivalents, end of period
  $ 10,549     $ 538  
                 
Supplemental disclosure of cash flow information
               
Income taxes paid
  $ -     $ -  
Interest paid
  $ -     $ -  
 
 
 
 
 
4

 
 
 
NAPRODIS, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ending
February 29, 2012
 
 
NOTE 1 – BASIS OF PRESENTATION AND NATURE OF BUSINESS

Basis of Presentation

 These unaudited interim financial statements as of and for the six months ended February 29, 2012 reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.

These unaudited interim financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Registration Statement on Form S-1. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three and six month periods ended February 29, 2012 are not necessarily indicative of results for the entire year ending August 31, 2012.

Nature of Business

Naprodis, Inc. (the “Company”) was incorporated in the state of Nevada on June 4, 1999. The Company is a pharmaceutical manufacturer, supplying natural raw materials and natural health care products to the health supplement and beauty product industry.  The Company also markets its own line of beauty products from its offices and laboratory in Poway, California.

Summary of Significant Accounting Policies

RECOVERY OF LONG-LIVED ASSETS

The Company adopted FASB ASC Topic 360: Property Plant and Equipment, sub topic 360-10-35-15: Impairment or Disposal of Long Lived Assets (SFAS 142 and 144).  ASC 360-10-35-15 requires recognition of impairment losses on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. No impairment has been applied to the company’s long lived assets.
 
 
 
5

 
 
 
NAPRODIS, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ending
February 29, 2012
 
 
RECOGNITION OF REVENUE

The Company's revenue recognition policies are in compliance with ASC 605-13 (Staff accounting bulletin (SAB) 104). Sales revenue is recognized at the date of completion of services to customers when a formal arrangement exists, the price is fixed or determinable, the delivery of services is completed, no other significant obligations of the Company exist and collectability is reasonably assured.  Revenue from wholesale customers is recognized at the time title passes and risk of loss is transferred to the customer, i.e. FOB “freight on board”. Discounts are based on trade terms. E-commerce revenue is recognized upon receipt of payment and shipment to the customer. The Company does not grant price adjustments after a sale is complete.  The Company warrants its products sold on the internet with a right of exchange. Returns of unused merchandise are pre-authorized.  Sales are presented net of discounts and allowances. The Company accounts for sales taxes by excluding such taxes from revenue and cost of revenue

SHIPPING AND HANDLING COSTS

Shipping and handling charges billed to customers are included in general revenue. Costs associated with shipping goods to customers that are not billed are reflected as Selling Costs.

COST OF GOODS SOLD

Cost of Goods Sold includes the expenses incurred to acquire and produce inventory for sale, including product costs, freight in and import costs, as well as changes in reserves for inventory shrinkage and obsolescence.

INVENTORIES
 
Inventory is recorded as lower of cost (first in, first out) or market. When required, a provision is made to reduce excess and obsolete inventory to estimated net value. Inventory at February 29, 2012 and August 31, 2011 consisted of raw materials, work in process, and finished goods as follows:

   
February 29,
    August 31,  
   
2012
   
  2011
 
             
Raw materials
  $ 120,218     $ 123,143  
Work in process
    --       186  
Finished goods
     --        3,081  
Total inventory
  $ 120,218     $ 126,410  

DEPOSITS

Deposits represent amounts paid under the Company’s office and laboratory space lease.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.  Significant estimates made by management are, among others, realizability of long-lived assets and deferred taxes.
 
 
 
6

 
 
 
NAPRODIS, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ending
February 29, 2012
 
 
The financial statements presented include all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the period presented in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.

CONCENTRATION OF CREDIT RISK

Credit risk arises from the potential that a counterpart will fail to perform its obligations.  The Company is exposed to credit risk related to its accounts receivable and manufacturing risk related to source of raw materials.

Cash and cash equivalents: The Company maintains its cash deposits in one bank account, which at times may exceed federally insured limits.

Revenues and Accounts Receivable: At the beginning of the fiscal year the Company had one customer whose sales amounted to approximately 85% of total revenue. Of total accounts receivable, approximately 89% was due from this customer. On October 17, 2011, this customer terminated its relationship with the Company and disputed the balance of the amount owing.  The balance of the account, $32,101, was considered uncollectable and written off.  See Note 9.   The balance of the accounts receivable was considered collectable based on an analysis of individual accounts.  It is management’s opinion that the Company is not exposed to significant credit risk associated with the balance of its accounts receivable.

Product Purchases and Accounts Payable: The Company purchases approximately 3.5% of its products from one company that is a related parties (See Note 5).   It is management’s opinion that the Company is not exposed to significant credit risk associated with manufacturing risk related to its suppliers.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts on accounts receivable is changed to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired.  During the six months ended February 29, 2012, receivables were written down by $32,101 following a bad debt, (Note 9).  There is no allowance for doubtful accounts recorded as of February 29, 2012 as the balance of the Company’s receivables was considered collectible based on analysis of individual accounts.
 
 
 
 
7

 
 
 
NAPRODIS, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ending
February 29, 2012
 
 
PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method with useful lives used in computing depreciation ranging from 5 to 7 years. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Expenditures for maintenance and repairs are charged to operations as incurred; additions, renewals and betterments are capitalized.

BASIC AND DILUTED INCOME (LOSS) PER SHARE

Net loss per share is calculated in accordance with FASB ASC 260, Earnings Per Share for the periods presented.  Basic net loss per share is based upon the weighted average number of common shares outstanding.  Diluted net loss per share is based on the assumption that all dilative convertible shares and stock options were converted or exercised.  Dilution is computed by applying the treasury stock method.  Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby we used to purchase common stock at the average market price during the period.

The Company has no potentially dilutive securities outstanding as of February 29, 2012.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Financial Accounting Standards Board issued   ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures" for financial assets and liabilities. FASB ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.  FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.  FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:

 
-
Level 1:  Quoted prices in active markets for identical assets or liabilities.
     
 
-
Level 2:  Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
     
 
-
Level 3:  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of the Company’s financial liabilities as at February 29, 2012 were measured against the three levels of inputs required by the standard to measure fair value:
 
 
 
8

 
 
 
NAPRODIS, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ending
February 29, 2012
 
 
   
Level 1
   
Level 2
   
Level 3
       
   
Quoted
   
Observable
   
Unobservable
       
   
Prices
   
Inputs
   
Inputs
   
Total
 
                         
Note Payable to Related Party
    -     $ 95,319       -     $ 95,319  
                                 
    $ -     $ 95,319     $ -     $ 95,319  

PROVISION FOR INCOME TAXES

The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company generated a deferred tax credit through net operating loss carry-forwards.  As of February 29, 2012 the Company had federal and state net operating loss carry-forwards of approximately $ 204,000 that can be used to offset future federal income tax. The federal and state net operating losses are reduced by a valuation allowance, when, in the opinion of management, utilization is not reasonably assured.

NOTE 2 – PROPERTY AND EQUIPMENT

A summary as of February 29, 2012 and August 31, 2011 is as follows:

   
February 29,
   
August 31,
 
   
2012
   
2011
 
 
           
Machinery and Equipment
  $ 48,001     $ 48,001  
Automobile
    28,800       28,800  
Furniture and Fixtures
    10,292       10,292  
 
    87,093       87,093  
 Less accumulated depreciation
    (49,462 )     (42,660 )
Property and equipment, net
  $ 37,631     $ 44,433  

NOTE 3 – OPERATING LEASES

The Company leased office and warehouse space under a lease that expired January 31, 2010.  On February 1, 2011 the Company moved to new premises under a five year lease. The future minimum payments for lease and common area costs are as follows, for the fiscal years ending August 31,
 
2012
    79,908  
2013
    79,908  
2014
    79,908  
2015
     33,295  
    $ 273,019  


 
9

 
 
 
NAPRODIS, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ending
February 29, 2012
 
 
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies.  Due to the tentative and preliminary nature of those proposed standards, the Company’s management has not determined whether implementation of such standards would be material to its financial statements.

NOTE 5 – PAYABLES TO RELATED PARTIES

The following payables to companies that are related by common ownership are payable on demand, have no terms of repayment or maturity date and accrue interest at 5% per annum:

   
February 29,
   
August 31,
 
   
2012
   
2011
 
 
           
Solde Naprodis Inc.
  $ 4,418     $ 4,418  
Phybiosis Inc.
     90,901       90,901  
    $ 95,319     $ 95,319  

NOTE 6 – OFFICER LOANS

Loans from the following officers of the Company have no terms of repayment or maturity, are payable on demand and bear interest at 5% per annum.

   
February 29,
   
August 31,
 
   
2012
   
2011
 
 
           
Paul Petit
  $ 89,011     $ 85,757  
Alain Petit
    15,851       351  
Kelley Thompson
    60,587       22,587  
Jean-Phillipe Petit
    4,037        37  
    $ 169,486     $ 108,732  

NOTE 7 – LOSS CONTINGENCIES, LEGAL PROCEEDINGS

There were no loss contingencies or legal proceedings against the Company with respect to matters arising in the ordinary course of business. Neither the Company nor any of its officers or directors is involved in any other litigation either as plaintiffs or defendants, and have no knowledge of any threatened or pending litigation against them or any of the officers or directors.

NOTE 8 – SEGMENTED INFORMATION

Although the Company sells more than 400 products, only the Company’s skin care product line accounted for more than 10% of the Company’s revenue for the six months ended February 29, 2012.  The following presents certain information concerning the Company’s skin care product segment:
 
 
 
 
10

 
 
 
NAPRODIS, INC.
NOTES TO FINANCIAL STATEMENTS
For the six months ending
February 29, 2012
 
 
Six months ended February 29, 2012

         
All Other
       
   
Skin Care
   
Segments
   
Total
 
                   
Revenue
    208,678       23,187       231,865  
Interest Revenue
    --       --       --  
Interest Expense
    --       6,515       6,515  
Depreciation and Amortization
    --       6,804       6,804  
Segment profit (loss)
    18,296       (73,740 )     (55,444 )
Segment assets (1)
    2,406       117,813       120,219  
Expenditures for Segment assets (1)
    --       --       --  

Six months ended February 29, 2011
 
         
All Other
       
   
Skin Care
   
Segments
   
Total
 
                   
Revenue
    465,788       52,503       518,291  
Interest Revenue
    --       --       --  
Interest Expense
    --       1,026       1,026  
Depreciation and Amortization
    --       4,357       4,357  
Segment profit (loss)
    34,917       (147,554 )     (112,637 )
Segment assets (1)
    8,367       101,007       109,374  
Expenditures for Segment assets
    675       71       746  

(1)
Inventory is the only asset that can be segmented since the remaining assets of the Company are used for all of the Company’s activities.

All other segments are:

 
Body Care
 
Hair Care
 
Dietary Supplements
 
Raw Materials which include:
 
-
Essential Oils;
 
-
Hydrolates;
 
-
Clays;
 
-
Celtic Sea Salt;
 
-
Fatty Vegetal Oils; and
 
-
Sea Algae

NOTE 9 – BAD DEBTS

On October 17, 2011 the Company’s major customer terminated its relationship with the Company and disputed the balance of the amount owing.  Management considered the receivable uncollectable.  The balance was written off accordingly and a bad debt of $32,101 was recorded.



 
11

 
 
 
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “should”, “likely” or similar expressions, indicates a forward-looking statement.

The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
 
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operation
 
General

We were incorporated in Nevada in June 1999.

Since September 2000 we have been in the business of selling nutritional and personal care products.  We distribute our products primarily through private label resellers and through spas, beauty salons, health professionals, and health and beauty stores.  As of the date of this prospectus our products were being sold in the United States and Canada along with several foreign countries.  We rely upon referrals from our customers and our website to market our products.

Our products include nutritional supplements that are made from vitamins, minerals, herbs and other substances for which there is a long history of human consumption.  Some of our products contain innovative ingredients or combinations of ingredients.  Although we believe all of our products to be safe when taken as directed, there is little long-term experience with human consumption of certain of these product ingredients or combinations of ingredients in concentrated form.  We conduct research and test the formulation and production of our products, but we have not performed or sponsored any clinical studies relating to our products.  Furthermore, because we are highly dependent on consumers’ perception of the efficacy, safety and quality of our products, as well as similar products distributed by other companies, we could be adversely affected in the event those products should prove or be asserted to be ineffective or harmful to consumers or in the event of adverse publicity associated with illness or other adverse effects resulting from consumers use or misuse of our products or a competitor’s similar products.

Material changes of certain items in our Statement of Operations for the three and six months ended February 29, 2012, as compared to the same period last year, are discussed below.

   
Increase (I)
       
Item
 
or Decrease (D)
   
Reason
 
             
Revenues
    D       (1 )
Cost of Sales
    D       (1 )
Salaries and wages
    D       (1 )
Freight
    D       (1 )
Other general and
    D       (1 )
administrative expenses
               

 
(1)
Loss of major customer.
 

 
 
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The following is an explanation of our material sources and (uses) of cash during the six months ended February 29, 2012 and February 28, 2011:
 
    February  
 
 
2012
   
 2011
 
             
Cash (used by) operations
    (76,019 )     (27,731 )
Bank overdraft
    10,089       5,797  
Advances from related parties
    60,753       17,402  
Cash on hand at beginning of period
    5,177       8,302  
 
 
In October 2011, our largest customer, Plant Devas which accounted for approximately 85% of our sales during the year ended August 31, 2011, decided to manufacture for its own account the products which they had previously been buying from us. We previously manufactured 22 products from our skin care segment for Plant Devas, who then resold the products under its own label.  We are now manufacturing these same 22 skin care products and selling them under our label.  The equipment we used to manufacture the skin care products for Plant Devas was not custom built, but was the same equipment we used, and are currently using, to manufacture all of our products.
 
Our revenues will of course decline until we can replace Plant Devas with other customers.  Cost of sales, salaries and wages, and freight will also decline with the reduction in revenues.  Although the loss of a large customer is not good, it should be noted that even with sales to Plant Devas, our net income was only $9,219 during the year ended August 31, 2009 and we suffered net losses during the two years ended August 31, 2011.  The loss of Plant Devas caused us to write off $5,000 of inventory and $32,101 of account receivables.

Other than the foregoing, we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our sales, revenues or income from continuing operations, or liquidity and capital resources.

Research and Development

During the past two years our research and development expenses have been less than $1,500.

However, we believe that in order to be competitive we will need to commit to continuous product innovation and improvement through research.  Our research efforts will combine in-house research, published research, and clinical studies and will involve the following:
 
 
Investigation of the in vitro activity of new natural extracts,
 
Identification and research of combinations of nutrients that may be suitable for new products,
 
Analysis of the benefits of existing and newly identified nutritional supplements,
 
Improvement of existing products following new discoveries in nutrition, and
 
Improvements to our manufacturing process.
 
CRITICAL ACCOUNTING POLICIES

There have been no changes in our critical accounting policies since February 29, 2012.
 
 
 
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Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Item 4.   Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q.  Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.  Based on that evaluation, our management concluded that, as of February 29, 2012, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended February 29, 2012, that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
 
PART II
 
Item 6.   Exhibits

a.  Exhibits

 
 
 
 
 
 
 
 

 

 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
NAPRODIS, INC.
 
     
       
Date:  September 17, 2012
By:
/s/ Paul Petit  
    Paul Petit, President, Principal Executive, Financial and Accounting Officer  
 
 
 
 
 
 
 
 
 
 
 
 







 
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