ITEM 1.
BUSINESS
CORPORATE HISTORY
We were incorporated on May 28, 2004 under the laws of the State of Nevada. Our principal offices are located at 802-610 Granville Street, Vancouver,BC Canada. Our telephone number is (604) 689-5661.
OUR BUSINESS
We are a development stage company focused on the development of real estate. We have acquired real property located in Solidaridad, Mexico (the "Solidaridad Property") on which we have constructed and provide management services for the apartment units being constructed on the adjoining property. Ms. Galan-Rios has completed the apartment units as of the date of this annual report..
We have earned revenues to date for the sum of $73,606. Our strategy is to acquire, manage, and develop income-producing real property in Mexico. We plan to earn revenues from management services, including reception, greeting, and general bookkeeping services, provided to the apartment units being constructed on the land adjacent to the Solidaridad Property and the operation of certain facilities on the Solidaridad Property. We are presently in the development stage of our business and we can provide no assurance that the revenues from management services generated will exceed our operating costs. Since our inception, we have used our common stock to raise money for asset acquisitions, for corporate expenses and to repay outstanding indebtedness. We have not attained profitable operations and are dependent upon obtaining financing to pursue our business plan. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.
The Solidaridad property has been developed and we commenced operations as of February 25th, 2007.
Recent Corporate Developments
We experienced the following significant developments since November 30, 2008:
1. We achieved revenues for the year from Operations of or Solidaridad Property of $73,606.
Solidaridad Property
The property consists of the Western half of the fraction of Lot #10 located at Km 8, Carretara a Tulum-Boca Paila Ejido Jose Maria Pino Suarez Municipality of Solidaridad, Quintana Roo, Mexico. See Figure 1 below. Solidaridad is one of the eight municipalities that make up the Mexican state of Quintana Roo. Quintana Roo is located on the eastern part of the Yucatán Peninsula. It borders the Mexican states of Yucatán and Campeche to the north and west, the Caribbean Sea to the east, and the nation of Belize to the south.
Figure 1
Property Location
We agreed to provide septic and water services to tenants on the adjoining property at a rate of $50 per apartment unit per month. We agreed that commencing on the completion of construction of the units, for a 25-year period following November 29, 2004, we will provide security, maintenance and gardening services for the Solidaridad Property for a fee of $250 per unit per month. We also agreed to grant to Mrs. Galan-Rios and any of the potential tenants, access to the road presently existing on the Solidaridad Property.
We presently do not have any written agreements with our third party contractors to provide the management, maintenance and septic services to the apartment units on the adjoining property. All understandings and arrangements with our consultants are presently verbal.
Under the terms of our agreement with Ms. Galan-Rios, we were assigned her interest in an occupation order issued by the Ejidal Commissariat of the Ejido NCPE Jose Maria Pino Suarez for the use and possession of the Solidaridad Property. Under Mexican law we own the right to possess and make use of the Solidaridad Property but do not own title to the property until a legal survey is completed by the Mexican government. The Mexican government is expected to undertake a legal survey of the Solidaridad Property and surrounding areas within the next twelve months. Once the legal survey is completed the Mexican government may require an additional fee prior to effecting a transfer of legal title to the property to Rancho. Because we do not own legal title to our Solidaridad Property we are subject to the risk that: (i) conditions may be imposed on our occupation order for the property and/or the order may be cancelled; (ii) the Mexican government may delay the implementation of a legal survey or decide not to undertake a survey of the property; and (iii) if a legal survey is completed there is no assurance that we will not be required to pay additional fees for the transfer of legal title to the property or that the property boundaries will be identical to those granted in the occupation order issued by the Ejidal Commissariat.
Revenue Model
Our strategy is to acquire, manage, and develop income-producing real property in Mexico. We are also presently reviewing candidates for development in Canada. We have earned revenues to date for the sum of $73,606. Our auditors have made reference to the substantial doubt as to our ability to continue as a going concern in their audit report on our audited financial statements for the period ended November 30, 2007. We earn revenues from management services, including reception, greeting, and general bookkeeping services, provided to the apartment units being constructed on the land adjacent to the Solidaridad Property and the operation of certain facilities on the Solidaridad Property.
A total of eleven apartments units are currently completed on the portion of the property not purchased. Once all the final testing and furniture has been installed in the apartment units, the Company plans to enter into an agreement to charge maintenance and management fees of $250 per unit every month, and service fees of $50 per unit every month to the apartment owners.
Facilities on the Solidaridad Property
The Solidaridad Property has been completed. Additions include an 18 foot by 35 foot swimming pool, a 25 jet Jacuzzi, a bar and restaurant area, a full outdoor theatre/performance area, a reception area, 2 John Deere sound acoustic engines with WEC generators, a three phase electric system to the building, a new storage facility, a living quarters for the workers and security people, an 18,000 litre water reservoir, a barbeque area, a connecting walkway to the adjoining spa, paved parking, and a white cement walkway from the roadway to the building.
Marketing Strategy
Our business plan is to continue to develop, maintain and manage our Solidaridad Property. We plan to acquire additional properties for development in Canada and Mexico. We are presently in the development stage of our business and we can provide no assurance that we will be able to generate sufficient revenues to exceed our operating expenses. We currently have no employees. We conduct our business largely through agreements with consultants and independent contractors.
Competition
Our competitors have substantially greater capital resources, name recognition, expertise in commercial real estate development and marketing. A number of residential and commercial developers and real estate services companies, some with greater financial and other resources, compete with us in seeking properties for acquisition, resources for development and prospective purchasers. Competition from other real estate developers and real estate services companies may adversely affect our ability to:
1. develop rental facilities
2. attract purchasers
3. sell undeveloped rural land
The presence of competing real estate development companies in Mexico may impact on our ability to raise additional capital in order to fund our property acquisitions or property developments in Mexico if investors are of the view that investments in competitors are more attractive. Competition could also reduce the availability of properties of merit or increase the cost of acquiring the properties.
Although we primarily rely on occupancy of the apartment units on the adjoining property for revenues, competition from neighbouring hotel properties such as the Tita Tulum Hotel, Ana Y Jose Hotel, Los Lirios Hotel, and the Esmeralda Hotel, may adversely affect the occupancy level of the apartment units on the adjoining property which may result in reduced rental revenue from our management services and rental of cabanas. Also, the presence of competing real estate development companies in Mexico may impact on our ability to raise additional capital in order to fund our property acquisitions or property developments in Mexico if investors are of the view that investments in competitors are more attractive. Competition could also reduce the availability of properties of merit or increase the cost of acquiring the properties.
Competition in the industry is based primarily on the level of service, quality of accommodations and amenities, convenience of the units and rental rates. We intend to compete with neighbouring hotels by providing superior service, quality of accommodations and amenities and convenience. We believe that due to our size and location we can offer greater privacy to guests. Should we be unable to provide service, quality of accommodations and convenience at an attractive rate, we may not be able to compete effectively.
The seasonality of the vacation rental industry may, from time to time, affect our rental income. We anticipate lower rental levels of our facilities in the off-season. If there is little demand for our rental facilities, our revenues could fall.
Government Regulations
Our present operations and development activities in Mexico are subject to Mexican federal, state and local laws and regulations, relating to the protection of the environment, including those concerning water supply, wastewater, noise, soil pollution and generation and handling of hazardous waste and materials and environmental impact.
Mexican state and local laws also regulate in the areas of water, atmospheric pollution, hazardous wastes or substances. The possibility exists that in the future that our facilities and operations will encounter: (i) newer and stricter state or local environmental laws and regulations, (ii) more rigorous interpretations of existing environmental laws and regulations, and/or (iii) stricter enforcement of federal, state and local environmental law regulations. Changes in laws or the interpretation thereof, new enforcement of laws, the identification of new facts or the failure of other parties to perform remediation could all lead to new or greater liabilities that could materially adversely affect our business, results of operations or financial condition.
The Solidaridad Property is subject to federal, state and local regulations and restrictions that may impose significant limitations on our ability to develop them. In addition, our ownership and operation of real property is subject to extensive and evolving federal, state and local environmental laws and other regulations. The provisions and enforcement of these environmental laws and regulations may become more stringent in the future. Violations of these laws and regulations can result in:
1. civil penalties;
2. remediation expenses;
3. natural resource damages;
4. personal injury damages;
5. potential injunctions;
6. cease and desist orders; and
7. criminal penalties.
In addition, some of these environmental laws impose strict liability, which means that we may be held liable for any environmental damages on our property regardless of our fault. The presence of hazardous substances on a property may also adversely affect our ability to sell or develop the property or to borrow using the property as collateral.
We believe that Rancho is in compliance in all material respects with all Mexican federal, state and local laws and regulations relating to water, atmospheric pollution, hazardous wastes or substances. We have not been notified by any environmental authority or any third party, of any material noncompliance, liability or claim related to those environmental matters in connection with any of its present properties. The possibility exists that in the future that Rancho and its operations will encounter: (i) newer and stricter federal, state or local environmental laws and regulations, (ii) more rigorous interpretations of existing environmental laws and regulations, and/or (iii) stricter enforcement of federal, state and local environmental law regulations.
Under Mexican law we own the right to possess and make use of the Solidaridad Property but do not own title to the property until a legal survey is completed by the Mexican government. Because we do not own legal title to our Solidaridad Property we are subject to the risk that: (i) conditions may be imposed on our occupation order for the property and/or the order may be cancelled; (ii) the Mexican government may delay the implementation of a legal survey or decide not to undertake a survey of the property; and (iii) if a legal survey is completed there is no assurance that we will not be required to pay additional fees for the transfer of legal title to the property or that the property boundaries will be identical to those granted in the occupation order issued by the Ejidal Commissariat.
Employees
We have no employees as of the date of this Annual Report. We conduct our business largely through consulting agreements with our executive officers and arms-length third parties. We have engaged an independent contractor to provide property maintenance, gardening and security services to the Solidaridad Property at a rate of $400 per month. Upon completion of the apartment units on the adjoining property and the development of our Solidaridad Property we intend to increase the payment rate to our contractor to $600 per month for property maintenance, gardening and security services provided to the Solidaridad Property and the adjoining property. We intend to hire an additional contractor to provide property management services to the apartment units on the adjoining property and the Solidaridad Property at a rate of $600 per month upon completion of the apartment units and the Solidaridad Property.
Research and Development Expenditures
We have not incurred any research or development expenditures since our incorporation.
Subsidiaries
We have no subsidiaries.
Patents and Trademarks
We do not own, either legally or beneficially, any patent or trademark.
ITEM 1A.
ITEM 1A.
RISK FACTORS
Forward-looking statements in this report are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements include underlying assumptions and other statements that are other than historical facts. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements, including, but not limited to, the following: the ability of the Company to provide for its obligations, to provide working capital needs from operating revenues, to obtain additional financing needed for any future acquisitions, to meet competitive challenges and technological changes, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission ("SEC").
We Do Not Own Legal Title To Our Solidaridad Property, And As A Result May Lose All Or Substantially All Of Our Interests In The Property.
Under the terms of the property purchase agreement for our Solidaridad Property, Ms. Galan-Rios assigned to us her interest in an occupation order issued by the Ejidal Commissariat of the Ejido NCPE Jose Maria Pino Suarez for the use and possession of the Solidaridad Property. Under Mexican law we own the right to possess and make use of our Solidaridad Property but do not own title to the property until a legal survey is completed by the Mexican government. Because we do not own legal title to our Solidaridad Property we are subject to the risk that: (i) conditions may be imposed on our occupation order for the property and/or the order may be cancelled; (ii) the Mexican government may delay the implementation of a legal survey or decide not to undertake a survey of the property; and (iii) if a legal survey is completed there is no assurance that we will not be required to pay additional fees for the transfer of legal title to the property or that the property boundaries will be identical to those granted in the occupation order issued by the Ejidal Commissariat. The occurrence of any of the above risks would have a material adverse effect our business, results of operations or financial condition.
Environmental And Other Regulations May Have An Adverse Effect On Our Business.
Our present operations and development activities in Mexico are subject to Mexican state and local laws and regulations, respectively, relating to the protection of the environment, including those concerning water supply, wastewater, noise, soil pollution and generation and handling of hazardous waste and materials and environmental impact.
We believe that we are in compliance in all material respects with all Mexican state and local laws and regulations relating to water, atmospheric pollution, hazardous wastes or substances. We have not been notified by any environmental authority or any third party, of any material noncompliance, liability or claim related to those environmental matters in connection with any of our present properties. The possibility exists that in the future that our facilities and operations will encounter: (i) newer and stricter state or local environmental laws and regulations, (ii) more rigorous interpretations of existing environmental laws and regulations, and/or (iii) stricter enforcement of federal, state and local environmental law regulations.
The Solidaridad Property is subject to federal, state and local regulations and restrictions that may impose significant limitations on our ability to develop them. In addition, our ownership and operation of real property is subject to extensive and evolving federal, state and local environmental laws and other regulations. The provisions and enforcement of these environmental laws and regulations may become more stringent in the future. Violations of these laws and regulations can result in:
1. civil penalties;
2. remediation expenses;
3. natural resource damages;
4. personal injury damages;
5. potential injunctions;
6. cease and desist orders; and
7. criminal penalties.
In addition, some of these environmental laws impose strict liability, which means that we may be held liable for any environmental damages on our property regardless of our fault. The presence of hazardous substances on a property may also adversely affect our ability to sell or develop the property or to borrow using the property as collateral.
Changes in laws or the interpretation thereof, new enforcement of laws, the identification of new facts or the failure of other parties to perform remediation could all lead to new or greater liabilities that could materially adversely affect our business, results of operations or financial condition.
We Are Highly Dependent On Our Senior Management. The Loss Of Any Of Our Executive Officers Could Have A Material Adverse Effect On Our Business.
Our future success is highly dependent upon the continued employment of our senior management. The loss of any of our executive officers could have a material adverse effect on our business. We believe that our continued success depends to a significant extent upon the efforts and abilities of our senior management and in particular Graham Alexander, our president, chief financial officer, chief executive officer, secretary and treasurer. The loss of Mr. Alexander's business experience, personal knowledge of the Tulum region where our property is located, and his local business contacts in Mexico, could materially adversely affect our business, results of operations or financial condition.
The Occurrence In Mexico Of Natural Disasters Could Adversely Affect Our Business.
Our property is located in Mexico. The occurrence of natural disasters, such as fires, hurricanes, floods, unusually heavy or prolonged rain and droughts in Mexico could have a material adverse effect on our ability to develop properties or realize income from our property.
Because We Are Significantly Smaller And Less Established Than A Majority Of Our Competitors, We May Lack The Financial Resources Necessary To Compete Effectively And Sustain Profitability.
Our competitors have substantially greater capital resources, name recognition, expertise in commercial real estate development and marketing. A number of residential and commercial developers and real estate services companies, some with greater financial and other resources, compete with us in seeking properties for acquisition, resources for development and prospective purchasers. Competition from other real estate developers and real estate services companies may adversely affect our ability to:
1. develop rental facilities
2. attract purchasers
3. sell undeveloped rural land
The presence of competing real estate development companies in Mexico may impact on our ability to raise additional capital in order to fund our property acquisitions or property developments in Mexico if investors are of the view that investments in competitors are more attractive. Competition could also reduce the availability of properties of merit or increase the cost of acquiring the properties.
Because Our President And Our Vice-President Have Only Agreed To Provide Their Services On A Part-Time Basis, They May Not Be Able Or Willing To Devote A Sufficient Amount Of Time To Our Business Operations, Causing Our Business To Fail.
Our directors and officers are employed on a full time basis by other companies. Because we are in the early stages of our business, Mr. Alexander, our president, chief financial officer, chief executive officer, secretary and treasurer, and Ms. Manetta, our vice-president, are not expected to spend a significant amount of time on our business. Mr. Alexander and Ms. Manetta each expect to expend approximately 8-10 hours per week on our business. Competing demands on their time may lead to a divergence between their interests and the interests of other shareholders.
Because Our President, Mr. Graham Alexander, Owns both directly and indirectly 84% Of Our Outstanding Common Stock, Investors May Find That Corporate Decisions Influenced By Mr. Alexander Are Inconsistent With The Best Interests Of Other Stockholders.
Mr. Graham Alexander, our president, chief financial officer, chief executive officer, secretary and treasurer, controls 84% of our issued and outstanding shares of common stock. Accordingly, in accordance with our articles of incorporation and bylaws, Mr. Alexander is able to control who is elected to our board of directors and thus could act, or could have the power to act, as our management. The interests of Mr. Alexander may not be, at all times, the same as that of other shareholders. Since Mr. Alexander is not simply a passive investor but is also one of our active executives, his interests as an executive may, at times, be adverse to those of passive investors. Where those conflicts exist, our shareholders will be dependent upon Mr. Alexander exercising, in a manner fair to all of our shareholders, his fiduciary duties as an officer or as a member of our board of directors. Also, Mr. Alexander will have the ability to significantly influence the outcome of most corporate actions requiring shareholder approval, including the merger of Rancho with or into another company, the sale of all or substantially all of our assets and amendments to our articles of incorporation. This concentration of ownership with Mr. Alexander may also have the effect of delaying, deferring or preventing a change in control of Rancho which may be disadvantageous to minority shareholders.
We Do Not Carry Comprehensive Liability Insurance. As A Result, Should An Uninsured Loss Occur, We Could Lose Our Capital Invested In The Solidaridad Property, As Well As The Anticipated Future Revenues From Such Property.
We do not currently carry comprehensive liability, fire, hurricane, storm, earthquake and business interruption insurance with respect to our business operations in Mexico. Should an uninsured loss occur, we could lose our capital invested in the Solidaridad Property, as well as the anticipated future revenues from such property and would continue to be obligated on any indebtedness or other obligations related to the property. Any such loss could have a material adverse effect on Rancho.
ITEM 2.
ITEM 2.
PROPERTIES
Office Location
We rent approximately 100 square feet of office space located 3104 Sunnyhurst Rd., North Vancouver, BC, V7K-2G3, Canada. The office rental was negotiated in December, 2008 on a non-arms length basis and is provided at a cost of $100 per month. This rental is on a month-to-month basis with no formal agreements. See "Certain Relationships and Related Transactions" below.
Our month-to-month rental arrangements will allow us flexibility in relocation if we employ more personnel, however, we believe these facilities are adequate in size to handle all of our current operations for the foreseeable future.
Description of Real Estate And Operating Data
We entered into an agreement dated for reference November 29, 2004 with Monica Galan-Rios pursuant to which we acquired certain lands located in the State of Quintana Roo, Mexico consisting of approximately 2,120 square meters. Under the terms of the agreement, Ms. Galan-Rios assigned to us her interest in an occupation order issued by the Ejidal Commissariat of the Ejido NCPE Jose Maria Pino Suarez for the use and possession of a fraction of the Solidaridad Property for consideration of $30,000 cash and an unsecured promissory note in the amount of $50,000. Currently, we own the right to possess and make use of the Solidaridad Property. We will own title to the property when a legal survey is completed by the Mexican government.
The Solidaridad Property is located on the Western half of the fraction of Lot #10 located at Km 8, Carretara a Tulum-Boca Paila Ejido Jose Maria Pino Suarez Municipality of Solidaridad, Quintana Roo, Mexico. Quintana Roo is located on the eastern part of the Yucatán Peninsula. It borders the Mexican states of Yucatán and Campeche to the north and west, the Caribbean Sea to the east, and the nation of Belize to the south. Solidaridad is one of the eight municipalities that make up the Mexican state of Quintana Roo. It was created in 1993 when the municipality of Cozumel was split into two, with the mainland section constituting the municipality of Solidaridad. Solidaridad is home to the Maya archaeological sites of Tulum, Xcaret, and Cobá.
Insurance
As of the date of this prospectus, we do not carry comprehensive liability, fire, hurricane, storm, earthquake and business interruption insurance with respect to our business operations in Mexico. Should an uninsured loss occur, we could lose our capital invested in the Solidaridad Property, as well as the anticipated future revenues from such property and would continue to be obligated on any indebtedness or other obligations related to the property. Any such loss could have a material adverse effect on Rancho. We plan to obtain comprehensive liability insurance once we complete development of our Solidaridad Property.
Investment Policies
We have no established policy with respect to investments on real estate or interests in real estate; however, we intend to continue to explore ways to increase the value of our Solidaridad Property and to improve management activities thereon. As of the date of this prospectus our only real estate operation is through our ownership interest in the Solidaridad Property. We may also look for new real estate investment opportunities in hotels, apartments, office buildings and shopping centers in Mexico. There are no limitations on the percentage of our assets which may be invested in any one investment or type of investments. Our Board of Directors may set such policy without a vote of our shareholders. We do not plan to limit the geographical area in which we may invest, but we expect that all or a majority of our investments will be made in Mexico. We have no current plans to form a joint venture or other arrangements with third parties to engage in real estate development.
The acquisition of any new real estate investments will depend on our ability to find suitable investment opportunities and the availability of sufficient financing to acquire such investments. To help fund any such acquisition, we plan to borrow funds to leverage our investment capital. The amount of this debt will depend on a number of factors including, but not limited to, the availability of financing and the sufficiency of the project's projected cash flows to support the operations and debt service. Because we do not own legal title to our Solidaridad Property we are restricted in our ability to place a mortgage on the property. There are no restrictions in our articles of incorporation or bylaws restricting our ability to place a mortgage on our property or on other properties we may acquire from time to time. There are presently no material mortgages, liens or other encumbrances against the Solidaridad Property.
ITEM 3.
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 any officer or any of our directors or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 4.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our shares commenced trading on the Over-The-Counter Bulletin Board (the "OTCBB") under the symbol RSDV on December 13, 2005. The high and the low bid prices for our shares for the last two fiscal years of actual trading, as reported by the OTCBB were:
The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
Holders of Common Stock
As of March 2nd , 2009, we had 71 active shareholders of record.
Dividends
We have not declared any dividends on our common stock since our inception. There are no dividend restrictions that limit our ability to pay dividends on our common stock in our Articles of Incorporation or bylaws. Chapter 78 of the Nevada Revised Statutes (the "NRS"), does provide certain limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:
(a)
we would not be able to pay our debts as they become due in the usual course of business; or
(b) 	
except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution.
Recent Sales of Unregistered Securities
None
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 7.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Management's Discussion and Analysis of Financial Condition or Plan of Operation and other sections of this report contain forward-looking statements that are based on the current beliefs and expectations of management, as well as assumptions made by, and information currently available to, the Company's management. Because such statements involve risks and uncertainties, actual actions and strategies and the timing and expected results thereof may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited financial statements and accompanying notes and other financial information appearing elsewhere in this annual report on Form 10-K.
PLAN OF OPERATION
Our plan of operation is to acquire, manage, and develop income-producing real property in Mexico. We have earned $73,606 in revenues to date. We commenced operation on February 25th, 2007.
Our auditors have made reference to the substantial doubt as to our ability to continue as a going concern in their audit report on our audited financial statements for the period ended November 30, 2008. We plan to earn revenues from management services, including reception, greeting, and general bookkeeping services, provided to the apartment units being constructed on the land adjacent to the Solidaridad Property and the operation of certain facilities on the Solidaridad Property.
Our business plan is to continue to develop, maintain and manage our Solidaridad Property. We are presently in the development stage of our business and we can provide no assurance that we will be able to generate revenues from the development and management of our Solidaridad Property or that the revenues generated will exceed the operating costs of our business. We currently have no employees. We conduct our business largely through agreements with consultants, independent contractors and arms-length third parties. We do not intend to hire any employees over the next twelve months.
MILESTONES AND OBJECTIVES
The table below highlights our milestones and objectives over the next twelve months:
We anticipate spending approximately $105,000 in pursuing our plan over the next twelve months. Currently, we have cash of $1 ,761, which is insufficient to allow us to meet our current commitments and to complete our plan of operation for the next twelve months. In addition, we do not expect our business to achieve profitability in the near future as we expect to continue to incur substantial product development, marketing and operating expenses. We are likely to need substantial additional financing in order to implement our long term business strategy and plan of operation. We anticipate that any additional financing will likely be in the form of equity financing as substantial debt financing is not expected to be available at this stage of our business.
Currently, we do not have any financing arrangements in place and there is no assurance that we will be able to obtain sufficient financing in order to complete Phase II or III of our plan of operation. If we do not obtain the necessary financing, then our plan of operation will be scaled back according to the amount of funds available. The inability to raise the necessary financing will severely restrict our ability to complete the Solidaridad Property development.
Our actual expenditures and business plan may differ from the one stated above. Our Board of Directors may decide not to pursue this plan. In addition, we may modify the plan based on available financing.
In addition to the costs outlined above, we anticipate that we will incur over the next twelve months the following expenses:
We have cash of $1,761 as of the date of this annual report. Our total expenditures over the next twelve months are anticipated to be approximately $105,000, the majority of which is due to obtaining new properties in Canada or Mexico.
RESULTS OF OPERATIONS
We have earned revenues of $73,606 for the year ending November 30th, 2008. We are presently in the development stage of our business and we can provide no assurance that we will be able to generate revenues from the development and management of our Solidaridad Property or that the revenues generated will exceed the operating costs of our business.
Summary
We provide maintenance services and septic/water services to tenants of the adjoining property:
In the event we do not generate sufficient revenues from our Solidaridad Property, we will not have sufficient cash on hand to fund our proposed expenditures for the next twelve months and will require additional financing to pursue our stated plan of operation. We anticipate that such funding will be in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund additional expenditures. The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until we generate sufficient revenues from our property development. We do not have any arrangements in place for any future equity financing.
Future Financing
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any of additional sales of our equity securities or arrange for debt or other financing for to fund our planned business activities.
We presently do not have any arrangements for additional financing beyond Phase II of our development program, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with development work beyond Phase II of our program.
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 our stockholders.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount 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. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain.
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 2 to the audited financial statements included in this Annual Report.
Development Stage Company
Rancho is a development stage company as defined in the Statements of Financial Accounting Standards No. 7. Rancho is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception has been considered as part of the Rancho's development stage activities.
Property
Property consists of land and building and is recorded at cost. Land improvements are capitalized and maintenance, repairs and minor replacements are expensed as incurred.
Stock Based Compensation
Rancho accounts for employee stock based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 - "Accounting for Stock Issued to Employees", and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the market price of the Company's common stock at the date of the grant over the amount an employee must pay to acquire the common stock. Non-employee stock based compensation is accounted for using the fair value method in accordance with SFAS No. 123 - "Accounting for Stock Based Compensation".
Impairment of Long-Lived Assets
Rancho periodically evaluates potential impairments of its long-lived assets, including intangibles. When Rancho determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, Rancho evaluates the projected undiscounted cash flows related to the assets. If these cash flows are less than the carrying value of the assets, Rancho measures the impairment using discounted cash flows or other methods of determining fair value.
Long-lived assets to be disposed of are carried at the lower of cost or fair value less estimated costs of disposal.
Foreign Currency Translation
The Company's functional and reporting currency is the U.S. dollar. Transactions in foreign currency are translated into U.S. dollars as follows:
i) 	
monetary items at the rate prevailing at the balance sheet date;
ii) 	
non-monetary items at the historical exchange rate;
iii) 	
Revenue and expense at the average rate in effect during the applicable accounting period.
Exchange gains or losses resulting from such transactions are included in the determination of net loss for the period.
RISKS AND UNCERTAINTIES
Our Ability To Issue "Blank Check" Preferred Stock, Could Have The Effect Of Deterring Or Delaying A Take Over Or Other Change In Control, Denying Shareholders The Receipt Of A Premium On Their Common Stock And Depress The Market Price Of Our Common Stock.
Rancho's board of directors, without any action by Rancho's shareholders, has the authority to issue the remaining undesignated and unissued authorized shares and to fix the powers, preferences, rights and limitations of such shares or any class or series thereof, without shareholder approval. Persons acquiring such shares could have preferential rights with respect to voting, liquidation, dissolution or dividends over existing shareholders. The ability to issue undesignated shares, could have the effect of deterring or delaying a take over or other change in control, deny shareholders the receipt of a premium on their common stock and depress the market price of Rancho's common stock.
Our Adoption Of Stock Based Benefit Plans And Future Equity Financings May Dilute Existing Stockholders' Ownership Interests.
In November, 2004, our board of directors approved the 2004 Stock Option Plan (the "2004 Plan"). Under the 2004 Plan, options to purchase up to 750,000 shares of our common stock may be granted to our employees, officers, directors, and eligible consultants. The 2004 Plan will increase our future compensation costs, thereby reducing our earnings, and shareholders may experience a reduction in ownership interest in the event newly issued shares are used to fund awards made under the plan. Further, we rely upon the availability of equity capital to fund our growth, which financing may or may not be available on favorable terms or at all. Equity capital could include our common stock or preferred stock. We cannot guarantee that additional financing, refinancing or other capital will be available in the amounts we desire or on favorable terms.
Because Our Stock Is A Penny Stock, Stockholders Will Be More Limited In Their Ability To Sell Their Stock.
The shares of our common stock constitute "penny stocks" under the Exchange Act. The shares will remain classified as a penny stock for the foreseeable future. The classification as a penny stock makes it more difficult for a broker/dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker/dealer engaged by the purchaser for the purpose of selling his or her shares will be subject to rules 15g-1 through 15g-10 of the Exchange Act. Rather than having to comply with these rules, some broker-dealers will refuse to attempt to sell a penny stock.
The "penny stock" rules adopted by the SEC under the Exchange Act subjects the sale of the shares of our common stock to certain regulations which impose sales practice requirements on broker/dealers. For example, brokers/dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities.
Legal remedies, which may be available to you as an investor in "penny stocks", are as follows:
(a)
if "penny stock" is sold to you in violation of your rights listed above, or other federal or states securities laws, you may be able to cancel your purchase and get your money back.
(b)
if the stocks are sold in a fraudulent manner, you may be able to sue the persons and firms that caused the fraud for damages.
(c)
if you have signed an arbitration agreement, however, you may have to pursue your claim through arbitration.
If the person purchasing the securities is someone other than an accredited investor or an established customer of the broker/dealer, the broker/dealer must also approve the potential customer's account by obtaining information concerning the customer's financial situation, investment experience and investment objectives. The broker/dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the SEC's rules may limit the number of potential purchasers of the shares of our common stock.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
ITEM 8
ITEM 8 .
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Rancho Santa Monica Developments, Inc.
We have audited the accompanying balance sheets of Rancho Santa Monica Developments, Inc. as of November 30, 2008 and 2007, and the related statements of operations, stockholders' equity and cash flows for the years ended November 30, 2008 and 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 Rancho Santa Monica Developments, Inc. as of November 30, 2008 and 2007, and the related statements of operations, stockholders' equity and cash flows for the years ended November 30, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.
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, since inception the Company has incurred losses and net cash outflows from operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
Moore & Associates, Chartered
Las Vegas, Nevada
February 18, 2009
6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Balance Sheets
The accompanying notes are an integral part of these financial statements.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Statements of Operations
The accompanying notes are an integral part of these financial statements
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Statements of Stockholders' Equity
The accompanying notes are an integral part of these financial statements.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Notes to Financial Statements
November 30, 2008 and 2007
1. OPERATIONS
Organization
Rancho Santa Monica Developments Inc. was incorporated in the State of Nevada, U.S.A., on May 28, 2004. The Company owns and operates resort property in Mexico.
Going Concern
Since inception, the Company has incurred losses and net cash outflows from operations. The Company expects to continue to incur substantial losses to complete the development of its business and acquisition of the land. Since its inception, the Company has funded operations through common stock issuances and debt in order to meet its strategic objectives. The Company plans to continue to fund its operations and to finance the acquisition of the land through common stock issuances and debt. However, there can be no assurance that the Company will be able to obtain sufficient funds to complete the acquisition of the land, and continue the development of and, if successful, to commence the management of the real estate under development. As a result of the foregoing, there exists substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
a)
Development Stage Company
Prior to commencing operations in 2007 the Company was a development stage company as defined in the Statements of Financial Accounting Standards No. 7.
b)
Property
Property consists of improvements to a resort in Mexico and is recorded at cost. Improvements are capitalized and maintenance, repairs and minor replacements are expensed as incurred.
c)
Financial Instruments
The Company's financial instruments consist of cash and accounts payable.
Unless otherwise noted, it is management's opinion that this Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless otherwise noted.
d)
Loss Per Share
The Company computes loss per share in accordance with SFAS No. 128 - "Earnings Per Share". Under the provisions of SFAS No. 128, basic loss per share is computed using the weighted average number of common stock outstanding during the periods. Diluted loss per share is computed using the weighted average number of common and potentially dilative common stock outstanding during the period. As the Company generated net losses in each of the periods presented, the basic and diluted loss per share is the same as any exercise of options or warrants, would anti-dilutive. The Company had no common stock equivalents outstanding as of November 30, 2008 and 2007.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Notes to Financial Statements
November 30, 2008 and 2007
e)
Stock Based Compensation
As of November 30, 2008 and 2007, the Company has not issued any share-based payments to its employees. The Company adopted SFAS No. 123-R effective January 1, 2006 using the modified prospective method. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123-R.
f)
Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income taxes" (SFAS 109). This standard requires the use of an asset and liability approach for financial accounting, and reporting on income taxes. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.
g)
Impairment of Long-Lived Assets
The Company periodically evaluates potential impairments of its long-lived assets, including intangibles. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, the Company evaluates the projected undiscounted cash flows related to the assets. If these cash flows are less than the carrying value of the assets, the Company measures the impairment using discounted cash flows or other methods of determining fair value.
Long-lived assets to be disposed of are carried at the lower of cost or fair value less estimated costs of disposal.
h)
Foreign Currency Translation
The Company's functional and reporting currency is the U.S. dollar. Transactions in foreign currency are translated into U.S. dollars as follows:
i) monetary items at the rate prevailing at the balance sheet date;
ii) non-monetary items at the historical exchange rate;
iii) revenue and expense at the average rate in effect during the applicable accounting period.
Exchange gains or losses resulting from such transactions are included in the determination of net loss for the period.
i)
Revenue Recognition
The Company recognizes revenues when products are fully delivered or services have been provided and collection is reasonably assured.
j)
Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
g)
Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred. The Company incurred advertising costs of $-0- and $-0- during the years ended November 30, 2008 and 2007, respectively.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Notes to Financial Statements
November 30, 2008 and 2007
3. PROPERTY
By an agreement, dated November 29, 2004, the Company acquired the right to possess and make use of a fraction of a property located in the State of Quinatana Roo, Mexico, for consideration of a $30,000 cash payment and a $50,000 unsecured promissory note. The Company will own title to the property upon completion of a legal survey by the Mexican Government.
Capital Improvements to the property include a 40 foot by 15 foot swimming pool, a spa area, paved parking area, generator platform, a bar area, outdoor washrooms, workers residence, paved walkway to apartment units, joint access to Coqui-Coqui Spa and eleven apartment units. Capital expenditures total $291,268 and are depreciated over the estimated useful life of 40 years using the straight-line method. The Company recorded depreciation expense of $7,694 and $3,640 during the years ended November 30, 2008 and 2007, respectively.
On October 15, 2008, the Company terminated its agreement of Contract of Purchase and Sale with L'Ena Enterprises Ltd. to purchase certain lands for $5,500,000 Canadian Dollars with civic address of 620 and 622 Seymour Street, Vancouver, British Columbia, Canada (the "Property"). The Company passed a resolution that it would not continue to pursue a development on the Property as a result of the City of Vancouver concluding that a Hotel Development would not be supported on the site. The Company recorded a loss of $135,000 upon the return of the property to L'Ena Enterprises Ltd.
4. NOTE PAYABLE
Note payable is comprised of a $50,000 unsecured promissory note, bearing interest at 12% per annum and payable in full on November 29, 2007. The note has not been paid as of the due date and no demand for payment has been made by the note holder. The Company has accrued $12,500 of interest payable as of November 30, 2008.
5. CONVERTIBLE DEBT
During the year ended November 30, 2008, the Company received $112,500 in proceeds from its convertible debt. The debt is convertible into shares of the Company's common stock at$1.00 per share. The Company has recorded $112,500 as the value of the imbedded conversion feature of the convertible debt as original issue discount and is amortizing the original issue discount over the one year term of the convertible debt. The Company is accruing interest on the convertible debt at 12% per annum. The Company has accrued interest payable of $6,750 as of November 30, 2008. A summary of the convertible debt as of November 30, 2008 is as follows:
6.
INCOME TAX A reconciliation of income tax expense to the amount computed at the statutory rate 39% is as follows as of December 31, 2008 and 2007:
Significant components of deferred income tax assets are as follows:
The Company has total losses since inception in the sum of $245,081 carry forward which will expire in 2028 if not utilized.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Notes to Financial Statements
November 30, 2008 and 2007
7. RELATED PARTY TRANSACTIONS
The amount owing to Directors of the company is $103,757. There are no current agreements in place for further compensation other than the amount owing. The amount due is non interesting bearing, unsecured and due upon demand.
8. EQUITY TRANSACTIONS
During the year ended November 30, 2008, the Company issued 50,000 shares of its common stock for cash at $0.82 per share.
During the year ended November 30, 2007, the Company issued 75,000 shares of its common stock for cash at $1.00 per share. 10,000 shares of the Company's common stock were returned to treasury and cancelled during 2007.
9. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share." FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial position and results of operations if adopted.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company's financial position, statements of operations, or cash flows at this time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company's financial position, statements of operations, or cash flows at this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its financial position, results of operations or cash flows.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Notes to Financial Statements
November 30, 2008 and 2007
9.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla"
share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for "plain vanilla" share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on the Company's financial position, results of operations or cash flows. In December 2007, the FASB issued SFAS No. 160, Non controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the non controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting non controlling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning March 1, 2009. It is not believed that this will have an impact on the Company's financial position, results of operations or cash flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations .'This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non controlling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Non controlling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company's financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities-Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entities first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company adopted SFAS No. 159 beginning March 1, 2008. The adoption of this pronouncement did not have an impact on the Company's financial position, results of operations or cash flows.
RANCHO SANTA MONICA DEVELOPMENTS, INC.
Notes to Financial Statements
November 30, 2008 and 2007
9.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company adopted this statement March 1, 2008. The adoption of this pronouncement did not have an impact on the Company's financial position, results of operations or cash flows.
10. SUBSEQUENT EVENT
On December 1, 2008 the Company, entered into an Agreement to purchase all of the outstanding shares of AptHost Communications USA Ltd ("Apthost") whereby the Company would issue 1,000,000 shares of its common stock for 500,000 shares of the common stock of AptHost representing all the outstanding shares of AptHost. The shares were issued to three shareholders of AptHost consisting of Brian French, Cody McLain, and Josuee Shang Ortiz (the "Shareholders'). The Shareholders in addition signed non-compete agreements with the Company. The shares are subject to a two year lock-up period as per the Agreement.
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with accountants or our auditors. Moore & Associates, Chartered of Las Vegas, Nevada has been our auditor since our fiscal year ending January 5, 2006.
ITEM 9A.
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission 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 conducted an evaluation (the "Evaluation"), under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls") as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.
Changes in Internal Controls
We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE
Set forth below is a brief description of the background and business experience of our executive officers and directors.
Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years:
Graham G. Alexander is our President, Secretary, Treasurer, Chief Financial Officer and Chief Executive Officer and our sole member of the board of directors and has served in those capacities since our inception. Mr. Alexander has been President of 674964 BC Ltd., the development Limited Partnership for Elk Mountain Estates, a 32 lot subdivision located on Marble Hill Road in Chilliwack, BC. Mr. Alexander served as President of Galan Ventures Ltd., the developer of ParaYso Hotel, Tulum Mexico, a 11 suite boutique hotel located in the Mayan Riviera Mexico. Mr. Alexander is an Electrical Engineer and holds a Bachelors of Applied Science in Electrical Engineering from the University of British Columbia, Canada in 1992.
Angela Manetta is our Vice-President and has served in that capacity since October 1, 2004. Ms. Manetta attended Simon Fraser University ("SFU") in British Columbia and graduated in 1984 with a Bachelor of Education. In 1985, she completed a one-year teaching practicum program at SFU, and has been employed as a teacher at Eric Hamber Secondary School in Vancouver, British Columbia, teaching French and Math for the past 18 years.
During our development stage, Mr. Alexander and Ms. Manetta each intend to devote approximately 8-10 hours per week of their time to our business. If, however, the demands of our business require more business time, such as raising additional capital or addressing unforeseen issues with regard to our plan of operation, they are prepared to adjust their timetable to devote more time to our business. However, they may not be able to devote sufficient time to the management of our business, as and when needed.
SIGNIFICANT PERSONNEL
We have no significant personnel other than our officers and directors. We conduct our business through agreements with consultants, independent contractors and arms-length third parties.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors does not maintain a separately-designated standing audit committee. As a result, our entire Board of Directors acts as our audit committee. Our Board of Directors has determined that we do not presently have a director who meets the definition of an "audit committee financial expert." We believe that the cost related to appointing a financial expert to our Board of Directors at this time is prohibitive. Our Board of Directors presently do not have a compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees.
TERMS OF OFFICE
Our directors are appointed for one-year terms to hold office until the next annual general meeting of the holders of our common stock or until removed from office in accordance with our by-laws. Our officers are appointed by our Board of Directors and hold office until removed by our Board of Directors.
CODE OF ETHICS
We have adopted a Code of Ethics applicable to our officers and directors which is a "code of ethics" as defined by applicable rules of the SEC. Our Code of Ethics is attached as an exhibit to this Annual Report. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our Chief Executive Officer, Chief Financial Officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a current report on Form 8-K filed with the SEC.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities (collectively, the "Reporting Persons") to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulation to furnish us with copies of all forms they file pursuant to Section 16(a). Based on our review of the copies of such forms received by us, there were no Reporting Persons who failed to file on a timely basis, reports required by Section 16(a) of the Exchange Act during the most recent fiscal year.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION.
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our executive officers and directors for all services rendered in all capacities to us for the last two fiscal years.
Stock Option Grants
The following table sets forth information with respect to stock options granted to each of our directors and officers during our most recent fiscal year ended November 30, 2007:
EXERCISES OF STOCK OPTIONS AND YEAR-END OPTION VALUES
The following is a summary of the share purchase options exercised by our officers, directors and employees during the financial year ended November 30, 2005:
Director Compensation Arrangements
Compensation
We currently do not have any compensation arrangements with our officers and directors.
Employment Contracts
We have no employees as of the date of this Annual Report. We conduct our business largely through consulting agreements with our executive officers and arms-length third parties. We have engaged an independent contractor to provide property maintenance, gardening and security services to the Solidaridad Property at a rate of $400 per month. Upon completion of the apartment units on the adjoining property and the development of our Solidaridad Property we intend to increase the payment rate to our contractor to $600 per month for property maintenance, gardening and security services provided to the Solidaridad Property and the adjoining property. We intend to hire an additional contractor to provide property management services to the apartment units on the adjoining property and the Solidaridad Property at a rate of $600 per month upon completion of the apartment units and the Solidaridad Property.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of February 5th, 2006 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) our sole director, (iii) the named executive officers, and (iv) officers and directors as a group. Unless otherwise indicated, the stockholders listed possess sole voting and investment power with respect to the shares shown.
Changes in Control
We are not aware of any arrangement that might result in a change in control in the future.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
None of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, other than as noted in this section:
(i) Any of our directors or officers;
(ii) Any person proposed as a nominee for election as a director;
(iii) Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
(iv) Any of our promoters; and
(v) Any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.
We issued 4,000,000 shares of common stock on May 28, 2004 to Mr. Graham Alexander at a price of $0.001 per share, for total proceeds of $4,000. Mr. Alexander is our sole director and our president, chief financial officer, chief executive officer, secretary and treasurer. These shares were issued pursuant to Section 4(2) of the Securities Act. The 4,000,000 shares of our common stock are restricted shares as defined in the Securities Act. This issuance was made to Mr. Alexander who is a sophisticated individual and as a promoter of Rancho since our inception was in a position of access to relevant and material information regarding our operations. Other than the issuance of our common stock to Mr. Alexander and our consulting arrangements with him, he has not entered into any agreements with us in which he is to receive from us or provide to us anything of value.
Pursuant to a management consulting agreement dated as of October 1, 2004, between Rancho and Graham G. Alexander, as extended on December 31, 2005, Mr. Alexander agreed to provide certain management consulting services to us as our president in consideration of: (i) a fee of $1,800 per month to December 31, 2004 and at a rate of $800 thereafter; (ii) the issuance of incentive options in such amounts as Rancho may determine at its discretion; and (iii) reimbursement of reasonable travel and promotional expenses incurred by Mr. Alexander in the course of providing his consulting services. The Alexander Consulting Agreement is for a renewable term expiring December 31, 2005, and may be terminated at any time in the event of a material breach as further described in the Alexander Consulting Agreement. The agreement expired on December 31, 2005 and has not been renewed.
Pursuant to a management consulting agreement dated as of October 1, 2004, between Rancho and Angela Manetta, as extended December 31, 2005, Ms. Manetta agreed to provide certain management consulting services to us as our vice-president in consideration of: (i) a fee of $1,800 per month and at a rate of $200 thereafter; (ii) the issuance of incentive options in such amounts as Rancho may determine at its discretion; and (iii) reimbursement of reasonable travel and promotional expenses incurred by Ms. Manetta in the course of providing her consulting services. The Manetta Consulting Agreement is for a renewable term expiring December 31, 2005, and may be terminated at any time in the event of a material breach as further described in the Manetta Consulting Agreement. The agreement expired on December 31, 2005 and has not been renewed.
We entered into an agreement dated for reference November 29, 2004 with Monica Galan-Rios pursuant to which we acquired our property located in Solidaridad, Mexico. Subsequently in 2005, our President, Mr. Alexander, married Mrs. Galan-Rios.We rent approximately 100 square feet of office space located at the home of our President Mr. Graham Alexander. The office rental was negotiated in December, 2004 on a non-arms length basis and is provided at a cost of $100 per month. This rental is on a month-to-month basis with no formal agreements.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed for the two most recently completed fiscal years ended November 30, 2008 and 2007 for professional services rendered by the principal accountant for the audit our annual financial statements and review of the financial statements included our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
ITEM 15.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(1)
Filed with the SEC as an exhibit to our Registration Statement on Form SB-2 originally filed on January 29, 2005, as amended.
(2)
Filed with the SEC as an exhibit to our Annual Report on Form 10KSB filed on February 28th, 2005.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 2nd day of March, 2009.
RANCHO SANTA MONICA DEVELOPMENTS INC. BY: /S/ GRAHAM ALEXANDER
Graham Alexander, President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Secretary, Treasurer and a member of the Board of Directors.