UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429

 

FORM 10-K

 

þ

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

 

For the fiscal year 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: 333-179490

 

Gold Party Payday, Inc.
(Exact Name of Registrant as Specified in Its Charter)

 

Delaware		45-3327444
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

 

3189 Pepperhill Road
Lexington, Kentucky		40502
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (859) 552-6204

 

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

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ

 

Indicate by check mark if 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 þ No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. Yes þ No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes þ 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. (Check one):

 

	Large accelerated filer ¨	Accelerated filer ¨
	Non-accelerated filer ¨	Smaller reporting company þ
	(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, as of March 31, 2012 (the last business day of the registrant’s most recently completed second fiscal quarter) was $0. As of December 28, 2012, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $40,002 based on the sale price of the shares in the registrant’s initial public offering completed on December 21, 2012, of $0.12 per share. To date, the shares of our company have not traded publicly.

 

Number of shares outstanding of the registrant’s common stock as of December 28, 2012: 4,333,350 shares.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None

 

 

GOLD PARTY PAYDAY, INC.

ANNUAL REPORT ON FORM 10-K

 

TABLE OF CONTENTS

 

Form 10-K Item Number:			Page No.
PART I
Item 1.	Business		1
Item 1A.	Risk Factors		4
Item 1B.	Unresolved Staff Comments		11
Item 2.	Properties		11
Item 3.	Legal Proceedings		11
Item 4.	Mine Safety Disclosures		12
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		13
Item 6.	Selected Financial Data		14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		19
Item 8.	Financial Statements and Supplementary Data		19
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		19
Item 9A.	Controls and Procedures		20
Item 9B.	Other Information		20
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		21
Item 11.	Executive Compensation		23
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		24
Item 13.	Certain Relationships and Related Transactions, and Director Independence		25
Item 14.	Principal Accountant Fees and Services		25
PART IV
Item 15.	Exhibits and Financial Statement Schedules		26
Signatures			27

 

 

PART I

 

ITEM 1. BUSINESS

 

Overview

 

Gold Party Payday, a development stage company, organizes events and parties in which guests bring their unwanted jewelry, scrap gold and silver, coins and other gold and silver items to sell to us.  Our events are centered around home and office parties hosted primarily by individuals.  We will also support organizations by holding fundraising events hosted by churches and other charitable or religious organizations.

 

We were incorporated in the State of Delaware on September 19, 2011. Our wholly-owned subsidiary, Gold Party Payday, LLC, in which we began our business, was formed as a limited liability company under the laws of the State of Kentucky on August 16, 2011. Our principal executive office is located at 3189 Pepperhill Road, Lexington, Kentucky 40502. Our main telephone number is (859) 552-6204. We maintain a website at www.goldpartypayday.net. The contents of this website are not part of this annual report.

 

Operations

 

A Gold Party Payday event host typically receives 10% of the gross proceeds received at the event.  The host also receives a bonus equal to 5% of the gross proceeds received at the first party or event that is booked by a guest who attended the original event. To date, we have organized 16 parties, purchasing approximately $6,050 in gold and silver items. In May 2012, we sold approximately $3,400 in gold items and, in July 2012, we sold approximately $600 in gold items to a metal refiner and we are currently holding approximately $2,500 in additional gold and silver items in inventory. We expect to hold one to two events per month on average in 2013, and are currently scheduling appointments. Two to 15 people have attended each of our parties and we expect that number of guests to be consistent at future events. Our parties are currently being conducted in central Kentucky.

 

Event guests have their gold and silver items tested, measured, weighed and appraised at the party and they receive an offer on the spot, based on the quality and quantity of the precious metals contained in the items and prevailing gold and silver prices.  Event guests who accept the offer and sell their items to us receive a corporate check at that time. We keep purchased items separated for at least three days in case a seller changes his or her mind and wants a refund minus a 10% processing fee. To date, we have not used a written purchase or sale contract.

 

Through both publicly available sources and the contacts we have made to date in the industry, we seek the best prices offered by precious metal refineries to resell the purchased items in bulk quantities.  We also work with several clients to source gold and silver bullion at competitive prices.

 

We pay an event guest based on the estimated appraised value of the items purchased, less a deduction determined by reference to the competitive discounts charged by jewelry stores and pawnshops in the central Kentucky area, as well as mail-in gold services. Following the event, we will deliver the items to a refinery to melt down the items into a solid form to produce pure gold, silver and other precious metals. This solid form is then tested for purity and payment from the refinery to us will be based on the true value of the metal. We estimate that we will be paid 90% to 95% of the daily gold spot value, given the volume of gold and silver items we have, based on our two sales of gold items in 2012. We expect this payout ratio to remain consistent throughout 2013. We are paid by the refinery approximately three business days following melting and testing.

 

 

Currently, we do not pay for gems. At our parties, we offer to remove gems and stones from jewelry settings and return them to the seller. If the seller does not want to keep the gems and stones, then we will retain them and take a bulk quantity to a gemologist for appraisal of value.

 

We have had discussions with several precious metal refining companies with which we intend to do business in the future. We currently perform our own appraising services. In the future, if needed, we may retain appraising companies or additional personnel from time to time to attend our events with us.

 

We are a newly-formed, development stage company with limited sales and commission fee revenue and operations, minimal assets and a net loss since inception. To date, we have earned only a small amount of revenue and have not generated cash flow from operations. We are currently holding in inventory certain items purchased at our parties. Our independent registered public accounting firm has expressed substantial doubt that we can continue as an ongoing business operation.

 

We do not have any current plans, arrangements, commitments or understandings to engage in a merger with or acquisition of another company.

 

Precious Metal Appraisals

 

The process we use for appraising gold and silver items at a party are:

 

(1)

Visually inspect the item with a jewelers loupe for markings (e.g., to determine 10-karat or 14-karat gold).

 

(2)

Pass neodymium magnet over the item to test for gold plated or fake/costume jewelry.

 

(3)

Test the item with electronic tester to verify consistency with markings, if any were viewed in step 1.

 

(4)

If electronic test and markings match, skip to step 6.

 

(5)

If further verification needed after step 3, test item with an acid test kit.

 

(6)

Weigh item on a digital jewelry scale.

 

(7)

Calculate an offer based on metal karat, spot price, weight and payout ratio.

 

We count Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, and Richard J. Hitt, our Secretary and a director, as trained valuation buyers.  Their knowledge was gained from training and practicing with the assistance of experienced valuation buyers. They do not hold (nor are required to hold) any certifications to serve in such capacity.

 

Opportunity

 

Gold has been highly valued from the earliest time because of its beauty and resistance to corrosion and because it is easier to work with than all other metals. Gold is easier to obtain in pure form than all other metals. Due to its relative rarity, gold has been used as currency and as a basis for international monetary transactions. According to public statistics, over 80% of available gold has been used to produce coins and jewelry which are purchased by consumers. Over time, some of these items become unwanted or broken. We provide a way for consumers to cash in on these unwanted and broken items while recycling the gold back into the overall gold market.

 

 

As the global economic market turns downward, we believe that more individuals will be seeking a safe and easy solution to sell their unwanted gold and silver coins and jewelry containing precious metals. As the need for cash rises, so does the value of gold, silver and other precious metals.

 

Growth Strategy

 

Our expansion and growth plans for the future include establishing a regional network of independent associates in cities throughout Kentucky and surrounding states, provided we can continue to offer exceptional customer service and competitive payouts that set us apart.  As we grow, we plan on adding independent associates to book parties and events throughout these and other states, and hire an in-house accounting staff to manage our finances and in-house marketing and operations staff to manage our events.

 

With the net proceeds of our recent public offering, we intend to expand the geographic footprint of our parties and events. We also expect to deploy additional capital by being able to host parties and acquire gold and silver items more frequently.  We will increase our marketing budget to create more market awareness of our company through direct-mail pieces to charities and churches, as well as online pay-per-click advertising through Google, Bing and Yahoo.

 

Competition

 

We are in direct competition with jewelry stores and pawnshops that purchase gold and silver.  We believe that we distinguish ourselves in three ways:

 

·

Our guests sell their items in a trusted environment, for example, at friends’ homes or offices, or at their church or a charity's office,

 

·

We can offer higher payouts because we do not have a brick and mortar storefront and the high overhead and operational expenses associated with it, and

 

·

Our guests enjoy the satisfaction in knowing they are financially contributing to a friend, church or charity by selling items to us.

 

Our business is highly competitive. We are a newcomer to this industry and virtually everyone we compete with has more industry experience than we do, has more financial resources than we do, and will likely have more financial resources than we will have for the foreseeable future. Some of our primary competitors are Cash4Gold, LLC, My Gold Envelope, Money4Gold, Inc. and Lippincott, LLC.

 

Government Regulation

 

Our activities currently are subject to no particular regulation by governmental agencies other than that routinely imposed on corporate businesses. However, we are subject to the unfair trade practice rules of the Federal Trade Commission. We may also be subject to various state laws designed to protect consumers. We cannot predict the impact of future regulations on either us or on consumers.

 

Intellectual Property

 

We currently have no patents, trademarks or other registered intellectual property. We do not consider the grant of patents, trademarks or other registered intellectual property essential to the success of our business.

 

 

Employees

 

Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, was our only full-time employee as of December 28, 2012. As our company grows, we expect to hire more employees.

 

Recent Developments

 

On December 21, 2012, we completed our initial public offering of 333,350 shares of common stock at an initial offering price of $0.12 per share, or an aggregate offering price of $40,002. The public offering commenced on June 25, 2012 pursuant to a Registration Statement on Form S-1 (No. 333-179490) that the U.S. Securities and Exchange Commission declared effective on June 25, 2012. The offering was terminated upon the completion of the minimum offering described in the Registration Statement. Of the 666,667 shares of common stock registered under the Registration Statement, 333,317 shares will not be sold. No underwriters were used in the public offering.

 

After deducting offering-related expenses of $30,000, the public offering resulted in net proceeds to us of $10,002. No offering expenses were paid directly or indirectly to any of our directors, officers or their associates, persons owning 10% or more of any class of our equity securities or any other of our affiliates. We have deposited the net proceeds of the public offering in a highly-rated U.S. financial institution. We are using the net proceeds of the public offering for our marketing efforts and for working capital, and there has been no material change in our planned use of proceeds from the public offering than what is described in the registration statement.

 

ITEM 1A. RISK FACTORS

 

In addition to the other information provided in this annual report, you should carefully consider the following risk factors in evaluating our business before purchasing any of our common stock. All material risks are discussed in this section.

 

Risks Relating to Our Business and Industry

 

We have reported limited revenue and net losses, and there can be no assurance that we will ever generate significant revenue or net income.

 

We began our business on August 16, 2011, and have limited revenue and operations, and minimal assets. In May and July 2012, we sold approximately $3,400 and $600 in gold items, respectively, to a precious metal refiner and are holding approximately $3,000 in additional gold and silver items in inventory, which were purchased at our parties. Our operations are subject to all of the risks inherent in the establishment of a new business enterprise.  The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the growth of a new business, the scaling-up of operations and the competitive environment in which we are operating.  From August 16, 2011 (date of inception) to September 30, 2012, we had commission fee revenue earned during the development stage of $120 and a net loss of $(29,155).  At September 30, 2012, we had total stockholder’s equity of $1,876.  No assurance can be given that we will have net income in future periods or ever generate significant revenue. Our ability to achieve and maintain profitability and positive cash flow is dependent, among other things, upon:

 

·

development and launching of our strategy to expand to cities throughout Kentucky and surrounding states,

 

 

·

creation of market awareness through direct-mail pieces and online advertising,

 

·

ability to attract event hosts and guests who want to sell their unwanted gold and jewelry items, and

 

·

entering into profitable relationships with refiners of precious metals.

 

Based upon current plans, we expect to incur operating losses in future periods because we expect to incur fees and expenses which will exceed revenue for the foreseeable future.

 

Because of our deficit accumulated during the development stage and our net loss, our auditors have expressed substantial doubt as to our ability to continue as a going concern.

 

Because we had a deficit accumulated during the development stage at September 30, 2012, and had a net loss and net cash used in operating activities for the period from August 16, 2011 (date of inception) to September 30, 2012, our auditors have expressed substantial doubt as to our ability to continue as a going concern. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months without raising additional funds. We estimate that we will require approximately $25,000, or approximately $2,000 per month, in capital to continue as a going concern over the next 12 months. The financial statements included in this annual report do not include any adjustments that might result from the uncertainty about our ability to continue in business. If we continue to sustain losses and lack sufficient capital, we may have to cease operations and you could lose your investment.

 

A decrease in gold and silver prices will likely result in fewer potential sellers of gold and silver items, which would negatively impact our operations.

 

Gold and silver prices have historically been subject to fluctuations and are affected by numerous factors beyond our control, including international economic and political conditions, levels of supply and demand, availability and costs of metals substitutes and international exchange rates. Stronger gold and silver prices have resulted in a greater interest by Americans in selling their unwanted jewelry, scrap gold and silver, coins and other gold and silver items. There can be assurance that this interest will continue at its current level and, when gold and silver prices do decrease, we expect fewer Americans will be interested in selling their gold and silver items, resulting in a lack of supply of goods to us and more competitive conditions.  Accordingly, a decrease in gold and silver prices would negatively impact our operations and financial results.

 

If we do not attract event hosts and guests, we will not make a profit, which ultimately will result in a cessation of operations.

 

Our success depends on our ability to attract event hosts and guests who desire to sell their unwanted gold and jewelry items for cash. Our strategy to attract individuals and organizations includes direct mail and online advertising. If we are unsuccessful in attracting a sufficient number of event hosts and guests, our ability to make money and our financial condition will be harmed. We cannot guarantee that we will ever have a significant number of events. Even if we accomplish this, there is no guarantee that we will generate a profit. If we cannot generate a profit, we will have to suspend or cease operations.

 

 

In light of our limited financial resources, we may be unable to maintain agreements for the services of a precious metal refinery which could impair our ability to pursue our business.

 

We need to maintain a services agreement with a precious metal refinery in connection with our business. In light of the fact that we are a small company and have limited financial resources, we may be unable to maintain formal agreements for the services of a precious metal refinery. In the event that we are unable to maintain these services, we may be forced to seek alternative sources for such services and the costs may be higher than anticipated.

 

We directly compete with jewelry stores and pawnshops, some of which are more visible than us and most of which have substantially greater resources than we have.

 

Some jewelry stores and pawnshops benefit from occupying "brick and mortar" storefronts, being located in retail areas and utilizing print and other advertising in a given community, thus being more visible to potential sellers of gold and silver items, than we are. In addition, most of these jewelry stores and pawnshops have substantially greater financial and personnel resources than we have. These additional resources may allow these competitors to continue in the business longer than we can under adverse market conditions.  Competition in this market is highly competitive.

 

We have limited marketing and sales capability, which would not currently support growth and could cause our results of operations to be stagnant.

 

We have limited internal marketing and sales capability at this time. Currently, our own marketing and sales force would not support growth.  This limited marketing and sales capability could cause our results of operations to be stagnant for an indefinite period of time.

 

Additional capital, if needed, may not be available on acceptable terms, if at all, and any additional financing may be on terms adverse to your interests.

 

We will need additional cash to fund our operations after March 2013. Our capital needs will depend on numerous factors, including market conditions and our profitability. We cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If additional financing is not available when required or is not available on acceptable terms, we may be unable to fund expansion, successfully promote our brand name, develop or enhance our services, take advantage of business opportunities, or respond to competitive pressures or unanticipated requirements, any of which could seriously harm our business and reduce the value of your investment.

 

If we are able to raise additional funds, if and when needed, by issuing additional equity securities, you may experience significant dilution of your ownership interest and holders of these new securities may have rights senior to yours as a holder of our common stock. If we obtain additional financing by issuing debt securities, the terms of those securities could restrict or prevent us from declaring dividends and could limit our flexibility in making business decisions. In this case, the value of your investment could be reduced.

 

If Tatum L. Morita resigns or dies without our having found a replacement, our operations may be suspended or cease. If that should occur, you could lose your investment.

 

Tatum L. Morita is our President, Chief Executive Officer and Chief Financial Officer.  We are dependent upon her to coordinate the marketing of our services and for her knowledge and contacts in our business.  If Ms. Morita should resign or die, there will be no one with her knowledge to operate the company. Further, we do not have an employment agreement with Ms. Morita and we do not have key-person life insurance for our benefit should she die. If we lose the services of Ms. Morita, and until we find another person to replace her, our operations may be suspended. In that event, it is possible you could lose your entire investment.

 

 

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

 

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and Finra rules, are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.

 

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could prevent us from producing reliable financial reports or identifying fraud. In addition, current and potential stockholders could lose confidence in our financial reporting, which could have an adverse effect on our stock price.

 

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud, and a lack of effective controls could preclude us from accomplishing these critical functions. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of an issuer’s internal controls over financial reporting. Assigned to accounting issues at present is only Ms. Morita, our President, Chief Executive Officer and Chief Financial Officer, which may be deemed to be inadequate. Although we intend to augment our internal controls procedures and expand our accounting staff, there is no guarantee that this effort will be adequate.

 

During the course of our testing, we may identify deficiencies which we may not be able to remediate. In addition, if we fail to maintain the adequacy of our internal accounting controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have an adverse effect on our stock price.

 

We may have to hire additional experienced precious metal appraisers as our business expands, or our business will be stagnant.

 

We may have to hire additional experienced personnel to assist us with precious metal appraisals if and as we expand our operations. If we need additional experienced personnel and we do not hire them, our business will be stagnant.

 

 

Because Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, does not have prior experience in financial accounting and the preparation of reports under the Securities Exchange Act of 1934, we may have to hire individuals which could result in an expense we may be unable to pay.

 

Because Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, does not have prior experience in financial accounting and the preparation of reports under the Securities Exchange Act of 1934, we may have to hire additional experienced personnel to assist us with their preparation. If we need additional experienced personnel and we do not hire them, we could fail in our plan of operations and have to suspend operations or cease operations entirely and you could lose your investment.

 

Having only two officers and two directors (the same persons) limits our ability to establish effective independent corporate governance procedures and increases the control of our senior executive officer.

 

We have only two directors and two officers.  Accordingly, we cannot establish board committees comprised of independent members to oversee functions like compensation or audit issues.  In addition, a tie vote of board members is decided in favor of the chairman (who is Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer), which gives Ms. Morita significant control over all corporate issues.

 

Unless and until we have a larger board of directors that would include one or more independent members, there will be limited oversight of Ms. Morita’s decisions and activities and little ability for you to challenge or reverse those activities and decisions, even if they are not in your best interests.

 

 

Risks Related to Our Common Stock

 

Because there is no public trading market for our common stock, you may not be able to resell your stock and, as a result, your investment is illiquid.

 

There is currently no public trading market for our common stock. Therefore, there is no central place, such as a stock exchange or electronic trading system, to resell your shares. If you want to resell your shares, you will have to locate a buyer and negotiate your own sale. As a result, your investment is illiquid.

 

An active trading market may not develop in the future.

 

An active trading market may not develop or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares of common stock at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the market value and increase the volatility of your shares of common stock. An inactive market may also impair our ability to raise capital by selling shares of common stock and may impair our ability to acquire other companies or assets by using shares of our common stock as consideration.

 

Our current management can exert significant influence over us and make decisions that are not in the best interests of all stockholders.

 

Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, owns 92% of our outstanding shares of common stock. As a result, Ms. Morita will be able to assert significant influence over all matters requiring stockholder approval, including the election and removal of directors and any change in control. This concentration of ownership of our outstanding shares of common stock could have the effect of delaying or preventing a change in control, or otherwise discouraging or preventing a potential acquirer from attempting to obtain control. This, in turn, could have a negative effect on the market price of our common stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares of common stock. Moreover, the interests of the owners of this concentration of ownership may not always coincide with our interests or the interests of other stockholders and, accordingly, could cause us to enter into transactions or agreements that we would not otherwise consider.

 

 

Finra sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

 

The Financial Industry Regulatory Authority, or Finra, has adopted rules that require that in recommending an investment to a customer, a broker/dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities (commonly referred to as penny stock) to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.  Under interpretations of these rules, Finra believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.  Finra requirements will make it more difficult for broker/dealers to recommend that their customers buy our common stock when traded, which may have the effect of reducing the level of trading activity and liquidity of our common stock in the future.  Further, many brokers charge higher fees for these speculative low-priced securities transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.

 

We will incur ongoing costs and expenses for SEC reporting and compliance and we may not be able to remain in compliance, making it difficult for investors to sell their shares, if at all.

 

We are working with a market maker to apply to have our shares quoted on the OTC Bulletin Board operated by Finra.  To be eligible for quotation on the OTC Bulletin Board, issuers must remain current in their periodic report filings with the SEC. Securities that become delinquent in their required filings are removed. In order for us to remain in compliance we will require funds to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to remain in compliance, it may be difficult for you to resell any shares you may purchase, if at all.

 

Our charter contains some anti-takeover provisions that may inhibit a takeover that might benefit you.

 

The provisions in our certificate of incorporation relating to delegation to the board of directors of rights to determine the terms of preferred stock may have the effect not only of discouraging attempts by others to buy us, but also of making it more difficult or impossible for stockholders to make management changes.  The ability of our board of directors to determine the terms of preferred stock, while providing flexibility in connection with possible business purchases and other corporate purposes, could make it more difficult for a third party to secure a majority of our outstanding shares of common stock.

 

Our common stock is considered “penny stock” and may be difficult to sell.

 

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market or exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock may be below $5.00 per share and therefore may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of our stockholders to sell their shares. In addition, since we are still in the process of getting our shares of common stock quoted on the OTC Bulletin Board, our stockholders may find it difficult to obtain accurate quotations of our common stock and may find few buyers to purchase the stock or a lack of market makers to support the stock price.

 

 

We do not anticipate paying dividends in the foreseeable future; you should not buy our stock if you expect dividends.

 

We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

 

We could issue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder interests and impairing their voting rights, and provisions in our charter documents and under Delaware corporate law could discourage a takeover that stockholders may consider favorable.

 

Our certificate of incorporation authorizes the issuance of up to 5,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue a series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company. In addition, advanced notice is required prior to stockholder proposals.

 

We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.

 

We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of May 30 of any year.

 

 

Our status as an “emerging growth company” under the JOBS Act of 2012 may make it more difficult to raise capital as and when we need it.

 

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it.  Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry.  If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Included in this annual report are “forward-looking” statements, as well as historical information. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should” and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Actual results may be materially different than those described in this annual report. Important factors that could cause our actual results, performance or achievements to differ from these forward-looking statements include the factors described in the “Risk Factors” section and elsewhere in this annual report.

 

All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. Except as required by federal securities laws, we undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None

 

ITEM 2. PROPERTIES

 

We currently utilize an office in the home of Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, on a rent-free basis.

 

ITEM 3. LEGAL PROCEEDINGS

 

As of the date hereof, we are not involved in any pending or threatened legal proceedings.

 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable

 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Common Stock

 

We are authorized to issue 95,000,000 shares of common stock, par value $0.000001 per share. As of December 28, 2012, there were 4,333,350 shares of common stock issued and outstanding held by 29 stockholders of record.

 

Market Information

 

There is no established public trading market for our securities and a regular trading market may not develop or, if developed, may not be sustained. We have no agreements or understandings with any person with regard to the development of a trading market in any of our securities.

 

OTC Bulletin Board Qualification for Quotation

 

We are still in the process of getting our shares of common stock quoted on the OTC Bulletin Board. Until our common stock is fully distributed and an orderly market develops, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for our shares of common stock, developments affecting our business generally, including the impact of the factors referred to in “Risk Factors,” investor perception and general economic and market conditions. No assurance can be given that an orderly or liquid market, if any, will ever develop for our shares of common stock.

 

Dividends

 

Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the board of directors out of our surplus. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our board of directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements and other factors.

 

Preferred Stock

 

We are authorized to issue 5,000,000 shares of preferred stock, par value $0.000001 per share. As of December 28, 2012, there were no shares of preferred stock outstanding.

 

Preferred stock may be issued in series with preferences and designations as the board of directors may from time to time determine (commonly known as “blank check” preferred stock). The board may, without shareholders approval, issue preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of our common shareholders and may assist management in impeding an unfriendly takeover or attempted changes in control.

 

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have any compensation plans or arrangements under which equity securities are authorized for issuance.

 

Purchases of Equity Securities

 

No purchases of our own equity securities, either as a part of a publicly-announced plan or otherwise, were made during any month in fiscal 2012.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following description of our financial condition and results of operations in conjunction with the consolidated financial statements and accompanying notes included in this annual report beginning on page F-1.

 

This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project” and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

  

Overview

 

We organize events and parties in which guests bring their unwanted jewelry, scrap gold and silver, coins and other gold and silver items to sell to us.  Our events are centered around home and office parties hosted primarily by individuals.  We will also support organizations by holding fundraising events hosted by churches and other charitable or religious organizations.  A Gold Party Payday event host typically receives 10% of the gross proceeds received at the event.  The host will also receive a bonus equal to 5% of the gross proceeds received at the first party or event that is booked by a guest who attended the original event. To date, we have organized 16 parties, purchasing approximately $6,050 in gold and silver items. In May 2012, we sold approximately $3,400 in gold items and, in July 2012, we sold approximately $600 in gold items to a metal refiner and we are currently holding approximately $2,500 in additional gold and silver items in inventory. We expect to hold one to two parties per month on average in 2012, and are currently scheduling appointments. Two to 15 people have attended each of our parties and we expect that number of guests to be consistent at future events.

 

Event guests have their items tested, measured, weighed and appraised at the party and they receive an offer on the spot, based on the quality and quantity of the precious metals contained in the items and prevailing gold and silver prices.  Event guests who accept the offer and sell their items to us receive a corporate check at that time. We keep purchased items separated for at least three days in case a seller changes his or her mind and wants a refund minus a 10% processing fee.

 

 

We pay an event guest based on the estimated appraised value of the items purchased, less a deduction determined by reference to the competitive discounts charged by jewelry stores and pawnshops in the central Kentucky area, as well as mail-in gold services. Following the event, we deliver the purchased items to a refinery to melt down the items into a solid form to produce pure gold, silver and other precious metals. This solid form is then tested for purity and payment from the refinery to us will be based on the true value of the metal. We estimate that we will be paid approximately 90% to 95% of the daily gold spot value, given the volume of gold and silver items we have, based on our two sales of gold items in 2012. We expect this payout ratio to remain consistent throughout 2013. We are paid by the refinery approximately three business days following melting and testing. Our gross profit would represent the difference between the sales proceeds received from the refinery and the cost of scrap gold and silver and bullion coins purchased from guests, less any other costs classified as cost of goods sold.

 

Revenue Recognition

 

We seek to derive revenues in two different ways.

 

First, we estimate our inventory using a scrap gold/silver calculator after the gold and silver items purchased from individuals at parties are measured, tested and weighed.  We will use publicly available sources to obtain daily spot prices to input into these calculations. 

 

We will then ship the inventory to the refineries and will keep such inventory as an asset until it has been received, weighed and had its purity tested by the refinery. The refinery agrees to pay us at a certain percentage of the spot price of gold and silver being used the day that the refinery melts and tests the metal and we recognize the revenue when the collectability is reasonably assured.  We assess the collectability based on a number of factors, including the refinery's creditworthiness.  We do not request collateral from the refinery. If we determine that collection of accounts receivable resulting from the sales of the gold and silver is not reasonably assured, we will defer the revenue recognition and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

 

Our gross profit bears the risk of change, either upwards or downwards because the spot price of gold and silver is used the day that the refinery melts and tests the metal, not the date that it was purchased and recorded as inventory.

 

Some refineries offer a “lock-in” price over the telephone.  During periods of volatility in the spot prices of gold and silver, the lock-in method may be preferred as compared with waiting five to ten business days for gold and silver to be delivered to the refinery and melted, weighed and tested to determine the value.

 

The second way is when gold and silver prices are low, we buy gold and silver bullion/coins for several clients.  We follow Section 605-45-45 (formerly EITF 99-19) (“ASC Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition for this revenue stream by reporting revenue on a net basis, since we (a) do not act as principal in the transaction, (b) take no title to the products, (c) have no risks and rewards of ownership, such as the risk of loss for collection, delivery or returns, and (d) do act as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on sales.  We determined that we should report revenue based on the net amount billed to a customer when considering each of the following eight indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14 as specified (1) we are not the primary obligor in the arrangement; (2) we have no general inventory risk (before customer order is placed or upon customer return); (3) we have no latitude in establishing price; (4) we do not change the product or perform part of the service; (5) we have discretion in supplier selection (i.e., we have multiple suppliers for the products ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer); (6) we are not involved in the determination of product or service specifications (i.e., we do not determine the nature, type, characteristics or specifications of the product(s) or service(s) ordered by the customer); (7) we have no physical loss inventory risk of purchased inventories after customer order; and (8) we have no credit risk.

 

 

Revenue to date is classified as commission fee revenue because it consists of the sale of gold bullion coins which were purchased by us on behalf of clients.

 

The cost of goods sold, which is only for the first revenue stream described above, consists of scrap gold and silver and bullion coins purchased, plus the shipping costs to deliver them to the precious metal refineries.

 

Limited Operating History

 

We are considered a development stage company in accordance with the guidance contained in the Codification Topic No. 915, “Development Stage Entities.”  We are still devoting substantially all of our efforts toward establishing our business, and our planned principal operations have commenced in a limited capacity.  All losses accumulated since inception have been considered as part of our development stage activities.

 

We have commenced limited operations and will require additional capital to recruit personnel to operate our business and to implement our business plan. In the next 12 months, if we are unable satisfy our cash requirements, our sole stockholder has indicated that she is willing to loan funds to us to cover any shortfalls, as described below.

 

Matters that May or Are Currently Affecting Our Business

 

The main challenges and trends that could affect or are affecting our financial results include:

 

·

Decrease in gold and silver prices - Gold and silver prices have historically been subject to fluctuations and are affected by numerous factors beyond our control.  Stronger gold and silver prices have resulted in a greater interest by Americans in selling their unwanted jewelry, scrap gold and silver, coins and other gold and silver items.  There can be no assurance that this interest will continue at its current level and, when gold and silver prices do decrease, we expect fewer Americans will be interested in selling their gold and silver items, resulting in a lack of supply of goods to us and more competitive conditions, which will negatively impact our financial results.

 

	·	Direct competition with jewelry stores and pawnshops - Some jewelry stores and pawnshops benefit from occupying “brick and mortar” storefronts, being located in retail areas and utilizing print and other advertising in a given community, thus being more visible to potential sellers of gold and silver items, than we are. In addition, most of these jewelry stores and pawnshops have greater financial resources than we do. These additional resources may allow these competitors to continue in the business longer than we can under adverse market conditions.
	·	Availability of additional capital - Our growth will depend on the availability of additional capital.  We have limited commission fee revenue and losses and we may be dependent on non-banking or traditional sources of capital, which tend to be more expensive.  Any increase in cost of goods sold will further tighten cash reserves.

 

 

Results of Operations

 

In May 2012, we sold approximately $3,400 in gold items and, in July 2012, we sold approximately $600 in gold items to a metal refiner. Costs associated with these sales were approximately $3,600. For the period from August 16, 2011 (date of inception) to September 30, 2012, we had $120 in commission fee revenue. The commission revenues were generated from the purchase of gold bullion coins for clients, which are not our normal revenue generating activity of organizing events and parties in which guests bring their unwanted jewelry, scrap gold and silver, coins and other gold and silver items to sell to us. The above revenues less the direct costs of goods sold yielded a gross profit of $500. Operating expenses for the period totaled $29,688, resulting in a net loss of $(29,155). Expenses for the period consisted of $29,247 in professional fees and $441 for general and administrative expenses. No income tax provision has been made for the period from August 16, 2011 (date of inception) to September 30, 2012.

 

Liquidity and Capital Resources

 

As of September 30, 2012, we had $163 cash on hand. We anticipate that our cash position is not sufficient to fund current operations.  We have no lending relationships with commercial banks and are dependent upon the completion of one or more financings or equity raises to fund our continuing operations.  We anticipate that we will seek additional capital through debt or equity financings.  While we are aggressively pursuing financing, there can be no assurance that we will be successful in our capital raising efforts.  Any additional equity financing may result in substantial dilution to our stockholders.

 

Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business for the foreseeable future. Since inception, we have generated minimal commission fee revenue and accumulated operating losses.  In addition, we do not have sufficient working capital to meet current operating needs for the next 12 months, as described above.  All of these factors raise substantial doubt about our ability to continue as a going concern.

 

Our officers and directors have not, as of the date of this annual report, loaned any funds to us.  Except as indicated below, there are no formal commitments or arrangements to advance or loan funds to us in the future.

 

Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, has agreed to loan us up to $50,000 in order to fund our working capital expenditure requirements through June 2013, as and when such funding is necessary and required. Any such loan will be evidenced by a non interest-bearing, unsecured promissory note payable if and when we have the financial resources to do so, as determined by our board at that time.

 

Seasonality

 

Although our operating history is limited, we do not consider our business to be seasonal.

 

 

Off Balance Sheet Arrangements 

 

We do not have any 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, revenue or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

 

Cash Requirements

 

We believe that our $163 in cash on hand at September 30, 2012 and limited cash flow from operations to date from our sale of approximately $4,000 in gold items to a precious metal refiner in May and July 2012 will meet part of our present cash needs. However, we will require additional cash resources, by selling equity or seeking loans, to meet our expected capital expenditure and working capital needs. We estimate that we will require approximately $25,000, or approximately $2,000 per month, in capital to continue as a going concern over the next 12 months. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand or continue our business operations and could harm our overall business prospects.

 

These conditions indicate a material uncertainty that casts significant doubt about our ability to continue as a going concern.   We require additional debt or equity financing to have the necessary funding to continue operations and meet our obligations. We have continued to adopt the going concern basis of accounting in preparing our financial statements. 

 

Impact of Recently Issued Accounting Standards

 

In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

 

The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.

 

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.

 

The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

 

 

In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02 “Intangibles—Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”).

 

This Update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. This guidance builds upon the guidance in ASU 2011-08, entitled Testing Goodwill for Impairment. ASU 2011-08 was issued on September 15, 2011, and feedback from stakeholders during the exposure period related to the goodwill impairment testing guidance was that the guidance also would be helpful in impairment testing for intangible assets other than goodwill.

 

The revised standard allows an entity the option to first assess qualitatively whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired.

 

This Update is effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012. Earlier implementation is permitted.

 

We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on our consolidated financial statements.

 

Emerging Growth Company

 

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The audited financial statements for this annual report follow the signature page beginning on page F-1.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None

 

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

 

This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None

 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Officers and Board of Directors

 

The names and ages of our directors and officers, and their positions, are as follows:

 

Name		Age		Positions
Tatum L. Morita		32		President, Chief Executive Officer, Chief Financial Officer and Director
Richard J. Hitt		28		Secretary and Director

 

The principal occupations for the past five years (and, in some instances, for prior years) of each of our directors and officers are as follows:

 

Tatum L. Morita, President, Chief Executive Officer, Chief Financial Officer and a Director, founded our company in August 2011. Ms. Morita has been involved in the residential real estate market as a realtor and investor for ten years. Currently, she is a realtor at Atkins Real Estate since January 2011, and was a realtor at Believe It Realty from June 2009 to January 2011, and at Rector-Hayden Realty from November 2003 to June 2009. Ms. Morita’s family has extensive experience in the precious metals business through multiple private mining companies, in which Ms. Morita has assisted from time to time in the past. Ms. Morita holds a B.A. degree in communications from the University of Kentucky.

 

Richard J. Hitt, Secretary and a Director, joined our company in September 2011. Mr. Hitt is currently the director of business development of Legacy Financial, a financial software developer, since March 2011. Previously, Mr. Hitt was director of expansion of Phi Gamma Delta, a non-profit organization, from May 2007 to March 2011. He is also an independent investor in the precious metals market. Mr. Hitt holds a B.A. degree in economics and Spanish from Wittenberg University, Springfield, Ohio. Mr. Hitt spends approximately four hours per month working with us.

 

All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Officers are elected annually by the board of directors and serve at the discretion of the board.

 

Board Committees

 

Our board of directors expects to create an audit committee, compensation committee, and nominations and governance committee during 2013, in compliance with established corporate governance requirements. Currently, we have no “independent” directors, as that term is defined under Nasdaq listing rules.

 

 

Audit Committee. We plan to establish an audit committee of the board of directors. The audit committee would be primarily responsible for reviewing the services performed by our independent registered public accounting firm and evaluating our accounting policies and our system of internal controls.

 

Compensation Committee. We plan to establish a compensation committee of the board of directors. The compensation committee would review and approve our salary and benefits policies, including compensation of executive officers. The compensation committee would also administer any future incentive compensation plans, and recommend and approve grants of stock options, restricted stock and other awards under any such plan.

 

Nominations and Governance Committee. We plan to establish a nominations and governance committee of the board of directors. The purpose of the nominations and governance committee would be to select, or recommend for our entire board’s selection, the individuals to stand for election as directors at the annual meeting of stockholders and to oversee the selection and composition of committees of our board. The nominations and governance committee’s duties would also include considering the adequacy of our corporate governance and overseeing and approving management continuity planning processes.

 

To date, our full board, rather than any of the committees, has performed all of these functions.

 

Indebtedness of Directors and Executive Officers

 

None of our directors or officers or their respective associates or affiliates is indebted to us.

 

Family Relationships

 

Our directors and officers do not have any family relationship between each other.

 

Legal Proceedings

 

As of December 28, 2012, there was no material proceeding to which any of our directors, officers, affiliates or stockholders is a party adverse to us.

 

Employment Agreements

 

We do not currently have an employment agreement with Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, or with Richard J. Hitt, our Secretary, and do not intend to do so until such time as we deem it prudent. Ms. Morita and Mr. Hitt do not currently receive a salary for their services, and we do not yet recognize compensation expense in our financial statements.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

We do not have securities registered under Section 12 of the Exchange Act and, accordingly, our directors, officers and affiliates are not required to file reports under Section 16(a) of the Exchange Act.

 

Code of Ethics

 

Our board of directors has adopted a code of ethics, which applies to all our directors, officers and employees. Our code of ethics is intended to comply with the requirements of Item 406 of Regulation S-K.

 

 

Our code of ethics is posted on our Internet website at www.goldpartypayday.net. We will provide our code of ethics in print without charge to any stockholder who makes a written request to Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, at Gold Party Payday, Inc., 3189 Pepperhill Road, Lexington, Kentucky 40502. Any waivers of the application, and any amendments to, our code of ethics must be made by our board of directors. Any waivers of, and any amendments to, our code of ethics will be disclosed promptly on our Internet website, www.goldpartypayday.net.

 

ITEM 11. EXECUTIVE COMPENSATION

 

We began our business in August 2011. No salaries have been paid by us at any time through December 28, 2012. We have not entered into any employment agreements with our officers.

 

The following table sets forth, since inception, all cash compensation paid, distributed or accrued, including salary and bonus amounts, for services rendered to us by our Chief Executive Officer and other executive officers in such period who received or are entitled to receive remuneration in excess of $100,000 during the stated period and any individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer at September 30, 2012:

 

Summary Compensation Table

Name and Principal Position		Fiscal Year				Salary $				Bonus $				Stock Awards $				Option Awards $ (1)				Non-Equity Incentive Plan Compensation $				Nonqualified Deferred Compensation Earnings $				All Other Compensation $				Totals $
Tatum L. Morita			2012				0				0				0				0				0				0				0				0
President, Chief Executive Officer and Chief Financial Officer			2011				0				0				0				0				0				0				0				0
Richard J. Hitt, Secretary			2012				0				0				0				0				0				0				0				0
			2011				0				0				0				0				0				0				0				0

 

(1)

The determination of value of option awards is based upon the Black-Scholes Option pricing model, details and assumptions of which are set out in our financial. The amounts represent annual amortization of fair value of stock options granted to the named executive officer.

 

The aggregate amount of benefits in each of the years indicated did not exceed the lesser of $50,000 or 10% of the compensation of any named officer.

 

Outstanding Equity Awards at Fiscal Year-End

 

As of September 30, 2012, there were no equity awards outstanding to any of our current or previous executive officers.

 

Director Compensation

 

Tatum L. Morita and Richard J. Hitt do not currently receive any compensation for serving on our board of directors.

 

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth information regarding the number of shares of our common stock beneficially owned on December 28, 2012, by:

 

·

each person who is known by us to beneficially own 5% or more of our common stock,

 

·

each of our directors and officers, and

 

·

all of our directors and officers as a group.

 

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days after the date indicated in the table are deemed beneficially owned by the optionees. Subject to any applicable community property laws, the persons or entities named in the table above have sole voting and investment power with respect to all shares indicated as beneficially owned by them.

Name (1)		Number of Shares Beneficially Owned (2)				Percentage of Shares Beneficially Owned
Officers and Directors:
Tatum L. Morita			4,000,000				92.3	%
Richard J. Hitt			0				–
All officers and directors as a group (2 persons)			4,000,000				92.3	%

 

* Less than 1% of outstanding shares of common stock.

 

	(1)	The address of each person is c/o Gold Party Payday, Inc., 3189 Pepperhill Road, Lexington, Kentucky 40502.
	(2)	Unless otherwise indicated, includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person. Also includes shares if the named person has the right to acquire those shares within 60 days after December 28, 2012, by the exercise or conversion of any warrant, stock option or convertible preferred stock. Unless otherwise noted, shares are owned of record and beneficially by the named person.

 

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.

 

We do not have a compensation plan under which equity securities are authorized for issuance.

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Pursuant to a Contribution Agreement, dated as of September 20, 2011, Tatum L. Morita, our President, Chief Executive Officer and Chief Financial Officer, contributed to the capital of our company 100% of the outstanding membership interests of Gold Party Payday LLC, a California limited liability company, in exchange for 4,000,000 shares of our common stock, constituting all of our outstanding shares of common stock. No value was given to the common stock issued by us. The shares were recorded to reflect the $0.000001 par value and paid-in capital was recorded as a negative amount of $(4.00). Ms. Morita is considered a promoter of our company.

 

Tatum L. Morita has agreed to loan us up to $50,000 in order to fund our working capital expenditure requirements through June 2013, as and when such funding is necessary and required. Any such loan will be evidenced by a non interest-bearing, unsecured promissory note payable if and when we have the financial resources to do so, as determined by our board at that time.

 

Director Independence

 

Our board of directors has determined that neither of the members of our board of directors qualifies as an “independent” director under Nasdaq’s definition of independence.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees

 

For fiscal year end September 30, 2012:		$	5,700
For fiscal year end September 30, 2011:		$	0

 

We did not pay any other fees as specified in Item 9(e) of Schedule 14A.

 

We do not have audit committee pre-approval policies and procedures.

 

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

The following exhibits are filed as part of this Form 10-K and this list includes the Exhibit Index.

 

No.		Description
3.1*		Certificate of Incorporation of Gold Party Payday, Inc., filed September 19, 2011 with the Secretary of State of the State of Delaware.
3.2*		By-laws of Gold Party Payday, Inc.
10.1*		Subscription Agreement.
10.2*		Contribution Agreement.
10.3*		Agreement between Gold Party Payday, Inc. and Tatum L. Morita.
10.4*		Escrow Agreement between Gold Party Payday, Inc. and Glenn Hoskins P.S.C.
14.1*		Code of Business Conduct and Ethics.
14.2*		Code of Ethics for the CEO and Senior Financial Officers.
21.1*		Subsidiaries of Gold Party Payday, Inc.
31.1		Certification as Adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

*

Incorporated by reference to the exhibits included with Registration Statement on Form S-1 (No. 333-179490), declared effective by the U.S. Securities and Exchange Commission on June 25, 2012.

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	GOLD PARTY PAYDAY, INC.
Date: December 28, 2012	By:	/s/ Tatum L. Morita
		Tatum L. Morita
		President, Chief Executive Officer and Chief Financial Officer
		(principal executive officer and principal
		financial and accounting officer)

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Date: December 28, 2012	/s/ Tatum L. Morita
	Tatum L. Morita
	President, Chief Executive Officer, Chief Financial Officer and Director
	(principal executive officer and principal
	financial and accounting officer)

 

Date: December 28, 2012	/s/ Richard J. Hitt
	Richard J. Hitt
	Secretary and Director

  

  

Gold Party Payday, Inc.

 

(A Development Stage Company)

 

September 30, 2012 and 2011

 

Index to the Consolidated Financial Statements

 

Contents		Page(s)
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets at September 30, 2012 and 2011		F-3
Consolidated Statements of Operations for the Fiscal Year Ended September 30, 2012, for the Period from August 16, 2011 (Inception) through September 30, 2011, and for the Period from August 16, 2011 (Inception) through September 30, 2012		F-4
Consolidated Statement of Member’s and Stockholder’s Equity for the Period from August 16, 2011 (Inception) through September 30, 2012		F-5
Consolidated Statement of Cash Flows for the Fiscal Year Ended September 30, 2012, for the Period from August 16, 2011 (Inception) through September 30, 2011, and for the Period from August 16, 2011 (Inception) through September 30, 2012		F-6
Notes to the Consolidated Financial Statements		F-7

  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholder of

Gold Party Payday, Inc.

(A development stage company)

Lexington, Kentucky

 

We have audited the accompanying consolidated balance sheets of Gold Party Payday, Inc., a development stage company, (the “Company”) as of September 30, 2012 and 2011, and the related consolidated statements of operations, member’s and stockholder’s equity and cash flows for the fiscal year ended September 30, 2012, for the period from August 16, 2011 (inception) through September 30, 2011, and for the period from August 16, 2011 (inception) through September 30, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2012 and 2011, and the related consolidated statements of operations, member’s and stockholder’s equity and cash flows for the fiscal year ended September 30, 2012, for the period from August 16, 2011 (inception) through September 30, 2011 and for the period from August 16, 2011 (inception) through September 30, 2012 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company had a deficit accumulated during the development stage at September 30, 2012 and had a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/Li and Company, PC
Li and Company, PC

 

Skillman, New Jersey

December 31, 2012

 

 

Gold Party Payday, Inc.

( A Development Stage Company)

Consolidated Balance Sheets

 

		September 30, 2012				September 30, 2011
ASSETS
CURRENT ASSETS:
Cash		$	163			$	2,006
Prepaid expenses			-				325
Inventory			1,713				-
Total Current Assets			1,876				2,331
Total Assets		$	1,876			$	2,331
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accrued expenses		$	-			$	-
Total Current Liabilities			-				-
STOCKHOLDER'S EQUITY:
Preferred stock: $0.000001 par value; 5,000,000 shares authorized; none issued or outstanding			-				-
Common stock: $0.000001 par value; 95,000,000 shares authorized; 4,000,000 shares issued and outstanding			4				4
Additional paid-in capital			31,014				2,733
Deficit accumulated during the development stage			(29,142	)			(406	)
Total Stockholder's Equity			1,876				2,331
Total Liabilities and Stockholder's Equity		$	1,876			$	2,331

 

See accompanying notes to the consolidated financial statements.

  

 

Gold Party Payday, Inc.

( A Development Stage Company)

Consolidated Statements of Operations

 

						For the Period from				For the Period from
		For the Fiscal Year				August 16, 2011				August 16, 2011
		Ended				(inception) through				(inception) through
		September 30, 2012				September 30, 2011				September 30, 2012
Revenue:
Commission earned during the development stage		$	77			$	43			$	120
Revenue earned during the development stage			4,021				-				4,021
Total revenue earned during the development stage			4,098				43				4,141
Cost of revenue			3,608				-				3,608
Gross profit			490				43				533
Operating expenses:
Professional fees			28,822				425				29,247
General and administrative expenses			404				37				441
Total operating expenses			29,226				462				29,688
Loss before income tax provision			(28,736	)			(419	)			(29,155	)
Income tax provision			-				-				-
Net loss		$	(28,736	)		$	(419	)		$	(29,155	)
Pro forma financial information (unaudited):
Loss before income taxes							(419	)
Income taxes provision							-
Net loss						$	(419	)
Net loss per common share:
- Basic and diluted						$	(0.00	)
Weighted average common shares outstanding:
- Basic and diluted							4,000,000

 

See accompanying notes to the consolidated financial statements.

 

 

Gold Party Payday, Inc.

( A Development Stage Company)

Consolidated Statement of Member's and Stockholder's Equity

For the Period from August 16, 2011 (Inception) through September 30, 2012

 

																		Earnings (Deficit)
						Common Stock, $0.000001 Par Value								Additional				Accumulated				Total Member's and
						Number of								Paid-in				during the				Stockholder's
		Member Interest				Shares				Amount				Capital				Development Stage				Equity
August 16, 2011 (Inception)		$	-				-			$	-			$	-			$	-			$	-
Member capital contribution for the period from August 16, 2011 (inception) through September 18, 2011			2,750																				2,750
Net income for the period from August 16, 2011 (inception) through September 18, 2011																			(13	)			(13	)
Shares issued to  LLC member for LLC membership interest upon formation the Company			-				4,000,000				4				(4	)							-
Reclassification of LLC member capital as additional paid-in capital			(2,750	)											2,750								-
Reclassification of LLC undistributed earnings at September 18, 2011 as additional paid-in capital															(13	)			13				-
Net loss for the period from September 18, 2011 through September 30, 2011																			(406	)			(406	)
Balance, September 30, 2011			-				4,000,000				4				2,733				(406	)			2,331
Capital contributions															28,281				-				28,281
Net loss																			(28,736	)			(28,736	)
Balance, September 30, 2012		$	-				4,000,000			$	4			$	31,014			$	(29,142	)		$	1,876

 

See accompanying notes to the consolidated financial statements.

 

 

Gold Party Payday, Inc.

( A Development Stage Company)

Consolidated Statements of Cash Flows

 

						For the Period from				For the Period from
		For the Fiscal Year				August 16, 2011				August 16, 2011
		Ended				(inception) through				(inception) through
		September 30, 2012				September 30, 2011				September 30, 2012
Cash flows from operating activities:
Net loss		$	(28,736	)		$	(419	)		$	(29,155	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Prepaid expenses			325				(325	)			-
Inventory			(1,713	)			-				(1,713	)
Net cash used in operating activities			(30,124	)			(744	)			(30,868	)
Cash flows from financing activities:
Capital contributions			28,281				2,750				31,031
Net cash provided by financing activities			28,281				2,750				31,031
Net change in cash			(1,843	)			2,006				163
Cash at beginning of period			2,006				-				-
Cash at end of period		$	163			$	2,006			$	163
Supplemental disclosure of cash flows information:
Interest paid		$	-			$	-			$	-
Income tax paid		$	-			$	-			$	-

 

See accompanying notes to the consolidated financial statements.

  

 

Gold Party Payday, Inc.

 (A Development Stage Company)

September 30, 2012 and 2011

Notes to the Consolidated Financial Statements

 

Note 1 - Organization and Operations

 

Gold Party Payday, LLC

 

Gold Party Payday, LLC, a development stage company, (“LLC” or “Predecessor”) was organized as a Limited Liability Company on August 16, 2011 under the laws of the State of California. The LLC organizes events and parties in which guests bring their unwanted jewelry, scrap gold and silver, and other gold and silver items to sell to the LLC.  The LLC’s events are centered on home parties hosted primarily by individuals.  The LLC also supports organizations by holding fundraising events hosted by churches and other charitable or religious organizations (the “Event Host(s)”).  A “Gold Party Payday” event host typically receives 10% of the gross proceeds received at the event.  The Event Host also receives a bonus equal to 5% of the gross proceeds received at any parties or events that are booked by guests who attended the original event.

 

Gold Party Payday, Inc.

 

Gold Party Payday, Inc. (the “Company”) was incorporated on September 19, 2011 under the laws of the State of Delaware for the sole purpose of acquiring all of the outstanding membership units of Gold Party Payday, LLC. Upon formation, the Company issued an aggregate of 4,000,000 shares of the newly formed corporation’s common stock to the member of the LLC for all of the outstanding membership units of Gold Party Payday, LLC. No value was given to the stock issued by the newly formed corporation.  Therefore, the shares were recorded to reflect the $.000001 par value and paid in capital was recorded as a negative amount of ($4).   The acquisition process utilizes the capital structure of the Company and the assets and liabilities of Gold Party Payday, LLC, which are recorded at historical cost.

 

The Company applied paragraph 505-10-S99-3 of the FASB Accounting Standards Codification (formerly Topic 4B of the Staff Accounting Bulletins (“SAB”) (“SAB Topic 4B”) issued by the U.S. Securities and Exchange Commission (the “SEC”), by reclassifying the LLC member’s capital account inclusive of capital contributions of $2,750 and the LLC’s undistributed earnings and losses of ($13) as of September 18, 2011 to additional paid-in capital.

 

The accompanying consolidated financial statements have been prepared as if the Company had its corporate capital structure as of the first date of the first period presented.

 

Note 2 - Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Principles of Consolidation

 

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification ("ASC") to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, in which the parent’s power to control exists.

 

 

The consolidated financial statements include all accounts of the entities as of the reporting period ending date(s) and for the reporting period(s) as follows:

 

Entity		Reporting period ending date(s) and reporting period(s)
Gold Party Payday, LLC		As of September 30, 2012 and September 30, 2011, for the Fiscal Year Ended September 30, 2012, and for the Period from August 16, 2011 (Inception) through September 30, 2011 and 2012
Gold Party Payday, Inc.		As of September 30, 2012 and September 30, 2011, for the Fiscal Year Ended September 30, 2012, and for the period from September 19, 2011 (inception) through September 30, 2011 and 2012

 

All inter-company balances and transactions have been eliminated.

 

Development Stage Company

 

The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company recognized nominal amount of revenues, it is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting period.

 

The Company’s significant estimates and assumptions include the fair value of financial instruments; inventory valuation and obsolescence; revenue recognized or recognizable; sales returns and allowances; income tax rate, income tax provision and valuation allowance of deferred tax assets; and the assumption that the Company will be a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly.

 

Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

 

Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accounts payable, approximate their fair values because of the short maturity of these instruments.

 

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

It is not however, practical to determine the fair value of advances from stockholder, if any, due to their related party nature.

 

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

 

The Company’s non-financial assets include inventory. The Company identifies potentially excess and slow-moving inventory by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts.

 

Fiscal Year-End

 

The Company elected September 30 as its fiscal year-end date.

 

Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

 

Inventory and Cost of Goods Sold

 

Inventory Valuation

 

The Company values inventory, consisting of finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value.  Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, and (iii) competitive pricing pressures.

 

Inventory Obsolescence and Markdowns

 

The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventory to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

 

 

There was no inventory obsolescence at September 30, 2012 or 2011.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Commitment and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

Revenue Recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

 

The Company derives its revenues from two different ways: (1) from sales with refineries, of gold purchased from individuals at parties, with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive and (2) when gold and silver prices are low, buying gold and silver bullion/coins for clients. The Company follows Section 605-45-45 (formerly EITF 99-19) (“ASC Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition for this revenue stream by reporting revenue net since the Company (1) does not acts as principal in the transaction, (2) takes no title to the products, (3) has no risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does act as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on its sales. The management of the Company determined that the Company should report revenue based on the net amount billed to a customer when considering each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14 as specified (1) The entity is not the primary obligor in the arrangement; (2) The entity has no general inventory risk (before customer order is placed or upon customer return); (3) The entity has no latitude in establishing price; (4) The entity does not change the product or performs part of the service; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer; (6) The entity is not involved in the determination of product or service specifications — The Company does not determine the nature, type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has no physical loss inventory risk of purchased inventories after customer order; and (8) The entity has no credit risk.

 

Income Tax Provision

 

The Company was a single member LLC, until September 19, 2011 during which time the Company was treated as a disregarded entity for income tax purposes.  The operating results prior to September 19, 2011 of LLC were included in the income tax return of the Company’s founder.

 

Effective September 19, 2011, the Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Uncertain Tax Positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the fiscal year ended September 30, 2012 or for the period from August 16, 2011 (inception) through September 2011.

 

 

Pro Forma Income Tax Information (Unaudited)

 

Prior to September 19, 2011, the date of recapitalization, the Company was an LLC.  The operating results of the LLC prior to September 19, 2011 were included in the income tax returns of the member of LLC for income tax purposes. The unaudited pro forma income tax amounts, income tax provision, deferred tax assets, and the valuation allowance of deferred tax assets included in the accompanying consolidated statements of operations and the income tax provision note reflect the provision for income taxes which would have been recorded as if the LLC had been incorporated as a C Corporation as of the beginning of the first date presented.

 

Net Income (Loss) per Common Share

 

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants.

 

There were no potentially dilutive common shares outstanding for the fiscal year ended September 30, 2012 or for the period from August 16, 2011 (inception) through September 2011.

 

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

Recently Issued Accounting Pronouncements

 

FASB Accounting Standards Update No. 2011-08

 

In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

 

The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.

 

FASB Accounting Standards Update No. 2011-11

 

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.

 

 

The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

 

FASB Accounting Standards Update No. 2012-02

 

In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02 “Intangibles—Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”).

 

This Update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. This guidance builds upon the guidance in ASU 2011-08, entitled Testing Goodwill for Impairment. ASU 2011-08 was issued on September 15, 2011, and feedback from stakeholders during the exposure period related to the goodwill impairment testing guidance was that the guidance also would be helpful in impairment testing for intangible assets other than goodwill. 

 

The revised standard allows an entity the option to first assess qualitatively whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired.

 

This Update is effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012.  Earlier implementation is permitted.

 

Other Recently Issued, but not yet Effective Accounting Pronouncements

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

 

Note 3 – Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the accompanying consolidated financial statements, the Company had a deficit accumulated during the development stage at September 30, 2012, a net loss and net cash used in operating activities for the fiscal year then ended, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

While the Company is attempting to commence operations and generate sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

 

The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 – Stockholder’s Equity

 

Shares Authorized

 

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is One Hundred Million (100,000,000) shares of which Five Million (5,000,000) shares shall be Preferred Stock, par value $0.000001 per share, and Ninety Five Million (95,000,000) shares shall be Common Stock, par value $0.000001 per share.

 

 

Common Stock

 

On September 19, 2011, upon formation, the Company issued an aggregate of 4,000,000 shares of the newly formed corporation’s common stock to the member of the LLC for all of the outstanding membership units of Gold Party Payday, LLC. No value was given to the stock issued by the newly formed corporation.  Therefore, the shares were recorded to reflect the $.000001 par value and paid in capital was recorded as a negative amount of ($4).

 

Capital Contribution

 

On September 19, 2011, as part of the recapitalization, the Company applied paragraph 505-10-S99-3 of the FASB Accounting Standards Codification (formerly Topic 4B of the Staff Accounting Bulletins (“SAB”) (“SAB Topic 4B”) issued by the U.S. Securities and Exchange Commission (the “SEC”), by reclassifying the LLC member’s capital account inclusive of capital contributions of $2,750 and LLC’s undistributed earnings and losses of ($13) as of September 18, 2011 to additional paid-in capital.

 

$28,281 of operating expenses were paid on behalf of the Company by its stockholder and recorded as a capital contribution during the fiscal year ended September 30, 2012.

 

Note 5 – Related Party Transactions

 

Free Office Space

 

The Company has been provided office space by its Chief Executive Officer at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statement.

 

Note 6 – Income Tax Provision

 

Deferred Tax Assets

 

At September 30, 2012, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $29,142 that may be offset against future taxable income through 2032. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets of approximately $9,908 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a valuation allowance of $9,908.

 

Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realization. The valuation allowance increased approximately $9,770 and $138 for the fiscal year ended September 30, 2012 and for the period from September 19, 2011 (date of recapitalization) through September 30, 2011, respectively.

 

Components of deferred tax assets are as follows:

 

		September 30, 2012				September 30, 2011
Net deferred tax assets – Non-current:
Expected income tax benefit from NOL carry-forwards		$	9,908				138
Less: Valuation allowance			(9,908	)			(138	)
Deferred tax assets, net of valuation allowance		$	-			$	-

 

 

Income Tax Provision in the Consolidated Statements of Operations

 

A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:

 

		For the Fiscal Year Ended September 30, 2012				For the Period from September 19, 2011 (Re- capitalization) through September 30, 2011
Federal statutory income tax rate			34.0	%			34.0	%
Change in valuation allowance on net operating loss carry-forwards			(34.0	)			(34.0	)
Effective income tax rate			0.0	%			0.0	%

 

Pro Forma Income Tax Information (Unaudited)

 

The unaudited pro forma income tax amounts, deferred tax assets and income tax rate included in the accompanying consolidated statements of operations and related income tax reflect the provision for income taxes which would have been recorded if the Company had been incorporated as a C Corporation as of the beginning of the first date presented.

 

Pro Forma Deferred Tax Assets

 

If the Company had been incorporated as a C Corporation as of the beginning of the first date presented, at September 30, 2011, the Company would have had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $419 that may be offset against future taxable income through 2031. No tax benefit would have been reported with respect to these net operating loss carry-forwards in the accompanying consolidated financial statements because the Company believes that the realization of the Company’s net deferred tax assets of approximately $142 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the full valuation allowance.

 

Deferred tax assets would consist primarily of the tax effect of NOL carry-forwards. The Company would have provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realization.  The valuation allowance would have increased approximately $142 for the period from August 16, 2011 (inception) through September 30, 2011.

 

Components of deferred tax assets are as follows:

 

		September 30, 2011
Net deferred tax assets – Non-current:
Expected income tax benefit from NOL carry-forwards			142
Less: Valuation allowance			(142	)
Deferred tax assets, net of valuation allowance		$	-

 

Pro Forma Income Tax Provision in the Consolidated Statements of Operations

 

A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes would have been as follows:

 

		For the Period from August 16, 2011 (inception) through September 30, 2011
Federal statutory income tax rate			34.0	%
Change in valuation allowance on net operating loss carry-forwards			(34.0	)
Effective income tax rate			0.0	%

 

 

Note 7 – Subsequent Events

 

The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were certain reportable subsequent events to be disclosed.

 

Private Placement

 

In December 2012, the Company sold 333,350 shares of its common stock in a private placement at $0.12 per share to twenty eight (28) Canadians, or $40,002 in aggregate.