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EX-31.1 - Eurocan Holdings Ltd.eurocan_10q-ex3101.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

or

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file # 333-177918

 

EUROCAN HOLDINGS LTD.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada   20-3937596
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification number)
     
1 Union Square West, Suite 610, New York, NY   10003

(Address of principal executive offices)

 

  (Zip Code)

 

Registrant's telephone number: (212) 419-4924

 

Securities registered under Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 ¨

 

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 ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

 

As of November 13, 2012 the registrant had 12,710,000 shares of its Common Stock outstanding.

 

 

 
 

Part I -- Financial Information

 

Eurocan Holdings Ltd.

Consolidated Balance Sheets

(Expressed in US dollars)

 

   September 30,
2012
$
(unaudited)
   December 31,
2011
$
(audited)
 
           
ASSETS          
           
Current Assets          
           
Cash   7,789    2,738 
Accounts receivable   2,230    665 
Prepaid expenses and other current assets       2,800 
           
Total Current Assets   10,019    6,203 
           
Other Assets          
Security Deposit   3,075     
           
Total Assets   13,094    6,203 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current Liabilities          
           
Accounts payable   38,975    39,941 
Accrued liabilities   3,005    16,514 
Deferred revenue       1,200 
Due to related party (Note 4)       4,610 
Notes payable (Note 3)   155,000    80,000 
           
Total Liabilities   196,980    142,265 
           
Contingencies and Commitments        
           
Stockholders’ Deficit          
           
Preferred Stock, 100,000,000 shares authorized, par value $0.0001; None issued and outstanding        
Common Stock, 900,000,000 shares authorized, par value $0.0001;
12,710,000 and 12,710,000 shares issued and outstanding, respectively
   1,271    1,271 
           
Additional Paid-In Capital   46,711    46,711 
           
Deficit   (231,868)   (184,044)
           
Total Stockholders’ Deficit   (183,886)   (136,062)
           
Total Liabilities and Stockholders’ Deficit   13,094    6,203 

 

The accompanying notes are an integral part of these unaudited financial statements.

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Eurocan Holdings Ltd.

Consolidated Statements of Operations

(Expressed in US dollars)

   For the
Three Months
Ended
   For the
Three Months
Ended
   For the
Nine Months
Ended
   For the
Nine Months
Ended
 
   September 30,   September 30,   September 30,   September 30, 
   2012   2011   2012   2011 
   $   $   $   $ 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                     
Revenue   37,921    14,633    81,396    56,602 
                     
Cost of sales   5,763    640    7,209    1,429 
                     
Selling, general and administrative   47,421    17,515    112,561    69,340 
                     
Loss from Operations   (15,263)   (3,522)   (38,374)   (14,167)
                     
Other Expenses                    
Interest and bank charges   (3,114)   (1,130)   (9,450)   (4,020)
                     
Total Other Expenses   (3,114)   (1,130)   (9,450)   (4,020)
                     
Net Loss   (18,377)   (4,652)   (47,824)   (18,187)
                     
Net Loss Per Share – Basic and Diluted   (0.00)   (0.00)   (0.00)   (0.00)
                     
Weighted Average Shares Outstanding – Basic and Diluted   12,710,000    12,710,000    12,710,000    12,710,000 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

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Eurocan Holdings Ltd.

Consolidated Statements of Cash Flows

(Expressed in US dollars)

 

   For the
Nine Months
Ended
September 30, 2012
$
(unaudited)
   For the
Nine Months
Ended
September 30, 2011
$
(unaudited)
 
           
Operating Activities          
           
Net loss for the period   (47,824)   (18,187)
           
Changes in operating assets and liabilities:          
Accounts receivable   (1,565)   6,180 
Prepaid expenses and other current assets   2,800     
Security deposits   (3,075)    
Deferred revenue   (1,200)   (25,194)
Accounts payable and accrued liabilities   (14,475)   16,398 
           
Net Cash Used In Operating Activities   (65,339)   (20,803)
           
Financing Activities          
Principal payments on related party debt   (4,610)    
Proceeds from notes payable   75,000     
           
Net Cash Provided By Financing Activities   70,390     
           
Increase (decrease) in Cash   5,051    (20,803)
           
Cash - Beginning of Period   2,738    36,258 
           
Cash - End of Period   7,789    15,455 
           
Supplemental Disclosures:          
           
Income taxes paid   1,796     
Interest paid   9,019    4,020 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

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Eurocan Holdings Ltd.

Notes to Consolidated Financial Statements

September30, 2012

(Expressed in U.S. dollars)

 

 

1.                Basis of Presentation

 

The accompanying unaudited interim financial statements of Eurocan Holdings Ltd. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the Company’s audited 2011 annual financial statements and notes thereto. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure required in the Company’s 2011 annual financial statements have been omitted.

 

2.                Going Concern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since inception, the Company has incurred losses of $231,868. In addition, the Company generated negative cash flows from operations during the year ended December 31, 2011 and during the nine months ended September 30, 2012. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

 

If necessary, the Company will pursue additional equity and/or debt financing while managing cash flows from operations in an effort to provide funds to meet its obligations on a timely basis and to support future business development.

 

The consolidated financial statements do not contain any adjustments to reflect the possible future effects on the classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

 

3.              Notes Payable

 

During the nine months ended September 30, 2012 the Company received advances totaling $75,000 and issued promissory notes to a non-related party. The notes bear interest at 5%, are unsecured, and are due on demand.

 

4.              Related Party Transactions

 

During the nine months ended September 30, 2012, a director of the Company received $11,965 as compensation for management services provided to the Company.

 

During the nine months ended September 30, 2012, the registrant made payments of $4,610 on a note owed to the President of the registrant. As of September 30, 2012, the balance of this note has been reduced to $0.

 

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Item 2. Management's Discussion and Analysis or Plan of Operations

 

The following discussion and analysis of our plan of operation should be read in conjunction with the financial statements and the related notes. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors.

 

Our Plan of Operation

 

We are an online marketing and media solutions firm specializing in digital interactive media. We utilize state-of-the-art digital interactive media technology to efficiently develop quantifiable and comprehensive advertising and marketing campaigns. By utilizing digital interactive media such as the internet, mobile communications, and digital interactive signage, our management believes that we can implement highly targeted campaigns to a local and global market quickly and cost effectively.

 

Our cash flows from operations and our available capital are not presently sufficient to sustain our current level of operations for the next 12 months. Furthermore, we anticipate that a minimum of $500,000 will be required to expand the breadth and scope of our business and implement our sales and marketing strategy. We plan to obtain the financing needed to sustain our current operations and expand our business from a combination of capital sources and means, including debt and equity financings. Any future financing through equity investments will likely be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.

 

There is no assurance that we will be able to obtain needed financing on terms satisfactory to us, or at all, and we do not have any arrangements in place for any future financing. Our ability to obtain financing may be impaired by such factors as the capital markets, both generally and specifically in the advertising industry, and the fact that we have not generally been profitable, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities together with our revenue from operations is not sufficient to satisfy our capital needs, we may be required to curtail, suspend or discontinue some or all of our operations, and investors could lose some or all of their investment. We have no plans, arrangements or contingencies in place in the event that we suspend or discontinue operations.

 

Our business plan calls for the hiring of one full-time mobile communications expert who will be strictly devoted to mobile communications marketing, and one full-time managed hosting specialist to oversee our managed hosting service. We do not otherwise expect any significant increase in the number of our employees. We intend to engage independent contractors on an “as needed” basis for the remainder of our personnel requirements, including sales and marketing, media content production and technical consulting. Except for certain capital lease purchases of equipment and systems for our managed hosting service, our management does not anticipate engaging in any research or development or purchasing any significant amount of equipment. Our ability to engage such personnel or to purchase any such equipment will be dependent upon our ability to raise additional financing as discussed above, of which there can be no assurance.

 

Results of Operations

 

We have suffered recurring losses and net cash outflows from operations since inception. When our cash flows from operations have been insufficient, our activities have been financed from the proceeds of share subscriptions and loans from management and non-affiliated third parties. We expect to continue to incur substantial losses to implement our business plan. We have not established any source of equity or debt financing and there can be no assurance that we will be able to obtain sufficient funds to implement our business plan. As a result of the foregoing, our auditors have expressed substantial doubt about our ability to continue as a going concern in our financial statements for the year ended December 31, 2011. If we cannot continue as a going concern, then our investors may lose all of their investment.

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Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

 

Revenue for the three months ended September 30, 2012 increased to $37,921 from $14,633 for the three months ended September 30, 2011. The increase in revenue can be directly attributed to an increase in contracts completed. During the three month period ended September 30, 2012, we completed two contracts resulting in revenue of $21,650. As of September 30, 2012, we have three contracts in process for which we expect to receive $40,450 in revenue. We have one new contract that commenced after September 30, 2012, for which we have received a deposit of $1,250. The increase in cost of sales was due to the need to hire contractors to do specialized programming work on the additional work load.

 

Operating expenses for the three months ended September 30, 2012 increased to $47,421 compared to $17,515 for the three months ended September 30, 2011. This increase is primarily due to an increase in professional fees, general and administrative expenses and rent. The increase in professional fees during the period was due to an increase in legal and accounting fees. The increase in general and administrative expense was a result of an increase in utilities, travel, entertainment and office expenses. We experienced a net loss of $18,377 during the three months ended September 30, 2012, as compared to a net loss of $4,652 for the three months ended September 30, 2011.

 

Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

 

Revenue for the nine months ended September 30, 2012, increased to $81,396 from $56,602 for the nine months ended September 30, 2011. The increase in revenue can be directly attributed to an increase in contracts completed. During the nine month period ended 2012, we completed three contracts resulting in revenue of $23,300. As of September 30, 2012, we have three contracts in process for which we expect to receive $40,450 in revenue. We have one new contract that commenced after September 30, 2012, for which we have received a deposit of $1,250.

 

Operating expenses for the nine months ended September 30, 2012 increased to $112,561 compared to $69,340 for the nine months ended September 30, 2011. This increase is primarily due to an increase in professional fees, general and administrative expenses and rent. The increase in general and administrative expense was a result of an increase in utilities, travel, entertainment and office expenses. The increase in professional fees during the period was due to legal and accounting costs associated with this offering. We experienced a net loss of $47,824 during the nine months ended September 30, 2012, as compared to a net loss of $18,187 for the nine months ended September 30, 2011.

 

Liquidity and Capital Resources

 

As of September 30, 2012, our total assets were $13,094 comprised of $7,789 in cash, $2,230 in accounts receivable and a security deposit of $3,075. This is an increase in total assets from $6,203 as of December 31, 2011. Our working capital deficit as of September 30, 2012 was $186,961, compared to a working capital deficit of $136,062 as of December 31, 2011.

 

Our increase in cash and liquidity is attributable to debt financing of $75,000 obtained by the registrant during the nine month period ended September 30, 2012.

 

During the nine months ended September 30, 2012, we used $65,339 of cash for operating activities compared to $20,803 for the nine months ended September 30, 2011.

 

Our cash flows from operations and our available capital are not presently sufficient to sustain our current level of operations for the next 12 months. Furthermore, we will require a minimum of $500,000 to expand and market our business. We plan to improve our cash position by focusing on increasing sales, improving profitability and equity financings.

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Critical Accounting Policies

 

Revenue Recognition

 

Revenue consists of web designing, web hosting, and maintenance services and is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is delivered, and collectability is reasonably assured. The registrant regularly reviews accounts receivable for any bad debts. Allowances for doubtful accounts are based on an estimate of losses on customer receivable balances.

 

Revenues from fixed-price contracts are recognized using the completed-contract method. A contract is considered complete when all costs except insignificant items have been incurred and the final product is delivered to the customer according to specifications. Revenues from time-and-material contracts are recognized as the work is performed.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by our management, with the participation of the Chief Executive Officer and the Chief Financial Officer (who are one and the same person), of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of September 30, 2012. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. In performing the assessment for the quarter ended September 30, 2012, our management concluded that our disclosure controls and procedures were not effective to accomplish the foregoing, due to the following material weaknesses in internal controls over financial reporting:

 

Procedures for Control Evaluation. Management has not established with appropriate rigor the procedures for evaluating internal controls over financial reporting. Due to limited resources and lack of segregation of duties, documentation of the limited control structure has not been accomplished.

 

Lack of Audit Committee. To date, the Company has not established an Audit Committee. It is management’s view that such a committee, including a financial expert, is an utmost important entity level control over the financial reporting process.

 

Insufficient Documentation of Review Procedures. We employ policies and procedures for reconciliation of the financial statements and note disclosures, however, these processes are not appropriately documented.

 

Insufficient Information Technology Procedures. Management has not established methodical and consistent data back-up procedures to ensure loss of data will not occur.

 

Changes in Disclosure Controls and Procedures

 

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 2012, that materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

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Part II. Other Information

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

The registrant did not sell any securities during the nine month period ended September 30, 2012.

 

Item 3. Default Upon Senior Notes

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit Description
   
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document
101.SCH XBRL Schema Document
101.CAL XBRL Calculation Linkbase Document
101.DEF XBRL Definition Linkbase Document
101.LAB XBRL Label Linkbase Document
101.PRE XBRL Presentation Linkbase Document

 

Signatures

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  EUROCAN HOLDINGS LTD.
   
Date: November 13, 2012

By: /s/ Michael Williams

Michael Williams

Chief Executive Officer, President,

Chief Financial Officer and

Principal Accounting Officer

 

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