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EX-32.01 - EXHIBIT 32.01 SECTION 906 CERTIFICATION - HARBOR ISLAND DEVELOPMENT CORP.f10k033113_ex32z01.htm
EX-31.02 - EXHIBIT 31.02 SECTION 302 CERTIFICATION - HARBOR ISLAND DEVELOPMENT CORP.f10k033113_ex31z02.htm
EX-31.01 - EXHIBIT 31.01 SECTION 302 CERTIFICATION - HARBOR ISLAND DEVELOPMENT CORP.f10k033113_ex31z01.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


(Mark One)


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

For the Fiscal year ended March 31, 2013


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

For the transition period from ______ to _______


HARBOR ISLAND DEVELOPMENT CORP.


[f10k033113_10k001.jpg]

(Exact name of registrant as specified in its charter)


Nevada

000-54618

27-2464185

(State or other jurisdiction

(Commission File Number)

(IRS Employer

of Incorporation)

 

Identification Number)

 

 

 

 

2275 NW 150th Street, Unit B

Opa Locka, FL 33054

(Address of principal executive offices)

 

 

 

 

 

(305) 688-7494

 


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


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


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  X . No      .


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


Indicate by check mark 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.      .


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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer

      .

Accelerated filer

      .

Non-accelerated filer

      . (Do not check if a smaller reporting company)

Smaller reporting company

  X .


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


The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of September 30, 2012 was $NIL based upon the price ($NIL) at which the common stock was last sold as of the last business day of the most recently completed second fiscal quarter, multiplied by the approximate number of shares of common stock held by persons other than executive officers, directors and five percent stockholders of the registrant without conceding that any such person is an “affiliate” of the registrant for purposes of the federal securities laws.  Our common stock is not currently traded in the over-the-counter market.


As of July 10, 2013 there were 450,000,000 shares of the registrant’s $0.001 par value common stock issued and outstanding.


Documents incorporated by reference: None





Table of Contents


 

 

Page

 

PART I

 

 

 

 

Item 1

Business

4

Item 1A

Risk Factors

10

Item 1B

Unresolved Staff Comments

10

Item 2

Properties

10

Item 3

Legal Proceedings

10

Item 4

Mine Safety Disclosures

10

 

 

 

 

PART II

 

 

 

 

Item 5

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

11

Item 6

Selected Financial Data

11

Item 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

11

Item 7A

Quantitative and Qualitative Disclosures about Market Risk

15

Item 8

Financial Statements and Supplementary Data

F-1

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

16

Item 9A

Controls and Procedures

16

Item 9B

Other Information

17

 

 

 

 

PART III

 

 

 

 

Item 10

Directors and Executive Officers and Corporate Governance

18

Item 11

Executive Compensation

21

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

22

Item 13

Certain Relationships and Related Transactions

22

Item 14

Principal Accountant Fees and Services

23

 

 

 

 

PART IV

 

 

 

 

Item 15

Exhibits

24




2




FORWARD-LOOKING STATEMENTS


 This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:


·

The availability and adequacy of our cash flow to meet our requirements;

·

Economic, competitive, demographic, business and other conditions in our local and regional markets;

·

Changes or developments in laws, regulations or taxes in our industry;

·

Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;

·

Competition in our industry;

·

The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business;

·

Changes in our business strategy, capital improvements or development plans;

·

The availability of additional capital to support capital improvements and development; and

·

Other risks identified in this report and in our other filings with the Securities and Exchange Commission or the SEC.

 

This report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.


Use of Term

 

Except as otherwise indicated by the context, references in this report to “Company”, “we”, “us” and “our” are references to Harbor Island Development Corp.  All references to “USD” or United States Dollars refer to the legal currency of the United States of America.




3




PART I


ITEM 1.

BUSINESS


Overview of the Company


The Company was incorporated in the State of Nevada on March 19, 2010.  We are a development stage company that plans to be a leading retailer of beach and island resort apparel. More specifically, we plan to specialize in the resale of wholesale apparel primarily for women.  Our corporate office is located in Opa Locka, Florida; therefore, our initial marketing focus will be within the South Florida area. Since we are a development stage company, to date we have recorded no revenue, and our operations have been limited to activities related to our Company’s formation and the initial licensing agreement with our distributor, as discussed herein. Accordingly, we have issued a comment regarding our ability to continue as a going concern (please refer to the footnotes to the financial statements).  Until such time that we are able to establish a consistent flow of revenues from our operations sufficient to sustain our operations, Management intends to rely primarily upon debt financing as needed to supplement the cash flows generated by the sale of our products.


The mission of the Company is to become a leading distributor and reseller of quality beach and island resort apparel through multiple sales venues.  We would like to put our Company in a position to grow rapidly with as little out-of-pocket expense as possible, yet, not sacrifice the quality or superior customer service that we feel is necessary to become a leading retailer.


Our Business and Principal Products


Currently, our business plan is centered around a Non-exclusive Distributor Agreement that we entered into on March 12, 2010 with Island Stuff USA, and which agreement was subsequently amended on July 23, 2010.


Donald Ross, our Company’s sole officer and director, was able to easily secure our Non-exclusive Distributor Agreement with Island Stuff USA because of his relationship with the owner.  Island Stuff USA is owned by Donald Ross’ brother, Steve Ross. We feel this relationship will be a large advantage to the Company.  It has already proven to be an asset whereby Island Stuff USA has agreed to let our Company utilize part of its warehouse as our corporate office.  This could prove to be extremely helpful in keeping our start-up costs low.


Our operations will be devoted solely to the sale and marketing of Island Stuff USA apparel.  We do not plan to seek out additional distributorships in our start-up phase unless we begin to generate steady revenue from the products that we plan to purchase from Island Stuff USA.  We know that the key factors that will enable us to effectively grow in the clothing retail industry are our price point on goods, customer service, effective marketing and quality control of all items that we sell.  To further our plan of operations beyond this start-up phase, we will require additional funding.


Our initial order from Island Stuff USA will mainly include women’s beachwear and casual apparel.  According to an article written by Aspire Marketing, a study conducted in May 2010 on international spending habits of people under the age of 30 found that 40% women spend a majority of their extra money (money left over each month after necessary expenses) on clothing, compared to just 12% of men. Consumer shopping statistics also reveal that women are responsible for 83% of all consumer purchases.  We feel that the items we have chosen for our initial order will give us a well-rounded selection of apparel for our potential customers within our target market. When our e-commerce website is fully developed, we would like to have a diverse selection of products to choose from, while keeping our upfront costs low.  


About Island Stuff USA


Island Stuff USA was established in 2000 and has grown to be a leading wholesaler of beach, resort and summer apparel to mass retail, specialty shops, grocery and drug stores, located in the Caribbean and in other destination locations. They distribute their products across the United States and currently export to 13 different countries.  Island Stuff USA caters to American women and all of their garments are cut to fit the American body and taste.  Island Stuff USA products, through various distributors, can be purchased in Wal-Mart, Walgreens, and in boutique gift shops in the Caribbean and United States. There are currently five non-exclusive distributors selling Island Stuff USA products, and large distributors receive a discount based upon quantities ordered.


Island Stuff USA produces both knit and woven clothing and they custom design fabrications and pattern designs.  They also employ their own staff of industry professionals in China and Indonesia and pride themselves on quality value.  Their product development team has mastered the entire process of bringing a product to the market. From idea generation and screening, to concept development and testing, to financial analysis and market testing, their team of professionals carefully plan and implement their business strategy from beginning to end.



4




Having created countless products over the years from many different countries, Island Stuff USA’s sourcing team is experienced in finding factories around the globe that can reliably meet all production expectations for any product. They work with established factories in the Far East, Central America, the Caribbean, as well as here in the United States. Their team of sourcing professionals travels to factories constantly and they know the genuine capabilities of each and every factory. Island Stuff USA’s founders and partners represent the essence of entrepreneurship. They have 19 years of business experience and know what it takes to create a business, build a business, build a brand, integrate and market new products, maintain a business, and successfully grow a business. They respect those who have entrepreneurial visions and goals, and their expertise will be of invaluable assistance to our start-up organization.


As we press on through the start-up phase of our Company, we believe that consulting with the staff at Island Stuff USA will truly be an invaluable commodity.  They have a ten year history of sales, and we believe that they will help jumpstart our distribution of their apparel.  It is a win-win for both parties involved because they are simply a wholesaler, and we will seek to be their leading reseller. As Island Stuff USA is a bulk wholesaler that does not sell directly to the public, we do not foresee Island Stuff USA being a competitor of ours.  


Our Plan of Operations, Distribution Methods and the Industry


Our operations will be devoted primarily to distributing products from Island Stuff USA. Initially, our first mode of sales will be through an e-commerce, shopping cart website.  We have calculated the total costs of setting up a website, and feel that this would be the most cost-effective way to begin the sale of our first batch of inventory from Island Stuff USA and promote our sales.  As we generate revenue through our website sales, we plan to seek out trade shows to attend.  Trade shows offer a large number of vendors and buyers in one place, and we believe that this venue could boost our brand awareness, and ultimately move our Company in the direction of gift shops, mall kiosks, and retail stores.


We believe that most apparel sales are conducted through department and chain stores, although growing levels of sales can be attributed to mass merchants, off-price retailers, online retailers and specialty stores. Many specialty retailers are located in vacation areas and tailor their inventory to local demand. While they only constitute a small percentage of total apparel sales, we believe that online retailers have made large strides in gaining market share, and that a lucrative niche market exists for specialty stores tailored to the vacation market. We intend to capitalize on the popularity of the growing “non-store” retail market, by focusing on online-based sales. However, we will not limit our growth potential to web-based sales alone.


We have taken the first step towards the setup and development of our website by purchasing our website domain www.HarborIslandApparel.com, and designing our logo that will become the branding icon for our website, apparel, and product tags. Once we acquire sufficient funding, we plan to purchase and develop our website.  For this, we will use Level Ten Hosting at www.leveltenhosting.com to purchase an e-commerce template and to host our website.  We will also need to start a merchant bank account with a merchant banker, and obtain an online payment gateway for instant credit card processing such as www.Authorize.net.  Once these items are in place, we will be ready to begin accepting orders through our website.  The website will be equipped with a shipping estimator so, that upon checkout, any customer may see the total price that they will be spending on their purchase.  We plan to use the United States Postal Service for the shipping of our products, and we will add $2 to each shipping estimate as processing and handling to pay for the packaging costs that we will incur.  Based on our initial research, we anticipate that we should be able to develop our website for a low price relative to industry standards. Total initial out-of-pocket expenses for our website be approximately $600, plus a monthly fee of approximately $40 for both the merchant banker and the payment gateway.  We expect to pay no more than $100 per year for our website hosting. Shipping will be a non-factor in terms of cost because the customer will be paying for all shipping costs.


We believe that our price point on apparel will allow us to effectively make sales through our website, and our low overhead will allow us to gain traction in the clothing industry.  We believe that we will set our initial price point at a 100% markup from wholesale.  We will use this price point for our website sales, and set different prices on apparel as each new sales outlet provides. Prices will strongly depend on the target market of a given area, and the marketing we will have to put into that particular area.




5




Licensing


Currently, our business plan is centered around a Non-exclusive Distributor Agreement that we entered into on March 12, 2010 with Island Stuff USA, and which agreement was subsequently amended on July 23, 2010.  The sale of licensed products is a key element of our business strategy and we intend to expand our offerings of licensed products over the coming years. Under typical license agreements, minimum net sales of licensed products are required and royalty and advertising payments must be paid to the licensor (usually based on a percentage of net sales of licensed products). Usually, a failure to satisfy the requirements or meet the obligations of a license agreement will give a licensor the right to terminate our license.


Our current license agreement with Island Stuff USA does not include any performance criteria; however, the license is terminable at any time by either party. Our management intends to develop an excellent working relationship with Island Stuff USA in order to ensure that the license agreement remains in place. We will work with Island Stuff USA to ensure the highest satisfaction in our sales and distribution efforts.


Marketing Plan/Budget


Our marketing strategy will begin with word of mouth, which will always be our most important means of promotion.  In order to effectively market the Company as a retailer of resort and beach apparel, we will focus on establishing a strong marketing, advertising and distribution presence in beach activity marketplaces. If we generate significant revenues, we intend to implement an advertising and marketing campaign to increase awareness of the Company and to acquire new customers through multiple channels, including traditional and online advertising and direct marketing.


We plan to brand and market our website first and foremost. We believe that having a website with a great design, easy navigation, and purchasing capability is a key factor to online shopping.  Once our website is fully developed, we will begin to market and advertise our website with cost-effective online marketing tools.  We will begin with search engine optimization (SEO) of our website.  This will increase our websites ranking on search engines within organic keyword searches.  There are many different ways to improve SEO of a website, and many companies can charge up to $15,000 to provide SEO.  We plan on initiating the SEO of our website ourselves to keep our costs down.  


We also plan to use social media forums, such as Facebook®, Twitter® and Myspace®, to begin the branding of our products.  Through venues like these, we will be able to place our brand in front of millions of Internet users and potential customers every day with no additional out-of-pocket expense.  Also, by gaining followers on these social media websites, we believe that it will help us form a bond with our potential customers, and possibly lead to repeat sales.


As we generate revenues from our website sales, we plan to initiate online advertising through large search engines such as Google® and Yahoo!®, and also through Facebook®.  These companies have developed advertising programs, which only charge an advertiser when their ad is actually clicked on.  This form of advertising is called cost-per-click advertising or CPC.  Advertising with these online companies will allow us to place keyword specific advertisements in our target market.  With relatively little cost, we will be able to develop an online marketing presence that reaches our target market, and we will only have to pay advertising fees when people with genuine interest in our products click on our ads.  


If our online marketing efforts prove to be successful, we will begin a print media campaign focused in the South Florida region.  We will begin with postcard mailers, and move towards print advertising in newspapers and magazines.  We plan to do all of our own graphic design in our print advertising, so that our costs remain as low as possible.  We will save a tremendous amount of money by developing our own fliers and advertisements because graphic designers charge anywhere from $70-$150 per hour for their work.  Also, by using large online print companies such as www.uprinting.com, we will be able to save large amounts of money on printing costs.




6




TimeLine of Anticipated Operational Milestones


The Milestones table hereunder is designed to illustrate the Company’s plan of operations and the associated costs for the next twelve months and beyond.  The Company’s operations will include creation and development of an e-commerce website for sales, ordering of inventory and supplies in preparation for sales, and seeking out and securing arrangements with existing retailers to distribute our products for resale, but does not include the establishment of a physical retail store. This table does not take into account offering expenses, legal, accounting and other professional fees.


Timeline

Activity

Anticipated Costs

Description of Milestone Activity

0-4 Months

Make an initial purchase from Island Stuff USA

$1,170 to purchase our initial inventory order

Our proposed initial order from Island Stuff USA will consist of twelve different styles of apparel, with twelve pieces each.  This will give us an initial inventory of 144 garments.

Begin the design and development of www.harborislandapparel.com, as a fully functional e-commerce website

Around $600 for the purchase of a website template, hosting for one year, and the initial setup* of a merchant bank account and payment gateway (*Additional monthly fee of $40/month incurred after initial month).

The Company intends to use Level Ten Hosting for the purchase of a website template and an e-commerce hosting package.  We plan to use Moneris Services for our merchant banker, and Authorize.net for our credit card processing payment gateway. This activity is not dependent on future financing.

 

Begin the branding of our products through the use of social media websites

$0 will be needed to start this form of marketing. It will only require the time of our sole officer and director

We anticipate using Facebook®, Twitter® and Myspace® for our initial product branding.  This will allow us to reach millions of potential customers at no cost to us, and therefore is not dependent on future financing.

3-5 Months

Begin online advertising campaigns through Google®, Yahoo!® and Facebook®

We are budgeting between $4,800-8,300 for online advertising.  The cost of these campaigns will vary and will be dependent on our ability to obtain future financing.

Assuming the Company's financing activities are meeting expectations, we do not foresee any reason that this activity would be delayed or suspended.

Begin placing ads in local media and produce postcard mailers seeking targeted marketing

$1,000 - $1,500 - We will design our own ads to keep costs low, and distribute to our local target market. The media we choose to place ads in will be dependent on future financing.

We anticipate distributing up to 10,000 postcards at a time. We plan to distribute them on beaches and boardwalks, as well as through standard mail, minimizing our postage costs.

Begin a full e-mail marketing campaign to supplement our print advertising

$500 - $1,500 - We will use the e-mail address of our growing customer base, and possibly purchase targeted e-mail lists.

Assuming the Company's other proposed advertising activities are proving successful, we do not see any reason why this would be delayed.  The size of the e-mail lists that we may purchase will determine the costs involved and will be dependent on future financing.



7




 

 

 

 

4-6 Months

Begin placing ads in local media seeking qualified sales associates and begin the hiring process.

$500 - $1000 for ads - We will only pay to place ads in local newspapers if we are unable to adequately utilize free internet job websites. Our ability to place paid ads will be dependent on future financings and/or generated revenue.  We have budgeted between $4,000 to $12,000 for initial employee salaries, depending on how many employees we decide to hire, which is dependent on future financing or successful operations.

We anticipate seeking out sales persons with sales experience in the retail clothing industry. We will offer no benefits and will base our hourly wages on what is customary for retail sales in our initial region. We have budgeted to pay around $8.50/hour for around 15 hours a week for 1-3 employees. We do not anticipate offering a commission structure; however, commission may be implemented once we have begun complete operations.

5-12 Months

Seek a booth at certain trade shows to further expand the branding of our products

$5,000 - $9,000 – Booth space at trade shows is expensive, but could prove to be a very important step in branding

Based on the financings obtained and the revenues we are generating at the five month mark, we will seek out booths in trade shows.

After 12 Months

Continue marketing and advertising

This cost will be completely dependent on the revenue that we are generating at the time and future financing.

We will continue marketing and advertising our products using word of mouth, print and email media campaigns and internet advertising.


As set forth in the table above, we anticipate our minimum total first year "start-up" costs to be roughly $19,000. However, depending on revenue, we may be able to devote more capital to marketing and advertising, consultants and/or staff.  We anticipate our maximum “start-up” costs to be approximately $37,000. If we do not generate enough revenue to implement our business plan, additional funding will be required and will likely be in the form of debt financing or equity financing from the sale of our common stock or sales of convertible promissory notes that are convertible into shares of our common stock. We will seek out additional funds from friends, family, and business acquaintances; however, there is no guarantee that such funds will be available since we haven’t received any firm commitments or indications of interest from such persons regarding potential investments in our Company. If we do not obtain the necessary additional financing, we will be forced to scale back our plan of operations and our business activities. At this time, neither the Company nor management has any plans, or has entered into any discussions, written or unwritten, with any third-party relating to any merger acquisitions or business combination transaction. The Company and its Management are committed to the foregoing plan of operations and will use all reasonable means to effectuate the Company's business plan.  


Growth Strategy


Our long-term goal, assuming we are successful in initiating our business plan, is to build an all-season diversified apparel company with a broad portfolio of brands that we will offer in multiple channels of retail distribution.  In order to reach this goal, we will put into action the following growth strategies:


Execute new initiatives. We intend to seek opportunities to offer products for all seasons. This may include finding new apparel companies to form distributorships with, or if cost effective for us, we may use our relationship with Island Stuff USA to manufacture our own clothing using their facilities abroad.


Extend our marketing and advertising capabilities. As we grow, we believe that our money will be best spent on marketing the products we sell.  We plan to expand our advertising campaigns to include the branding of our products.


Seek attractive acquisitions. We plan to pursue acquisitions of complementary product lines and businesses, which could include wholesale and retail opportunities.



8




Competition


The beach apparel industry is highly competitive and fragmented and is subject to rapidly changing consumer demands and preferences. We believe that success in this industry depends in large part upon the ability to anticipate, gauge and respond to changing consumer demands and fashion trends in a timely manner. Initially, we will be relying on Island Stuff USA to adjust its production to the changing demands of the consumer, and we will purchase our orders accordingly.  


We compete with numerous apparel manufacturers, distributors and designers which operate in the beachwear and resort apparel markets.  We do not currently have, nor do we expect to have, exclusive relationship(s) with Island Apparel USA or other future supplier(s).  Many of the designers, manufacturers, and retailers, domestic and foreign, that we compete with are significantly larger and have substantially greater resources than we do. These companies may be able to engage in larger scale branding, advertising and manufacturing activities than we can. Further, with sufficient financial backing, talented designers can become competitors within several years of establishing a new label.


We will compete primarily on the basis of fashion, quality, and service. Our business depends on our ability to shape and stimulate consumer tastes and demands by marketing innovative and exciting beachwear, as well as on our ability to remain competitive in the areas of quality and price.  We believe that our price point and customer service will allow us to be a competitive apparel company within our target market.  By doing a simple Internet search for a sarong, defined as a length of fabric often wrapped around the waist and worn as a skirt by women, shopping results vary from $14.99 – $44.00.  We plan on selling our sarongs through our website at $14.00.  Also, because we are only a distributor, and not the actual manufacturer of our clothing, we believe that we will be able to direct our focus on customer service.  


Additionally, Island Stuff USA allows us to use a portion of their warehouse as our corporate office, thus, we will not have to pay any additional shipping fees to receive our orders from them.  This gives us a strong advantage over competing distributors because it will allow us to maintain a lower price point, and realize more profits from our sales.  Also, because we are located at the Island Stuff USA warehouse, we should be able to maintain the highest level of product quality control.


Government Regulation


Our products are subject to regulation by the Federal Trade Commission in the United States. Such regulations relate principally to the labeling of our products. We believe that any product that we resell will be in substantial compliance with such regulations, as well as applicable federal, state, local, and foreign rules and regulations.


Any import or export operations we engage in will also be subject to constraints imposed by bilateral textile agreements between the United States and a number of foreign countries. Those agreements, which have been negotiated bilaterally, either under the framework established by the Arrangement Regarding International Trade in Textiles, known as the Multifiber Agreement, or other applicable statutes, impose quotas on the amounts and types of merchandise which may be imported into the United States from these countries. Those agreements also allow the signatories to adjust the quantity of imports for categories of merchandise that, under the terms of the agreements, are not currently subject to specific limits. Any imported products that we may sell, may also be subject to United States customs' duties.


Employees


We have no employees, other than Donald Ross, our sole officer and director.  


Subsequent Events:


On April 3, 2013, Chuck Anton acquired control of three hundred million (300,000,000) restricted shares of the Company’s issued and outstanding common stock, representing approximately 66.67% of the Company’s total issued and outstanding common stock, from Julian Benavides in exchange for $15,000 per the terms of a stock purchase agreement by and between Mr. Anton and Mr. Benavides.


There are no arrangements or understandings between Mr. Benavides and Mr. Anton and/or their respective associates with respect to the election of directors or other matters


On April 4, 2013, Harbor Island Development Corp. (the "Company") entered into a License Agreement (the "License Agreement") with BrandSeed Inc., a Virginia corporation, ("Licensor") under which the Licensor granted the Company a five (5) year worldwide, exclusive right to utilize that certain proprietary direct marketing software owned and developed by the Licensor (the "Software").



9




In exchange for the rights to use the Software, the Company agreed to issue 110,000,000 restricted shares of its common stock (the “Shares”) to Licensor.


The License Agreement also contains customary representations and warranties of the Company and Licensor.


WHERE YOU CAN GET ADDITIONAL INFORMATION


We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.E., Washington, DC 20549. You can obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these reports and other filings electronically on the SEC’s web site, www.sec.gov.


ITEM 1A.

RISK FACTORS


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


ITEM 1B.

UNRESOLVED STAFF COMMENTS


None.


ITEM 2.

PROPERTIES


We do not own any real estate. Our sole supplier, Island Stuff USA, currently provides us with office space at 2275 NW 150th Street, Unit B, in Opa Locka, FL 33054 and our current telephone number is 305-688-7494. We do not pay for use of these premises, as it is offered to us by our sole supplier. However, our use of this space may be terminated at any time, with no penalty or termination fee due to the Company.  The space is utilized for general office purposes and it is our belief that our space is adequate for our immediate needs. Additional space may be required as we expand our operations. As of the date of this filing, we have not sought to move or change our office site.   In the event that we do seek to move or change our office site, we do not foresee any significant difficulties in obtaining other office space.


ITEM 3.

LEGAL PROCEEDINGS


We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.


ITEM 4.

MINE SAFETY DISCLOSURES


Not Applicable.




10




PART II


ITEM 5.

MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Common Stock


Our common stock is currently quoted on the OTC Bulletin Board. Our common stock has been quoted on the OTC Bulletin Board since April 16, 2012 trading under the symbol “HIDC.OB”. Because we are quoted on the OTC Bulletin Board, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.


As of June 30, 2013, the Company has not begun trading on the OTCBB.


Record Holders


As of July 10, 2013, an aggregate of 450,000,000 shares of our Common Stock were issued and outstanding and were owned by approximately 26 holders of record, based on information provided by our transfer agent.


Recent Sales of Unregistered Securities


Other than as previously disclosed, none.


Re-Purchase of Equity Securities


None.

 

Dividends


We have not paid any cash dividends on our common stock since inception and presently anticipate that all earnings, if any, will be retained for development of our business and that no dividends on our common stock will be declared in the foreseeable future. Any future dividends will be subject to the discretion of our Board of Directors and will depend upon, among other things, future earnings, operating and financial condition, capital requirements, general business conditions and other pertinent facts. Therefore, there can be no assurance that any dividends on our common stock will be paid in the future.


Securities Authorized for Issuance Under Equity Compensation Plans

 

None.


ITEM 6.

SELECTED FINANCIAL DATA


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.



11




Working Capital


 

March 31, 2013

March 31, 2012

  

$

$

Current Assets

6,623

12,076

Current Liabilities

231,492

176,903

Working Capital Deficit

(224,869)

(164,827)


Cash Flows

  

March 31, 2013

$

March 31, 2012

$

Cash Flows from (used in) Operating Activities

(15,453)

(36.888)

Cash Flows from (used in) Financing Activities

10,000

48,522

Net Increase (decrease) in Cash During Period

(5,453)

11,834


Operating Revenues


We have not generated any revenues since inception.


Operating Expenses and Net Loss


Operating expenses for the year ended March 31, 2013 was $52,221 compared with $90,091 for the year ended March 31, 2012.   During the year, the Company had a decrease of $5,870 in general and administrative costs as the Company had limited amounts of cash flow and had limited proceeds raised from financing activities during the year , a decrease of $15,000 in management fees due to the change in management during the year and the new management electing not to take a management fee, and $17,000 decrease in professional fees relating to lower legal costs as the Company had limited transactions during the year that did not require extensive legal services.


Net loss for the year ended March 31, 2013 was $60,042, or $nil per share compared with a net loss of $97,045 and $nil loss per share for the year ended March 31, 2012.  In addition to operating expenses, the Company also incurred interest expense of $7,821 during the year ended March 31, 2013 for accrued interest on the $82,401 of note payable which is unsecured, due interest at 10% per annum, and due on demand.  During the year ended March 31, 2012, interest expense was $6,954 and the increase in the current year is due to the fact that the current year debt is comprised of the full year of the note payable.


Liquidity and Capital Resources


As at March 31, 2013, the Company’s cash balance and total assets were $6,623 compared to $12,076 as of March 31, 2012.  The decrease was attributed to the use of the Company’s cash flow for operating activities at a higher rate than proceeds received from financing activities during the year.  


As at March 31, 2013, the Company had total liabilities of $231,492 compared with total liabilities of $176.903 as at March 31, 2012.  The increase in total liabilities was attributed to increases in accounts payable and accrued liabilities of $29,589 due to the lack of sufficient cash flow for the Company to repay its obligations on a timely basis, increase in amounts due to related parties of $15,000 relating to the management fee owed to the former President and Director of the Company, and $10,000 increase in notes payable for additional financing received by the Company during the year, which is unsecured, bears interest at 10% per annum, and is due on demand.     


As at March 31, 2012, the Company had a working capital deficit of $224,869 compared with a working capital deficit of $164,827 as at March 31, 2012.  The increase in working capital deficit was attributed to day-to-day obligations of the Company that are unpaid given the fact that the Company lacks sufficient cash flow to repay its debts on a timely basis.


Cashflow from Operating Activities


During the year ended March 31, 2013, the Company used $15,453 of cash for operating activities as compared to $36,688 during the year ended March 31, 2012.  The decrease in the use of cash for operating activities is attributed to the fact that the Company raised only $10,000 in proceeds from notes payable and only had limited amounts of cash for operating activities during the year.  



12




Cashflow from Investing Activities


During the years ended March 31, 2013 and 2012, the Company did not have any cash transactions related to investing activities.


Cashflow from Financing Activities


During the year ended March 31, 2013, the Company received $10,000 of cash from financing activities compared to $48,522 during the year ended March 31, 2012.  The Company received $10,000 in proceeds from notes payable compared with proceeds of $10,750 from notes payable and $37,772 from the issuance of common shares during the year ended March 31, 2012.


Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

Future Financings

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

 

Off-Balance Sheet Arrangements

 

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


Critical Accounting Policies


Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.




13




Recently Issued Accounting Pronouncements


In February 2013, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:


·

Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income (but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period); and


·

Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.


The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of this standard did not have a material impact on the Company’s financial statements.  


In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the FASB determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of this standard did not have a material impact on the Company’s financial statements.  


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 this standard did not have a material impact on the Company’s financial statements.  


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 this standard did not have a material impact on the Company’s financial statements.  


In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented. The adoption of this standard did not have a material impact on the Company’s financial statements.  



14




The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


Contractual Obligations


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.




15






ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Financial Statements



March 31, 2013


Index


Report of Independent Registered Public Accounting Firm

F-2

 

 

Balance Sheets

F-3

 

 

Statements of Operations

F-4

 

 

Statements of Cash Flows

F-5

 

 

Statements of Stockholders Deficit

F-6

 

 

Notes to the Financial Statements

F-7




F-1






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors

Harbor Island Development Corp.

(A Development Stage Company)


We have audited the accompanying balance sheets of Harbor Island Development Corp. (a development stage company) as of March 31, 2013 and 2012 the related statements of operations, changes in stockholders' deficit, and cash flows for the years then ended and for the period from March 19, 2010 (inception) through March 31, 2013. 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 audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 audit 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the financial position of Harbor Island Development Corp., as of March 31, 2013 and 2012, and the results of its operations and cash flows for the periods described above in conformity with U.S. generally accepted principles.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficit and incurred a net loss from operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ M&K CPAS, PLLC

www.mkacpas.com

Houston, Texas

July 10, 2013




F-2






HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Balance Sheets

(Expressed in U.S. dollars)


 

March 31,

2013

$

March 31,

2012

$

 

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash

 6,623

 12,076

 

 

 

Total Assets

 6,623

 12,076

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable

 57,171

 35,403

Accrued liabilities

 19,420

 11,599

Due to related parties

 72,500

 57,500

Notes payable – related

 -

 64,301

Notes payable

 82,401

 8,100

 

 

 

Total Liabilities

 231,492

 176,903

 

 

 

 

 

 

Stockholders’ Deficit

 

 

 

 

 

Preferred stock, 50,000,000 shares authorized, $0.001 par value;

nil shares issued and outstanding

 -

 -

 

 

 

Common stock, 700,000,000 shares authorized, $0.001 par value;

450,000,000 and 1,150,000,000 shares issued and outstanding, respectively

 450,000

 1,150,000

 

 

 

Additional paid-in capital

 (407,228)

 (1,107,228)

 

 

 

Deficit accumulated during the development stage

 (267,641)

 (207,599)

 

 

 

Total Stockholders’ Deficit

 (224,869)

 (164,827)

 

 

 

Total Liabilities and Stockholders’ Deficit

 6,623

 12,076


(The accompanying notes are an integral part of these financial statements)




F-3






HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Statements of Operations

(Expressed in U.S. dollars)



Year Ended

March 31,

2013

$

Year Ended

March 31,

2012

$

Accumulated from

March 19, 2010

(date of inception)

to March 31,

2013

$

 

 

 

 

 

 

 

Revenue

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

General and administrative

2,471

8,341

25,271

Management fees

15,000

30,000

77,500

Professional fees

34,750

51,750

145,450

 

 

 

 

Total Operating Expenses

52,221

90,091

248,221

 

 

 

 

Loss from Operations

(52,221)

(90,091)

(248,221)

 

 

 

 

Other Expense

 

 

 

 

 

 

 

Interest expense

(7,821)

(6,954)

(19,420)

 

 

 

 

Net loss

(60,042)

(97,045)

(267,641)

 

 

 

 

Net loss per share, basic and diluted

(0.00)

(0.00)

 

 

 

 

 

Weighted average number of shares outstanding

969,726,027

1,041,052,400

 


(The accompanying notes are an integral part of these financial statements)




F-4






HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Statements of Cash Flows

(Expressed in U.S. dollars)


 

Year Ended

March 31,

2013

$

Year Ended

March 31,

2012

$

Accumulated from

March 19, 2010

(Date of Inception)

to March 31,

2013

$

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

Net loss

(60,042)

(97,045)

(267,641)

 

 

 

 

Adjustments to reconcile net loss for non-cash items relating to operating activities:

 

 

 

 

 

 

 

Shares issued for management fees

5,000

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts payable and accrued liabilities

29,589

30,357

76,591

Due to related parties

15,000

30,000

72,500

 

 

 

 

Net cash used in operating activities

(15,453)

(36,688)

(113,550)


 

 

 

Financing Activities

 

 

 

 

 

 

 

Proceeds from notes payable

10,000

10,750

82,401

Proceeds from issuance of common shares

37,772

37,772

 

 

 

 

Net cash provided by financing activities

10,000

48,522

120,173

 

 

 

 

Increase (decrease) in cash

(5,453)

11,834

6,623

 

 

 

 

Cash, beginning of period

12,076

242

 

 

 

 

Cash, end of period

6,623

12,076

6,623

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

Cancellation of shares

700,000

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Interest paid

Income taxes paid

 

 

 

 


(The accompanying notes are an integral part of these financial statements)




F-5






HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Statement of Stockholders’ Deficit

From March 19, 2010 (Date of Inception) to March 31, 2013

(Expressed in US dollars)


 

 

 

 

 

Accumulated

 

 

 

Common Stock

 

Additional

Paid-

 

Deficit

during the

Development

 

 

 

Shares

 

Par Value

 

In Capital

 

Stage

 

Total

 

#

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

Balance – March 19, 2010 (Date of Inception)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of founders shares

1,000,000,000

 

1,000,000

 

(995,000)

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

 

(5,832)

 

(5,832)

 

 

 

 

 

 

 

 

 

 

Balance – March 31, 2010

1,000,000,000

 

1,000,000

 

(995,000)

 

(5,832)

 

(832)

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

 

 

(104,722)

 

(104,722)

 

 

 

 

 

 

 

 

 

 

Balance – March 31, 2011

1,000,000,000

 

1,000,000

 

(995,000)

 

(110,554)

 

(105,554)

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for cash

150,000,000

 

150,000

 

(112,228)

 

 

37,772

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

 

 

(97,045)

 

(97,045)

 

 

 

 

 

 

 

 

 

 

Balance – March 31, 2012

1,150,000,000

 

1,150,000

 

(1,107,228)

 

(207,599)

 

(164,827)

 

 

 

 

 

 

 

 

 

 

Cancellation of common shares

(700,000,000)

 

(700,000)

 

700,000

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year

 

 

 

(60,042)

 

(60,042)

 

 

 

 

 

 

 

 

 

 

Balance – March 31, 2013

450,000,000

 

450,000

 

(407,228)

 

(267,641)

 

(224,869)

 

 

 

 

 

 

 

 

 

 


(The accompanying notes are an integral part of these financial statements)




F-6






HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)


1.

Nature of Operations and Continuance of Business


Harbor Island Development Corp. (the “Company”) was incorporated in the State of Nevada on March 19, 2010. The Company is a Development Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company’s principal business is the retail of beach and island resort apparel.  


These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely to generate significant revenue or earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at March 31, 2013, the Company has not generated revenues, and has a working capital deficit and accumulated losses totaling $267,641 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


The Company currently has no revenues and must rely on the debt and/or equity financing to fund operations. The Company will require significant additional financings in order to pursue exploration of any properties acquired. There is no assurance that the Company will be able to obtain the necessary financings to complete its objectives.


2.

Summary of Significant Accounting Policies


a)

Basis of Presentation


These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year end is March 31.  


b)

Use of Estimates


The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.


c)

Cash and Cash Equivalents


The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.  At March 31, 2013 and 2012, the Company had no cash equivalents.  



F-7





HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)


2.

Summary of Significant Accounting Policies (continued)


d)

Financial Instruments


Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:


Level 1


Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.


Level 2


Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.


Level 3


Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


The Company’s financial instruments consist principally of cash, accounts payable, accrued liabilities, amounts due to related parties, and notes payable.  Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.


e)

Loss Per Share


The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.


f)

Comprehensive Income


ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at March 31, 2013 and 2012, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.



F-8





HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)


2.

Summary of Significant Accounting Policies (continued)


g)

Foreign Currency Translation


Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into United States dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.


h)

Stock-based Compensation


The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.


i)

Recent Accounting Pronouncements


In February 2013, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:


·

Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income (but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period); and


·

Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.


The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of this standard did not have a material impact on the Company’s financial statements.  



F-9





HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)


2.

Summary of Significant Accounting Policies (continued)


i)

Recent Accounting Pronouncements (continued)


In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the FASB determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of this standard did not have a material impact on the Company’s financial statements.  


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 this standard did not have a material impact on the Company’s financial statements.  


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 this standard did not have a material impact on the Company’s financial statements.  


In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented. The adoption of this standard did not have a material impact on the Company’s financial statements.  


The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


3.

Notes Payable


a)

As of March 31, 2013, the Company had an outstanding note payable of $82,401 (2010 - $72,401) to a company related to the President and Director of the Company.  Under the terms of the note, the amount owing is unsecured, due interest at 10% per annum and due on demand.  As at March 31, 2013, accrued interest of $19,420 (2012 - $11,599) has been recorded in accrued liabilities.




F-10





HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)


4.

Common Shares


a)

In December 2011, the Company issued 150,000,000 common shares for proceeds of $37,772.  


b)

On July 3, 2012, the former President and Director of the Company returned 700,000,000 split-adjusted common shares to treasury for no consideration.  The common shares were cancelled upon return to treasury.  


c)

On October 12, 2012, the Company and its Board of Directors increased the authorized preferred shares from 10,000,000 shares to 50,000,000 and increased the authorized common shares from 250,000,000 common shares to 700,000,000 common shares.  Furthermore, the Company authorized a 200-to-1 forward stock split of its issued and outstanding common shares.  The effective of the forward stock split increased the number of issued and outstanding common shares from 2,250,000 common shares to 450,000,000 common shares.  The effects of the forward stock split have been applied retroactively since the Company’s date of inception.  


d)

During the year ended May 31, 2013, the Company cancelled 700,000,000 shares of common stock which was returned to treasury.  


5.

Related Party Transactions


a)

As at March 31, 2013, the Company owes $72,500 (2011 - $57,500) to the former President and Director of the Company for management fees.  The amounts owing are unsecured, non-interest bearing, and due on demand.  


b)

During the year ended March 31, 2013, the Company incurred $15,000 (2011 - $30,000) of management fees to the former President and Director of the Company.  


6.

Income Taxes


The income tax benefit differs from the amount computed by applying the US federal income tax rate of 34% to net loss before income taxes for the years ended March 31, 2013 and 2012 as a result of the following:


 

 

2013

$

2012

$

 

 

 

 

Net loss before taxes

 

(60,042)

(97,045)

Statutory rate

 

34%

34%

 

 

 

 

Expected tax recovery

 

(20,414)

(32,995)

Change in valuation allowance

 

20,414

32,995

 

 

 

 

Income tax provision

 


The significant components of deferred income tax assets and liabilities as at March 31, 2013 and 2012, after applying enacted corporate income tax rates, are as follows:


 

 

2013

$

2012

$

 

 

 

 

Net operating losses carried forward

 

90,997

70,583

Valuation allowance

 

(90,997)

(70,583)

 

 

 

 

Net deferred tax asset

 


The Company has incurred operating losses of $267,641 which, if unutilized, will expire through to 2030. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance.



F-11





HARBOR ISLAND DEVELOPMENT CORP.

(A Development Stage Company)

Notes to the Financial Statements

(expressed in U.S. dollars)


7.

Subsequent Events


a)

On April 3, 2013, the Company entered into a license agreement with BrandSeed Inc. (“BrandSeed”), a company incorporated in the state of Virginia, whereby BrandSeed grants the Company a five year license in direct marketing software in exchange for 110,000,000 common shares of the Company.


In addition to the license agreement, the former President and Director of the Company has sold 300,000,000 common shares of the Company to the President and Director of BrandSeed in exchange for $15,000.  Furthermore, the President and Director of BrandSeed became the sole officer and director of the Company upon the resignation of the former President and Director of the Company.  





F-12





ITEM 9.

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


None.


ITEM 9A.

CONTROLS AND PROCEDURES.


Disclosure Controls and Procedures


We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2013. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.


Management’s Report on Internal Control Over Financial Reporting


Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2013 using the criteria established in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").  


A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of March 31, 2013, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.


 

1.

We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities.  

 

 

 

2.

We did not maintain appropriate cash controls – As of March 31, 2013, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts.  Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.

 

 

 

 

3.

We did not implement appropriate information technology controls – As of March 31, 2013, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors.  




16






Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

     

As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2013 based on criteria established in Internal Control—Integrated Framework issued by COSO. 


Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of March 31, 2013, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  


This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Managements report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.


Continuing Remediation Efforts to address deficiencies in Company’s Internal Control over Financial Reporting


Once the Company has sufficient personnel available, then our Board of Directors, in particular and in connection with the aforementioned deficiencies, will establish the following remediation measures:


 

1.

Our Board of Directors will nominate an audit committee or a financial expert on our Board of Directors in fiscal 2014.

 

 

 

2.

We will appoint additional personnel to assist with the preparation of the Company’s monthly financial reporting, including preparation of the monthly bank reconciliations.


ITEM 9B.

OTHER INFORMATION.


None.




17






PART III


ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS.


Identification of Directors and Executive Officers


The following table sets forth the names and ages of our current directors and executive officers:


Name

Age

Position with the Company

Director Since

Chuck Anton (1)

54

CEO, CFO, President, Treasurer, Secretary, & Director

April 4, 2013

Julian Benavides

60

Former CEO, CFO, President, Treasurer, Secretary, & Director

September 26, 2012

Donald Ross

64

Former CEO, CFO, President, Treasurer, Secretary, & Director

March 19, 2010


(1) Chuck was appointed on April 4, 2013

(2) Julian Benavides resigned on April 4, 2013

(3) Donald Ross resigned on September 26, 2012


The board of directors has no nominating, audit or compensation committee at this time.


Term of Office


Each of our directors is appointed to hold office until the next annual meeting of our stockholders or until his respective successor is elected and qualified, or until he resigns or is removed in accordance with the provisions of the Nevada Revised Statutes. Our officers are appointed by our Board of Directors and hold office until removed by the Board or until their resignation.


Background and Business Experience


The business experience during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:


Chuck Anton


Mr. Anton has extensive experience with Fortune 500 and startup companies. From January 2005 to September 2008, he consulted and provided marketing and telecommunications services including build-out and call center management services for EverDrive, LLC a national used auto parts internet retailer located in Richmond, VA.


From January 2008 to December 2010, he consulted with Cuore Marketing a call center client located in Richmond, VA and helped monetize client business for clients like Nascar Members Club, Direct TV, Total Gym, Infusion Brands, Protect America, Body By Jake and many others. As consultant to these companies, he was responsible for the financial aspects of the company’s growth and the respective call center management. From January 2011 to September 2011 Anton consulted with Home Care Delivered (EVP Marketing) and developed and managed the direct sales channel in print for BioDerm Medical Products located in St. Petersburg, FL. from October 2011 to April 2012.


Currently, Mr. Anton owns and operates Brandseed, Inc. and serves as a corporate consultant to various direct response companies. Providing strategic marketing, creative development, channel development and full service project management driving incremental performance based revenues for clients launching new products across multiple marketing channels. 


Designed/built operational and real-time CRM suite of applications to optimize yield for its clients while optimizing sales margins for its clients. Pioneered new strategies and marketing channels to drive sales from unclosed sales calls, abandoned shopping cart traffic, online product registration, database marketing and customer reactivation marketing.


BrandSeed Group has identified, developed and implemented new incremental revenue streams for a number of clients including The Total Gym, NASCAR Membership Club, Phillips HeartStart, Body By Jake, Dual Saw, Procede HairCare, The AbDoer, Protect America, FlavorWave Oven and many others.



18






Created turnkey marketing platforms that consistently produced an incremental lift in sales for its clients from 20% to 50% over their stand-alone marketing efforts.


Developed industry leading platforms to utilize both inbound and outbound telemarketing to drive conversions from unclosed lead sources consistently 2 to 5 times higher than alternative strategies.


He holds a B.S. degree in Industrial & Systems Engineering from Georgia Institute of Technology. He was also is an intern fellowship recipient from Philip Morris USA while he earned his Masters in Industrial & Systems Engineering from Virginia Polytechnic Institute and State University.


Mr. Anton was a finalist for The Ernst & Young Entrepreneur of The Year and his ventures have received the Top 5 Fastest Growing Companies by The Richmond Chamber of Commerce on four different occasions. A previous company he founded was also honored by The March of Dimes as the Most Charitable Company in Richmond, Virginia. He is married with three kids and is an avid golfer and has been named to The Hall Of Fame for The Greater Richmond Bowling Association


Identification of Significant Employees


We have no significant employees, other than Chuck Anton, our President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director.


Family Relationship


We currently do not have any officers or directors of our Company who are related to each other.   


Involvement in Certain Legal Proceedings


During the past ten years no director, executive officer, promoter or control person of the Company has been involved in the following:


(1)

A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;


(2)

Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);


(3)

Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:


i.

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;


ii.

Engaging in any type of business practice; or




19






iii.

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;


Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;


(4)

Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;


(5)

Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;


(6)

Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:


i.

Any Federal or State securities or commodities law or regulation; or


ii.

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or


iii.

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or


(7)

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.


Audit Committee and Audit Committee Financial Expert


The Company does not have an audit committee or an audit committee financial expert (as defined in Item 407 of Regulation S-K) serving on its Board of Directors. All current members of the Board of Directors lack sufficient financial expertise for overseeing financial reporting responsibilities.  The Company has not yet employed an audit committee financial expert on its Board due to the inability to attract such a person.


The Company intends to establish an audit committee of the board of directors, which will consist of independent directors. The audit committee’s duties will be to recommend to the Company’s board of directors the engagement of an independent registered public accounting firm to audit the Company’s financial statements and to review the Company’s accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls. The audit committee will at all times be composed exclusively of directors who are, in the opinion of the Company’s board of directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.


Code of Ethics


Our Board of Directors has not adopted a code of ethics due to the fact that we presently only have one director and we are in the development stage of our operations. We anticipate that we will adopt a code of ethics when we increase either the number of our directors and officers or the number of our employees.



20






Compliance with Section 16(a) of the Exchange Act


Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(e) during the year ended March 31, 2013, Forms 5 and any amendments thereto furnished to us with respect to the year ended March 31, 2013, and the representations made by the reporting persons to us, we believe that during the year ended March 31, 2013, our executive officers and directors and all persons who own more than ten percent of a registered class of our equity securities complied with all Section 16(a) filing requirements.


ITEM 11.

EXECUTIVE COMPENSATION


The following table sets forth the compensation paid to our executive officers during the twelve month periods ended March 31, 2013 and 2012: 


Summary Compensation Table


Name

and

Principal

Position

Fiscal

Year

Ended

3/31




Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive

Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings

($)

All Other Compensation

($)

Total

($)

Donald  Ross(1)

President, CEO, CFO, Secretary, Treasurer and Director

2013

?

-0-

-0-

-0-

-0-

-0-

-0-

 

2012

30,000

-0-

-0-

-0-

-0-

-0-

-0-

30,000

Julian Benavides

President, CEO, CFO, Secretary, Treasurer and Director

2013

?

-0-

-0-

-0-

-0-

-0-

-0-

 

 

 

 

 

 

 

 

 

 


(1)

Pursuant to an Amended Management Agreement with Mr. Ross dated November 3, 2010 and effective April 26, 2010, Mr. Ross has agreed to act as our sole officer and director in exchange for a fee of $2,500 per calendar month.  The Agreement is on a month-to-month basis until notice of cancellation is provided by either party.


Narrative Disclosure to Summary Compensation Table


There are no compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.


Outstanding Equity Awards at Fiscal Year-End


No executive officer received any equity awards, or holds exercisable or unexercisable options, as of the year ended March 31, 2013.


Long-Term Incentive Plans


There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.  

 

Compensation Committee

 

We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.



21






Compensation of Directors


Our directors receive no extra compensation for their service on our Board of Directors.


ITEM 12.

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


Security Ownership of Management


The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of  March 31, 2013, by: (i) each of our directors; (ii) each of our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of common stock.  Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.


Name and Address of Beneficial Owner

Title of Class

Amount and Nature of  Beneficial

Ownership (1)

(#)

Percent of Class (2)

(%)

Julian Benavides (3)

2275 NW 150th Street, Unit B

Opa Locka, FL 33054

Common

300,000,000

86.96%

All Officers and Directors as a Group (1 Person)

Common

300,000,000

86.96%


(1)

The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.


(2)

Based on 450,000,000 issued and outstanding shares of common stock as of  March 31, 2013.


(3)

Julian Benavides was the Company’s President, CEO, CFO, Treasurer, Secretary and a Director as of March 31, 2013. His beneficial ownership includes 300,000,000 common shares.  


Changes in Control


There are no present arrangements or pledges of the Company’s securities which may result in a change in control of the Company.


ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.


Related Party Transactions


With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manor:

 

·

Disclosing such transactions in reports where required;

·

Disclosing in any and all filings with the SEC, where required;

·

Obtaining disinterested directors consent; and

·

Obtaining shareholder consent where required.



22






Director Independence


For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  


According to the NASDAQ definition, Donald Ross is not an independent director because he is also an executive officer of the Company.  


Review, Approval or Ratification of Transactions with Related Persons


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.


 

 

Year Ended

March 31, 2013

 

Year Ended

March 31, 2012

Audit fees

$

10,000

$

10,000

Audit-related fees

$

0

$

0

Tax fees

$

0

$

0

All other fees

$

0

$

0

Total

$

10,000

$

10,000


Audit Fees


During the fiscal years ended March 31, 2013, we incurred approximately $10,000 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for fiscal year ended March 31, 2013.


During the fiscal year ended March 31, 2012, we incurred approximately $10,000 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for fiscal year ended March 31, 2012.


Audit-Related Fees


The aggregate fees billed during the fiscal years ended March 31, 2013 and 2012 for assurance and related services by our principal independent accountants that are reasonably related to the performance of the audit or review of our financial statements (and are not reported under Item 9(e)(1) of Schedule 14A was $0 and $0, respectively.


Tax Fees


The aggregate fees billed during the fiscal years ended March 31, 2013 and 2012 for professional services rendered by our principal accountant tax compliance, tax advice and tax planning were $0 and $0, respectively.


All Other Fees


The aggregate fees billed during the fiscal year ended March 31, 2013 and 2012 for products and services provided by our principal independent accountants (other than the services reported in Items 9(e)(1) through 9(e)(3) of Schedule 14A was $0 and $0, respectively.




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PART IV


ITEM 15.

EXHIBITS.


(a)

Exhibits

 

Exhibit

 

 

Number

Description of Exhibit

Filing

3.01

Articles of Incorporation

Filed with the SEC on May 5, 2010 as part of our Registration Statement on Form S-1.

3.02

Bylaws

Filed with the SEC on May 5, 2010 as part of our Registration Statement on Form S-1.

10.01

Non-Exclusive Distributor Agreement between the Company and Island Stuff USA dated March 12, 2010

Filed with the SEC on May 5, 2010 as part of our Registration Statement on Form S-1.

10.02

Form of Promissory Note to Steve Ross dated April 23, 2010

Filed with the SEC on May 5, 2010 as part of our Registration Statement on Form S-1.

10.03

Form of Promissory Note to Alpha Eagle Development Limited dated April 23, 2010   

Filed with the SEC on May 5, 2010 as part of our Registration Statement on Form S-1.

10.04

Form of Management Agreement between the Company and Donald Ross dated April 26, 2010

Filed with the SEC on May 5, 2010 as part of our Registration Statement on Form S-1.

10.05

Amended Non-Exclusive Distributor Agreement between the Company and Island Stuff USA dated July 23, 2010

Filed with the SEC on July 30, 2010 as part of our Amended Registration Statement on Form S-1/A.

10.06

Consulting Agreement between the Company and Voltaire Gomez dated September 23, 2010

Filed with the SEC on November 4, 2010 as part of our Amended Registration Statement on Form S-1/A.

10.07

Amended Management Agreement between the Company and Donald Ross dated November 3, 2010

Filed with the SEC on November 4, 2010 as part of our Amended Registration Statement on Form S-1/A.

10.08

Promissory Note to Steve Ross dated November 3, 2010

Filed with the SEC on November 4, 2010 as part of our Amended Registration Statement on Form S-1/A.

10.09

Promissory Note to Steve Ross dated November 3, 2010

Filed with the SEC on November 4, 2010 as part of our Amended Registration Statement on Form S-1/A.

10.10

Promissory Note to Steve Ross dated November 3, 2010

Filed with the SEC on November 4, 2010 as part of our Amended Registration Statement on Form S-1/A.

10.11

Amended Promissory Note to Steve Ross dated November 23, 2010

Filed with the SEC on November 30, 2010 as part of our Amended Registration Statement on Form S-1/A.

31.01

Certification of Principal Executive Officer Pursuant to Rule 13a-14

Filed herewith.

31.02

Certification of Principal Financial Officer Pursuant to Rule 13a-14

Filed herewith.

32.01

CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act

Filed herewith.

101.INS*

XBRL Instance Document

Filed herewith.

101.SCH*

XBRL Taxonomy Extension Schema Document

Filed herewith.

101.LAB*

XBRL Taxonomy Extension Labels Linkbase Document

Filed herewith.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith.




24






SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



HARBOR ISLAND DEVELOPMENT CORP.


Dated:  July 11, 2013


/s/Chuck Anton

By: Chuck Anton

Its: President, Principal Executive Officer & Principal Financial Officer (Principal Accounting Officer)



Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:



Dated:  July 11, 2013


/s/Chuck Anton

By: Chuck Anton

It’s Director




25