Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.Financial_Report.xls
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R9.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R6.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R2.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R25.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R30.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R29.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R22.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R24.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R28.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R33.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R32.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R31.htm
EX-31.2 - CERTIFICATION - Trans-Pacific Aerospace Company, Inc.transpacific_10k-ex3102.htm
EX-10.16 - AMENDMENT TO SERIES B COMMON STOCK PURCHASE WARRANT - Trans-Pacific Aerospace Company, Inc.transpacific_10k-ex1016.htm
EX-31.1 - CERTIFICATION - Trans-Pacific Aerospace Company, Inc.transpacific_10k-ex3101.htm
EX-10.14 - SETTLEMENT AGREEMENT AND GENERAL RELEASE - Trans-Pacific Aerospace Company, Inc.transpacific_10k-ex1014.htm
EX-10.15 - AMENDMENT TO SERIES A COMMON STOCK PURCHASE WARRANT - Trans-Pacific Aerospace Company, Inc.transpacific_10k-ex1015.htm
EX-32.1 - CERTIFICATION - Trans-Pacific Aerospace Company, Inc.transpacific_10k-ex3201.htm
10-K - TRANS-PACIFIC AEROSPACE COMPANY, INC. 10-K - Trans-Pacific Aerospace Company, Inc.transpacific_10k-103112.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R5.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R1.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R3.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R4.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R7.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R13.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R10.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R15.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R21.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R23.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R14.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R34.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R11.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R12.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R18.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R20.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R19.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R16.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R17.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R26.htm
XML - IDEA: XBRL DOCUMENT - Trans-Pacific Aerospace Company, Inc.R27.htm
v2.4.0.6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Oct. 31, 2012
Accounting Policies [Abstract]  
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

 

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

On March 30, 2010, the Company acquired 25% of the outstanding share capital of Godfrey (China) Limited, a Hong Kong corporation (“Godfrey”), in exchange for the Company’s technology used for the design and production of SAE-AS81820, 81934 and 81935 self-lubricated spherical bearings, bushings and rod-end bearings. The Company legally owns 25% of Godfrey. The investment in Godfrey has been accounted for under the Equity Method whereby the investment in Godfrey is treated as an asset. The asset has been determined to be fully impaired with no value being shown on the balance sheet. Income and losses proportional to the Company’s investment in Godfrey respectively increase or decrease the carrying value of the investment. Losses are only recognized to the extent of the Company’s investment in Godfrey. When and if the carrying value becomes zero, losses become suspended and are recognized only when Godfrey realizes income. At October 31, 2012 there were suspended losses of $583,648. See Note 4 for further discussion.

 

Use of Estimates

 

The preparation of the 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 liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Equivalents

Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at October 31, 2012 or October 31, 2011.

Concentration of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.

 

Impairment of Long-Lived Assets

 

The Company has adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10, Property, Plant and Equipment FASB ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

  

Indefinite-lived Intangible Assets

 

The Company has an indefinite-lived intangible asset (goodwill) relating to purchased blueprints, formulas, designs and processes for manufacturing and production of self-lubricated spherical bearings, bushings and rod-end bearings. The indefinite-lived intangible asset is not amortized; rather, it is tested for impairment at least annually by comparing the carrying amount of the asset with the fair value. An impairment loss is recognized if the carrying amount is greater than fair value. Testing done for the year ended October 31, 2010 determined that the above mentioned intangible asset with a cost of $2,469,404 was fully impaired.

 

Fair Value of Financial Instruments

 

The Company adopted FASB ASC 820 on October 1, 2008. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has various financial instruments that must be measured under the new fair value standard including: cash and debt. The Company currently does not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

Cash, accounts payable, and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.

 

The following tables provide a summary of the fair values of assets and liabilities: 

 

          Fair Value Measurements at  
          October 31, 2012  
    Carrying                          
    Value                          
    October 31,                          
    2012     Level 1     Level 2     Level 3  
Liabilities:                                
Convertible notes payable   $ 260,000     $     $     $ 260,000  

 

          Fair Value Measurements at  
          October 31, 2011  
    Carrying                          
    Value                          
    October 31,                          
    2011     Level 1     Level 2     Level 3  
Liabilities:                                
Convertible notes payable   $ 260,000     $     $     $ 260,000  

 

Goodwill and the investment in Godfrey have been recorded as fully impaired, see Notes 3 and 4.

 

The Company believes that the market rate of interest as of October 31, 2012 and October 31, 2011 was not materially different to the rate of interest at which the convertible notes payable were issued. Accordingly, the Company believes that the fair value of the convertible notes payable approximated their carrying value at October 31, 2012 and 2011.

Income Taxes

 

The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.

 

No provision for federal income taxes has been recorded due to the net operating loss carry forwards totaling approximately $2,471,678 as of October 31, 2012 that will be offset against future taxable income.  The available net operating loss carry forwards of approximately $2,471,678 will expire in various years through 2032.  No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance the carry forwards will expire unused.

 

Deferred tax asset and the valuation account are as follows:

 

    October 31,  
    2012     2011  
Deferred tax asset:                
  NOL Carry forward   $ 840,370     $ 700,137  
  Valuation allowances     (840,370 )     (700,137 )
  Total   $     $  

 

The components of income tax expense are as follows:

 

Current Federal Tax   $     $  
Current State Tax            
Change in NOL benefit     140,233       284,353  
Change in valuation allowance   $ (140,233 )     (284,353 )
    $     $  

  

Equipment

 

Equipment is recorded at cost and depreciated using straight line methods over the estimated useful lives of the related assets. The Company reviews the carrying value of long-term assets to be held and used when events and circumstances warrant such a review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. The cost of normal maintenance and repairs is charged to operations as incurred. Major overhaul that extends the useful life of existing assets is capitalized. When equipment is retired or disposed, the costs and related accumulated depreciation are eliminated and the resulting profit or loss is recognized in income. As of October 31, 2012, the useful lives of the office equipment ranged from five years to seven years.

 

Issuance of Shares for Non-Cash Consideration

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

Stock-Based Compensation

In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments. For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts. Prior periods presented are not required to be restated. We adopted the standard as of inception and applied the standard using the modified prospective method. During the year ended October 31, 2011, the Company issued stock options to its Board of Directors and officer as compensation for their services. The options have been accounted for at a fair value as required by the FASB ASC 718.

 

Beneficial Conversion Features

 

From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.

 

Development-Stage Company

 

The Company is considered a development-stage company, with limited operating revenues during the periods presented, as defined by the FASB. The FASB requires companies to report their operations, shareholders deficit and cash flows since inception through the date that revenues are generated from management’s intended operations, among other things. Management has defined inception as June 5, 2007. Since inception, the Company has incurred losses of $10,425,677. The Company’s working capital has been primarily generated through the sales of common stock. Management has provided financial data since June 5, 2007, “Inception”, in the financial statements.

  

Net Loss Per Share

 

The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. There were 2,000,000 Series A Warrants, 2,000,000 Series B Warrants and options for 18,000,000 shares outstanding as of October 31, 2012 that are not included in the calculation of Diluted EPS as their impact would be anti-dilutive.

 

    For the
Year Ended
October 31,
 
    2012     2011  
             
Net loss from continuing operations   $ (1,537,219 )   $ (3,044,151 )
                 
Discontinued operations                
Net gain (loss) from discontinued operations            
                 
Net loss from operations   $ (1,537,219 )   $ (3,044,151 )
                 
Basic and diluted net loss from continuing operations per share   $ (0.02 )   $ (0.07 )
                 
Basic and diluted net loss from discontinued operations per share   $     $  
                 
Basic and diluted net loss attributable to Trans-Pacific Aerospace Company, Inc. per share   $ (0.02 )   $ (0.07 )
                 
Weighted average number of common shares outstanding, basic and diluted     67,440,727       43,353,134  

 

The weighted average numbers of shares included in the calculation above are post-split.

 

Recent Accounting Pronouncements

 

In October 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

 

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (“SAB”) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

  

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in ASU No. 2012-02. This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.

 

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05, in order to defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. The amendments are being made to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. All other requirements in ASU 2011-05 not affected by this ASU are effective for fiscal years beginning after December 15, 2011. The Company does not expect the adoption of the standard update to impact its financial position or results of operations, as it only requires a change in the format of presentation.

 

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income (loss) as part of the statement of shareholders’ equity. Instead, the Company must report comprehensive income (loss) in either a single continuous statement of comprehensive income (loss) which contains two sections, net income (loss) and other comprehensive income (loss), or in two separate but consecutive statements. This guidance will be effective for the Company beginning in fiscal 2013. The Company does not expect the adoption of the standard update to impact its financial position or results of operations, as it only requires a change in the format of presentation.

 

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and International Financial Reporting Standards. While many of the amendments to U.S. GAAP are not expected to have a significant effect on practice, the new guidance changes some fair value measurement principles and disclosure requirements. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The Company does not expect the adoption of the standard update to have a significant impact on its financial position or results of operations.