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 September 30, 2012

               OR

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

 

       For the transition period from        to

       Commission file number              000-54533

 

USG1, INC.

(Exact name of registrant as specified in its charter)

 

         Delaware                             27-2288541

    (State or other jurisdiction of           (I.R.S. Employer

     incorporation or organization)          Identification No.)

 

                 1126 Madison 9517, Fredericktown, Missouri 63645

          (Address of principal executive offices)  (zip code)

 

         573-561-4283

 


 

 

          (Registrant's telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X    No 

 

Indicate by check mark whether the registrant 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

   (do not check if a smaller reporting company

 

 

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.

                                               Yes X      No 

 

Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date.

 

Class

Outstanding at

 

November 14, 2012

 

 

Common Stock, par value $0.0001

6,600,000

 

 

Documents incorporated by reference:

None

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

USG1, INC.

INDEX TO UNAUDITED FINANCIAL STATEMENTS

 

 

Page

 

 

Unaudited Financial Statements:

 

 

 

Balance Sheets

F-1

 

 

Statements of Operations

F-2

 

 

Statements of Cash Flows

F-3

 

 

Notes to Unaudited Financial Statements

F-4

 

 

 


 

 

 

 

USG1, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

 

 

 

September 30,

 

December 31,

Assets

 

2012

 

2011

 

 

(Unaudited)

 

(Audited)

 

 

 

 

 

Current Assets

 

 

 

 

  Cash and cash equivalents

$

                  1,062

$

                      21

     Total Current Assets

 

                  1,062

 

                      21

 

 

 

 

 

     Total Assets

$

                  1,062

$

                      21

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

  Accrued interest - related party

$

                         -

$

                      21

  Accrued expenses

 

                  6,403

 

                  2,500

  Note payable - related party

 

                         -

 

                  2,500

     Total Current Liabilities

 

                  6,403

 

                  5,021

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

  Preferred stock - $.0001 par value; 20,000,000 shares authorized, 0 shares

        issued and outstanding

 

 

 

 

                         -

 

                         -

  Common stock - $.0001 par value; 100,000,000 shares authorized,

        6,600,000 shares issued and outstanding

 

 

 

 

 

                     660

 

                     660

  Additional paid-in capital

 

                35,233

 

                26,983

  Accumulated deficit

 

               (41,234)

 

               (32,643)

     Total Stockholders' Deficit

 

                 (5,341)

 

                 (5,000)

 

 

 

 

 

     Total Liabilities and Stockholders' Deficit

$

                  1,062

$

                      21

 


 

 

 

The accompanying notes are an integral part of financial statements.

 

 

USG1, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

For The Period From February 27, 2010 (Inception) through September 30, 2012

 

 

For The Three Months Ended

 

 

For The Nine Months Ended

 

 

 

 

September 30,

 

 

September 30,

 

 

 

 

2012

 

2011

 

 

2012

 

2011

 

 

Net Revenue

$

                             -

$

                             -

 

$

                             -

$

                             -

 

$

                               -

 

 

 

 

 

 

 

 

 

 

 

 

 

General and Administrative Expenses

 

 

 

 

 

 

 

 

 

 

 

 

    Legal and professional expenses

 

                       2,480

 

                       2,000

 

 

                       7,403

 

                       5,500

 

 

                       39,696

    Business Taxes and Licenses

 

                             -

 

                             -

 

 

                       1,208

 

                             -

 

 

                         1,208

    Office supplies

 

                             -

 

                         202

 

 

                             -

 

                         202

 

 

                           202

    Bank service fees

 

                             1

 

                           54

 

 

                             1

 

                           54

 

 

                           128

         Total general and administrative expenses

 

                       2,481

 

                       2,256

 

 

                       8,612

 

                       5,756

 

 

                       41,234

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

                     (2,481)

 

                     (2,256)

 

 

                     (8,612)

 

                     (5,756)

 

 

                      (41,234)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on forgiveness of interest payable

 

                             -

 

                             -

 

 

                           24

 

                             -

 

 

                             24

Interest expense

 

                             -

 

                           (4)

 

 

                           (3)

 

                          (10)

 

 

                            (24)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss before Income Taxes

 

                     (2,481)

 

                     (2,260)

 

 

                     (8,591)

 

                     (5,766)

 

 

                      (41,234)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

                             -

 

                             -

 

 

                             -

 

                             -

 

 

                               -

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

$

                     (2,481)

$

                     (2,260)

 

$

                     (8,591)

$

                     (5,766)

 

$

                      (41,234)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share - basic and diluted

$

                             -

$

                             -

 

$

                           -  

$

                             -

 

$

                               -

Weighted average shares outstanding, basic and diluted

 

                 6,600,000

 

                 6,600,000

 

 

                 6,600,000

 

                 6,600,000

 

 

                   6,600,000

 


 

 

 

The accompanying notes are an integral part of financial statements.

 

 

USG1, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

For The Period From February 27, 2010 (Inception) through 
September 30, 2012

 

 

 

 

 

 

For The Nine Months Ended

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

2012

 

2011

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net loss

 

 

$

               (8,591)

$

               (5,766)

$

                        (41,234)

 

Gain on forgiveness of interest payable

 

                   (24)

 

                       -

 

                              (24)

 

Shares issued for legal and consulting services

 

                       -

 

                       -

 

                              793

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Increase in accrued interest

 

                      3

 

                     10

 

                                24

 

 

Increase in accrued expenses

 

                3,903

 

                 3,000

 

                            6,403

 

Net cash used in operating activities

 

               (4,709)

 

               (2,756)

 

                        (34,038)

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from issuance of common stocks

 

                       -

 

                       -

 

                          20,100

 

 

Proceeds from loans from related party

 

                       -

 

                       -

 

                            2,500

 

 

Proceeds from capital contributions

 

                5,750

 

                 2,700

 

                          12,500

 

Net cash provided by financing activities

 

                5,750

 

                 2,700

 

                          35,100

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS

 

                1,041

 

                   (56)

 

                            1,062

CASH & CASH EQUIVALENTS, BEGINNING BALANCE

 

                    21

 

                     67

 

                                  -

CASH & CASH EQUIVALENTS, ENDING BALANCE

$

                1,062

$

                     11

$

                            1,062

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Non-cash financing activities:

 

 

 

 

 

 

 

 

Transfer from note payable - related party to additional paid-in capital

$

2,500

$

                       -

$

                                  -

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

                       -

$

                       -

$

                                  -

 

 

Income taxes paid

 

$

                       -

$

                       -

$

                                  -

 


 

 

 

The accompanying notes are an integral part of financial statements.

 

 

NOTE 1: ORGANIZATION

 

USG1, Inc. (“the Company”) was incorporated under the laws of the State of Delaware, U.S. on February 27, 2010.  The Company intends to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company will attempt to locate and negotiate with a business entity for the combination of that target company with it. The combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended.

 

No assurances can be given that USG1 will be successful in locating or negotiating with any target company.

 

The proposed business activities described herein classify USG1 as a “blank check” company. The Securities and Exchange Commission and certain states have enacted statuettes, rules and regulations limiting the public sale of securities of blank check companies. USG1 will not make any efforts to cause a market to develop in its securities until such time as it has successfully implemented its business plan and is no longer classified as a blank check company.

 

Development Stage Risk

 

The Company has not earned revenues from operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Enterprise” as set forth in Accounting Standards Codification (“ASC”) 915 “Development Stage Entities”, which was previously Statement of Financial Accounting Standards No. 7 (“SFAS 7”). Among the disclosures required by ASC 915 are that the Company’s financial statements be identified as those of a development stage company, and that the statements of operations, stockholders’ equity and cash flows disclose activity since the date of the Company’s inception. For the period from February 27, 2010 (inception) through September 30, 2012, the Company has accumulated losses of $41,234.

 

 


 

 

Since its inception, the Company has been dependent upon the receipt of capital investment to fund its continuing activities. In addition to the normal risks associated with a new business venture, there can be no assurance that the Company’s business plan will be successfully executed. Our ability to execute our business plan will depend on our ability to obtain additional financing and achieve a profitable level of operations. There can be no assurance that sufficient financing will be obtained. Further, we cannot give any assurance that we will generate substantial revenues or that our business operations will prove to be profitable.

 

NOTE 2: GOING CONCERN

 

The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management’s Plan to Continue as a Going Concern

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its securities, and (2) short-term borrowings from shareholders or related party when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.

 

 

NOTE 3: SUMMARY OF ACCOUNTING POLICIES

 

Interim Financial Statements:

 

The unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual audited financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations of the Company. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. These interim financial statements should be read in conjunction with the Company’s audited financial statements as of December 31, 2011 and related notes included therein.

 

Basis of Presentation:

 

 


 

 

The accompanying financial statements have been prepared by the Company. The Company’s financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

Fiscal Year:

 

The Company’s fiscal year end is December 31.

 

Cash and Cash Equivalents:

 

Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less.

 

Use of Estimates:

 

The preparation of financial statements in conformity with generally accepted accounting principles in the Unites 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 revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

 

Share Based Payments:

 

In December, 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment”, which replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123(R) is now included in ASC 718 “Compensation – Stock Compensation”. Under SFAS No. 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees or independent contractors are required to provide services. Share-based compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March, 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) which expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS No. 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under SFAS No. 123. To date, the Company has not adopted a stock option plan nor granted any stock options.

 

Advertising Costs:

 

The Company expenses all advertising costs in the current period. The results of future benefits from advertising are minimal based upon the type of advertising involved. To date, the Company has not incurred any advertising expenses.

 

Income Taxes:

 

Income taxes are accounted for under the assets and liabilities method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

 


 

 

 

Net Loss per Common Share:

 

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share reflects the potential dilution of securities by including common stock equivalents, such as stock options, stock warrants and convertible preferred stock, in the weighted average number of common shares outstanding for a period, if dilutive. For the nine months ended September 30, 2012 and 2011, there were no potentially dilutive securities.

 

Recently Issued Accounting Pronouncements:

 

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

 

 

NOTE 4: STOCKHOLDERS’ EQUITY

 

The Company is authorized to issue a total of 120,000,000 shares of stock consisting of 100,000,000 shares of Common Stock with par value of $.0001 per share and 20,000,000 shares of Preferred Stock, par value of $.0001.

 

On February 27, 2010 (inception), the Company issued 6,350,000 shares of common stock to 43 individual shareholders at an average price of $.00317 per share for cash in the amount of $20,100. On the same date, the Company issued 250,000 shares of common stock as payment for legal and consulting services at $.00317 per share for a total value of $793.

 

On June 30, 2012, the Company entered a loan conversion agreement with its major shareholder, Ms. Kimi Royer, who is also the Chairman and Chief Executive Officer of the Company. Pursuant to the agreement, Ms. Royer agrees to convert the $2,500 loan provided in June 2010 to the Company to additional paid-in capital and to forgive any accrued interest that has accumulated as of the conversion date.

 

NOTE 5: RELATED PARTY TRANSACTIONS

 

The parties primarily refer to the shareholders and officers of the Company and corporate entities related to the Company through common ownership.

 

Note Payable

 

Note payable to officer amounted to $0 and $2,500 as of September 30, 2012 and December 31, 2011, respectively. The loan was borrowed from the President and Chairman of the Company on July 6, 2010 for short-term with written agreement, unsecured, and bearing an interest of 0.43% per annum. Unpaid interests accrued associated with the note amounted to $0 and $21 as of September 30, 2012 and December 31, 2011, respectively.

 

On June 30, 2012, the Company entered a loan conversion agreement with its major shareholder, Ms. Kimi Royer, who is also the Chairman and Chief Executive Officer of the Company. Pursuant to the agreement, Ms. Royer agrees to convert the $2,500 loan provided in June 2010 to the Company to additional paid-in capital and to forgive any accrued interest that has accumulated as of June 30, 2012. (See Note 4.) Unpaid interests accrued associated with the note amounted to $24 as of the conversion date was recorded as other income for the nine months ended September 30, 2012.

 


 

 

 

NOTE 6: COMMITMENTS AND CONTINGENCIES

 

On August 10, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Canwealth Minerals Corporation, a Delaware corporation (“Canwealth”), and Ms. Kimi Royer as representative of the Company’s stockholders, pursuant to which Canwealth will merge with and into the Company at the closing, as contemplated by the Merger Agreement.

 

Pursuant to the Merger Agreement, the existing shares of Canwealth common stock will be converted into 44,169,231 shares of the Company’s common stock at the closing.  The existing stockholders of the Company with continue to hold 6,600,000 shares of the Company’s common stock.  As consideration for the merger, Canwealth shall pay $50,000 in the aggregate to the participating stockholders of the Company.  Upon the merger becoming effective, the current officers and directors of the Company will resign and new officers and directors will be appointed.

 

The closing of the merger is subject to certain closing conditions, such as the delivery of the written consent of the holders of at least 90% of the issued and outstanding shares of the Company common stock approving the terms of the Merger Agreement and the proposed merger. 

 

 

NOTE 7: SUBSEQUENT EVENTS

 

In accordance with FASB Accounting Standards Codification Topic 855, “Subsequent Events”, the Company has evaluated subsequent events through November 14, 2012, the date which the unaudited financial statements were available to be issued.  All subsequent events requiring recognition as of September 30, 2012, have been incorporated into these financial statements and there are no subsequent events that require disclosure.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report include forward-looking statements. These forward looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "proposed," "intended," or "continue" or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other "forward-looking" information. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including but not limited to: variability of our revenues and financial performance; risks associated with product development and technological changes; the acceptance our products in the marketplace by existing and potential future customers; general economic conditions. You should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

 


 

 

 

INTRODUCTION

 

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations and financial condition of USG1, Inc (“USG1”). MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements. As used in this Quarterly Report, the terms "we", "us", "our", “Registrant”, and “the Company” mean USG1.

 

The Company was incorporated in the State of Delaware on February 27, 2010.

 

NATURE OF BUSINESS

 

USG1, Inc. ("USG1" or the "Company") was incorporated on February 27, 2010 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. USG1 has been in the developmental stage since inception and its operations to date have been limited to issuing shares to its original shareholders and filing a registration statement. USG1 has been formed to provide a method for a foreign or domestic private company to become a reporting company with a class of securities registered under the Securities Exchange Act of 1934.

 

The Company registered its common stock on a Form 10 registration statement filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 12(g) thereof. The Company files with the Securities and Exchange Commission periodic and current reports under Rule 13(a) of the Exchange Act, including quarterly reports on Form 10-Q and annual reports Form 10-K.

 

The Company has no employees and one officer, who is also the sole director.

 

USG1 intends to help a company become a public reporting company. In the event USG1 is successful in a business combination, our advisors may recommend that the company file a registration statement; most likely on Form S-1, or alternatively that a company first effect a business combination with USG1 and then subsequently file a registration statement. A company may choose to effect a business combination with USG1 before filing a registration statement as such method may be an effective way to obtain exposure to the brokerage community.

 

A combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended.

 

As of September 30, 2012, USG1 had not generated revenues and had no income or cash flows from operations since inception. The continuation of USG1 as a going concern is dependent upon financial support from its stockholders, its ability to obtain necessary equity financing to continue operations, to successfully locate and negotiate with a business entity for the combination of that target company with USG1. There is no assurance that USG1 will ever be profitable.

 


 

 

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

 

The Company has received no income and has incurred operating expenses for general corporate upkeep and accounting fees. Operations will likely remain similar until USG1 transacts a business combination. Since there is minimal cash on hand, the Company will be reliant on the additional capital from existing shareholders or will need to issue more shares to continue as a going concern.

 

Operating expenses during the three months ended September 30, 2012 totaled $2,481 compared to $2,256 for the three months ended September 30, 2011.  The increase resulted primarily from professional fees incurred related to our public filing obligations.

 

On August 10, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Canwealth Minerals Corporation, a Delaware corporation (“Canwealth”), a mining and mineral company headquartered in Canada.  Upon the merger becoming effective, the Company would have a material change that will include a change in control and material business operations.

 

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

 

The Company has received no income and has incurred operating expenses for general corporate upkeep and accounting fees. Operations will likely remain similar until USG1 transacts a business combination. Since there is minimal cash on hand, the Company will be reliant on the additional capital from existing shareholders or will need to issue more shares to continue as a going concern.

 

Operating expenses for the nine months ended September 30, 2012 totaled $8,612 compared to $5,756 for the nine months ended September 30, 2011.  The increase resulted primarily from professional fees incurred related to our public company filing obligations.

 

On August 10, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Canwealth Minerals Corporation, a Delaware corporation (“Canwealth”), a mining and mineral company headquartered in Canada.  Upon the merger becoming effective, the Company would have a material change that will include a change in control and material business operations.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2012, we had working capital deficit of $5,341. Operating expenses during the nine months ended September 30, 2012 totaled $8,612 compared to $5,756 for the nine months ended September 30, 2011. The increase resulted primarily from professional fees incurred related to our public company filing obligations.

 

Net cash provided by financing activities during the nine months ended September 30, 2012 was $5,750, which was solely contributed by shareholders.

 

No shares were sold during the nine months ended September 30, 2012.

 

We have not yet recognized revenues from our operations. As a result, our current cash position is not sufficient to fund our cash requirements during the next twelve months, including operations and capital expenditures.

 

 


 

 

Current assets consisted of cash of $1,062 as of September 30, 2012. We will be reliant upon additional paid-in capital from shareholders, shareholder loans, private placements or public offerings of equity to fund our operations. We have secured no sources of loans. We had negative cash flow from operations and no revenues during the nine months ended September 30, 2012.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

There are no 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 is material to investors.

 

INFLATION

 

We do not believe our business and operations have been materially affected by inflation.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Our critical accounting policies are as follows:

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the Unites 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 revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

 

Share Based Payments

 

In December, 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment”, which replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123(R) is now included in ASC 718 “Compensation – Stock Compensation”. Under SFAS No. 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees or independent contractors are required to provide services. Share-based compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March, 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) which expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS No. 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under SFAS No. 123. To date, the Company has not adopted a stock option plan nor granted any stock options.

 

Income Taxes

 

Income taxes are accounted for under the assets and liabilities method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

 


 

 

 

Recently Issued Accounting Pronouncements

 

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

 

ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   

 

Information not required to be filed by Smaller reporting companies.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Disclosures and Procedures

 

Pursuant to Rules adopted by the Securities and Exchange Commission, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules. This evaluation was done as of the end of the period covered by this report under the supervision and with the participation of the Company's principal executive officer (who is also the principal financial officer).

 

Based upon that evaluation, she believes that the Company's disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

This Quarterly Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Quarterly Report.

 

Changes in Internal Controls

 

There were no changes in the Company's internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS

 


 

 

 

There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.

 

ITEM 1A.  RISK FACTORS

 

As a “smaller reporting company”, we are not required to provide disclosure under this Item 1A.

 

ITEM 2.  UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On February 27, 2010 (inception), the Company issued 6,350,000 shares of common stock to 43 individual shareholders at an average price of $.00317 per share for cash in the amount of $20,100. On the same date, the Company issued 250,000 shares of common stock as payment for legal and consulting services at $.00317 per share for a total value of $793.

 

The proceeds of these sales have been used to cover operating, legal, and professional fees since inception.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

None.

 

ITEM 5.  OTHER INFORMATION

 

            (a)  Not applicable

            (b)  Item 407(c)(3) of Regulation S-K:

 

During the quarter covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

 

ITEM 6.  EXHIBITS

 

            31  Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

            32  Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

                                                        

            101. INS          XBRL Instance Document

            101. CAL         XBRL Taxonomy Extension Calculation Link base Document

            101. DEF         XBRL Taxonomy Extension Definition Link base Document

            101. LAB         XBRL Taxonomy Label Link base Document

            101. PRE         XBRL Extension Presentation Link base Document

            101. SCH         XBRL Taxonomy Extension Scheme Document

 

 


 

 

                                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.

                               USG1, INC

                               By:   /s/ Kimi Royer

                                     President, Chief Executive Officer

Dated:   November 14, 2012