ITEM 1. BUSINESS
(a) General Development of Business
Raphael Industries Ltd is a Nevada company incorporated on October 31, 2005. We are a startup company providing list management and marketing services in the direct mail marketing industry. To date we have had limited revenues and have been issued a going concern opinion from our auditors. Our registered office and agent for service is located at 5190 Neil Road, Suite 430 Reno, NV 89502 and we maintain a corporate office at 268 Bush Street, Suite 4205, San Francisco, CA 94104. Our telephone and fax numbers are 1-866-261-8853 and 1-414-434-3656, respectively and our corporate website is www.raphaelindustries.net.
On November 15, 2005 we signed a license agreement with Free Enterprise Press Limited for the right to market two of their lists which are comprised of subscribers and former subscribers to two of their financial publications. The license agreement grants us the right to market the lists for a term of 2 years after which we have the option to renew. Additionally, the license agreement includes an option to purchase the lists for a total consideration of $100,000 during the first year of the agreement. On April 14, 2006 we made an initial payment of US$50,000. We were required to make a final payment of $50,000 at or before November 15, 2006. On November 15, 2006 we agreed to extend the option to purchase the licensed list to August 15th, 2007. In consideration of the extension Raphael paid the licensor $10,000. We elected to let the option laps without acquiring the licensed list.
On December 1, 2005 we signed a license agreement with Global Commodity Press Limited for the right to market two of their lists which were assembled from various sources, including public domain databases, Internet marketing campaigns and media print publications. The license agreements grant us the right to market the lists for a term of 2 years after which we have the option to renew.
On December 1, 2007 we renegotiated and extended the license agreement with Global Commodity Press Limited for an additional term of 2 years.
(c) Business of the Issuer
Our auditors have issued a going concern opinion suggesting there is a real possibility that we will not be able to maintain our operations. Since inception we have generated limited revenues. We are dependent on the sale of our securities to fund operations.
We provide list management and marketing services within the direct mail marketing industry.
List marketing entails storing and maintaining a client’s list, sourcing prospective renters of the list, securing rentals, approving marketing material that will be mailed to the list, and secure payment from renters.
Our business strategy is to continue to market and rent lists and seek contracts with new list owners. On December 1, 2009 our two year license agreement with Global Commodity Press expired. We are in discussions with list brokers to secure list agreements and other possible business opportunities.
Outsourced Management and Marketing Services
We have business relationships with management and marketing agents that enable us to provide the following services specific to licensed lists:
Management Services
1.
Cleaning services - NCOA (National Change of Address) and CASS certification (CASS means the standardization of address and zip codes). NCOA and CASS are bi-annual requirements as dictated by the United States Postal Service.
2.
Data compilation and merge/purge - this includes compiling data on new subscriptions, changes and updates to current records as set out under NCOA and CASS and maintaining of 'due not mail' records and merge/purge services. Merge/purge refers to the combining of two or more databases into one, eliminating or excluding duplicate records.
3.
Accounting services - including, monthly reports detailing sales and payments for rental revenue, collection reports, which provide monthly progress assessments on our communication with list brokers on payment status from the merged database.
Marketing Services
1.
Advertising campaigns through trade publications and the Internet, which consists of space ads and daily emails and faxes to list brokers and other prospective list renters.
2.
Conference attendance to promote our lists and other agent sponsored lists.
In-House management services;
We provide the following in-house management services.
1.
Document Review and Assessment - review all proposed marketing materials to be sent to lists by prospective renters including any disclaimers and related disclosure.
2.
Credit checks and payment security - perform credit checks on all initial orders and ensure prepayment. On subsequent orders from credit worthy customers we implement industry standard terms, specifically; payment is required 45 days from mail date.
3.
Accounting services - including, monthly reports detailing sales and payments for rental revenue, collection reports, which provide monthly progress assessments on our communication with list brokers on payment status from the merged database.
4.
List authorization - based on final suitability assessment authorize rental or decline rental request.
5.
Order processing and fulfillment - The processing and fulfillment of orders entails several steps to ensure the rented list meets the renter's requirements such as list selection and name suppression. Name suppression is defined as the process of excluding names based on geographic or demographic characteristics.
6.
Electronic file preparation - Once the order processing and fulfillment has been completed the rented file is prepared for delivery via mail or email to the renter or its agent.
In-House marketing services
1.
Internet Marketing - this includes the placement of list data cards online through our web site making them accessible for download by any marketer searching the web for mailing list information. List data cards refer to brief summaries of the lists' contents including the number of names, rental price, and source of derivation. We are presently tracking and testing the effectiveness of inbound links that connect directly to our website from external sites. Specifically, tracking customers' clicks on these links that connect to our website from search engines and community and affinity sites like Google and Overture. We send emails to people and companies that have double opted in to receive information on marketing and list rentals.
2.
Client List Acquisition Marketing - we utilize trade publications such as DM News, Catalog Age and Target Marketing, to source potential renters of our specific lists. These searchable databases allow us to locate brokers and prospective renters.
3.
Trade Shows / Conferences - we attend Trade Shows and Conferences in an effort to secure additional license agreements with list owners and publishers to secure the management and marketing of their lists. This entails our attendance at major direct marketing related trade shows each year.
4.
Direct Client Acquisition - we use direct client acquisition efforts, also known as 'cold calling' to market our company and services to the direct mail marketing industry and other companies that we believe could benefit from our services.
INDUSTRY AND COMPETITION
We operate within the direct mail marketing industry. Direct mail marketing is defined as the practice of delivering promotional messages through the postal service directly to potential customers on an individual basis. There are two different types of lists - response lists and compiled lists. Response lists are comprised of individuals and companies that have responded to direct mail solicitations or offers, including subscription-based magazines and newspapers, catalogues and other response generated offers. Compiled lists are generated from public sources such as yellow pages, white pages, incorporation records, real estate deed transfers, and various other sources. Information about the individuals and companies such as income, and marital status is then often added to increase the value of the list. Our licensed lists have been generated from both response and compiled efforts.
According to the Direct Marketing Association, a leading global trade association supporting the direct mail marketing industry, total direct mail marketing advertising in 2006 was $166.5 billion. According to the report, measured against total US sales, these advertising expenditures generated $1.93 trillion in incremental sales.
The direct mail marketing industry is changing and faces several challenges. The trend in the industry is toward more comprehensive multi faceted avenues of advertising. For example, mailing marketing materials to consumers directing them to an Internet web site where they are provided additional information in an effort to secure an online sale. This trend reduces the overall budget devoted exclusively toward direct mail. There is also a greater demand for more cost effective mechanisms to target prospective consumers, primarily through the use of the Internet and email.
Many companies are reducing their use of direct mail advertising and increasing their use of on-line advertising, including e-mail, search words, and banner advertisements. As a result of this change in the direct mail marketing industry, some customers are purchasing less data for direct mail applications. In addition, several of our potential customers operate in industries, in particular the financial media and newsletter publishers that are undergoing consolidation.
Although the direct mail marketing industry has self-imposed standards of conduct (Direct Marketing Associations Guidelines for Ethical Business Practice) the industry is subject to greater outside regulatory intervention. Heightened Federal Trade Commission (FTC) regulation, expanding 'do-not-call' and 'do-not-mail' directories are reducing the number of prospective consumers available to marketers. Similarly, there is also a greater regulatory awareness on privacy and the protection of personal information.
The following laws impose limits on the nature of materials our clients send, the frequency sent, the medium used and the use of data gleaned from the individuals and companies within the list. Making efforts to ensure compliance with these regulations may result in additional costs.
1.
The CAN-SPAM Act governs the sending of e-mails that have a commercial primary purpose. The act requires that each marketing email is identified as an advertisement and that it includes the sender's valid physical postal address. The act further requires that an opt-out method is available in the email. These requirements reduce the creative flexibility available to marketers and possibly the effectiveness of the delivered message. Consequently demand for email marketing lists may be reduced and our costs and potential liability may increase.
2.
The Telemarketing Sales Rules (TSR) govern telemarketing. The TSR prohibit calling consumers listed on the National Do Not Call Registry. It also sets forth mandatory disclosures applicable to both inbound and outbound calls. The TSR and Do Not Call Registries reduce the number of people eligible to receive marketing phone calls and imposes additional cost on us and our clients to ensure that databases are cross referenced with the National Do Not Call Registry and kept up to date. The TSR further increases the cost of educating phone marketing personnel to ensure that scripts are adhered to and that the rules are met on all occasions. The accumulative effects of the TSR are a reduction in demand for phone solicitation lists and increased cost and potential liability.
The following laws govern the protection of personal and private information. Specifically, they impose limits and requirements for the use, storage and dissemination of personal and private information.
1.
Health Insurance Portability and Accountability Act governs disclosure of protected health information for marketing or fundraising. Protected Health Information (PHI) is information created or received by a health care provider or plan that includes treatment and payment information plus information that personally identifies the individual patient or plan. The act specifically restricts the use of protected information for marketing purposes thereby reducing the available information about consumers and increasing our cost to ensure that lists we market does not contain or are not derived from protected information.
2.
The Gramm-Leach-Bliley Act governs financial institutions and sharing of non-public personal information. The act imposes rules that financial institutions must abide by prior to sharing customer information. The act specifies that consumers must be given the opportunity to object to the sharing of their information. The act has the effect of reducing the amount of information available to marketers and of increasing our cost to ensure list owners abide by the act.
These laws impose limitations that will potentially affect the scope of our business activity and may reduce the number of rentals. Additionally, we will be held liable and subject to fines for failure to abide by these laws and regulations.
All of these laws have come into effect since 1995 and the Telemarketing Sales Rules have already been amended once in 2003. We may be subject to additional tightening of the regulatory environment within which we operate.
The FTC holds that those who provide lists for marketing share at least some responsibility for knowing what promotion will be communicated to those lists, and especially for knowing when the promotion, on its face, violates federal trade or consumer protection laws. Ensuring that we adhere to these laws and other potential future government regulations may result in increased costs.
Raw Materials and Suppliers
The lists are not dependent on raw materials.
Customers
The main provisions in our rental agreements require us to forward a copy of the rented list to the customer. This may entail a portion of a list or the whole list, depending on the agreement entered into with the customer. The customer has the right to mail marketing materials to the names of the individuals and companies he has rented on a one time only basis, unless otherwise agreed.
Our customers rent the list or a portion of the list on a multi-use basis (multiple mailings) or on a one time only basis (single mailing). Ordinarily a small portion of the list is rented to test its response rate. Response rate refers to the number or percentage of individuals who responded to the initial marketing solicitation. If the customer is satisfied with the response rate, they often rent the remaining names, or a portion of the remaining names depending upon the terms of the agreement. We are not dependent on any one customer or a few major customers for our ongoing revenue.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements, or Labor Contracts
Although the Company believes that its operations do not infringe on any trademark or copyright or other proprietary rights of third parties, there can be no assurance that those parties will not assert that our business procedures infringe their proprietary rights. We do not own any intellectual property however, we have entered into two agreements to secure our licensed lists. The agreements prevent the unauthorized use, dissemination, reproduction or publication of the lists.
Development Activities
Information regarding the Company's development activities is included in Footnote 1 to the Financial Statements and is incorporated by reference herein.
Impact of Environmental Laws
We are not aware of any federal, state, or local environmental laws that would effect our operations.
Employees
We presently have no full-time employees. We have agreements with several database storage and management firms to perform storage, maintenance and marketing of the lists. Our officer, directors, and consultants are currently not represented by a collective bargaining agreement.
Transfer Agent and Registrar
Our transfer agent is Interwest Transfer Company Inc. 1981 East 4800 South Suite 100 Salt Lake City, Utah 84117, (801) 272-9294
ITEM 1A.
ITEM 1A. RISK FACTORS
Our common shares must be considered a speculative investment. Readers should carefully consider the risks described below before deciding whether to invest in shares of our common stock. If we do not successfully address the risks described below, there could be a material adverse effect on our business, financial condition or results of operations, and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure any investor that we will successfully address these risks.
An investment in our securities involves a high degree of risk. Before deciding whether to invest, you should read and consider carefully the following risk factors.
Our auditors have indicated that our inability to generate sufficient revenue raises substantial doubt as to our ability to continue as a going concern. Our audited financial statements for the year ended September 30, 2009 were prepared on a going concern basis in accordance with United States generally accepted accounting principles. The going concern basis of presentation assumes that we will continue in operation for the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. However, our auditors have indicated that our inability to generate sufficient revenue raises substantial doubt as to our ability to continue as a going concern.
We have a limited history of operations and unless we are able to successfully generate rental income from our licensed lists, our business and operating results will suffer resulting in the failure of our business. We have limited history in the activities described herein and there is no certainty that we will be successful in marketing and renting the lists. We have had limited sales and even if revenues meet levels we anticipate, we could sustain losses, and our business and the price of our common stock may be harmed. See notes accompanying financial statements for information on our history of losses and anticipation of continued losses.
We have generated limited revenues from operations and may have additional capital requirements to continue our operations. Such capital might not be available to us on favorable terms or at all, and if unavailable our ability to run our business will be negatively effected. If we are unable to generate sufficient revenues to cover operating expenses or raise additional funds, we will unlikely establish or maintain our business operations resulting in the failure of our business and the loss of your investment. We currently have no other plans or arrangements to raise capital for our business.
Our President is our sole executive officer and he is responsible for both establishing and maintaining internal controls. He is responsible for establishing and maintaining effective internal controls over financial reporting, establishing and maintaining proper accounting records, selecting appropriate accounting principles, safeguarding assets and complying with relevant laws and regulations. There can be no guarantee that this conflict of interest may not result in errors and omissions going undetected.
If we lose the services of our President we will be left without management. Mr. Raabe is our sole officer and the loss of his services and knowledge of our business will likely result in the failure of our business and the total loss of your investment.
Mr. Raabe, our sole officer, spends 50% of his time on our business. This may diminish our prospects for growth. We have only one officer and he has another business interest, which results in him devoting only approximately 50% of his time to our business. As such it may be difficult to establish rentals independent of third party agents.
We rely on consultants and if we are unable to retain these or other similarly qualified individuals, we may be unable to carry out our business operations. We are dependent upon service providers, such as database storage companies. Loss of their services would adversely affect our business and our ability to maintain our operations. We have not entered into any employment or non-competition agreements with these individuals and do not plan to in the future. Our success will depend on our ability to attract and retain qualified personnel. If we cannot attract and retain the necessary individuals our operating results will suffer.
We are presently dependent on the owners of licensed lists for our continued operations and our business could be materially harmed by their failure to renew the license agreements. We had entered into licensing agreements to market and manage two lists. This agreement expired on December 1, 2009 and failure to renew this agreement or enter into additional agreements with other list owners will result in the failure of our business.
We are a development stage company and have conducted limited market research on the viability of our business. There is no guarantee that we will be able to generate sufficient revenues to maintain our operations. Failure to do so will result in the failure of our business. The market for our licensed lists is limited and there is no assurance that we'll generate market acceptance or that we will be able to expand upon our existing market. Failure to attain market acceptance or expand our existing market will result in our inability to generate sufficient revenue to fund our business, resulting in the failure of our business and the total loss of your investment.
We rely on third party marketers to assist us in the marketing and sale of our licensed lists. Failure to maintain these relationships will limit our growth prospects. Our business success is dependent on the performance of third party management and marketing agents. Revenues derived from their efforts represent vital funds for our continued operations. The loss or damage of any of our business relationships and or revenues derived there from will limit our growth.
The industry in which we operate is subject to government regulation. There can be no certainty that new regulations or laws will not arise which may increase our costs and operating expenses. During the last decade laws have been passed to regulate the marketing of personal and private information. These laws have had the effect of increasing cost for list managers and list providers. There can be no guarantee that new laws will not make the future marketing of lists impossible or cost prohibitive.
Many large companies are reducing their use of direct mail advertising and increasing their use of Internet advertising, including e-mail and banner advertisements. As a result of this change in the direct mail marketing industry, some customers are purchasing less data for direct mail applications, thereby reducing the potential market for our lists.
A small active shareholder base can influence the affairs of the company. Our bylaws specify a quorum requirement of 5% at any meeting of shareholders. As a consequence the company can conduct business at shareholder meetings with only 5% of the shareholders present in person or by proxy. This can lead to decisions being made by a small active shareholder base that impact the majority of shareholders if the majority elects to stay inactive.
We face intense competition in the market from larger more established companies that offer a wider array of products. These competitors will make it difficult for us to offer competing products and grow our business. Companies that are larger, better funded, with longer operating histories like infoUSA and the Millard Group dominate our industry. These competitors are able to offer services and expertise beyond our capabilities which will make it difficult for us to secure new clients and increase our client base. Failure to expand our client base will severely limit our prospects for growth.
There are legal restrictions on the resale of the Company’s common shares, including Penny Stock Regulations under the U.S. Federal Securities Laws. These restrictions may adversely affect the ability of investors to resell their shares. Our Articles do not restrict the sale or transfer of the Company’s securities however such sale or transfer must be made in full compliance with applicable state and federal securities laws. Our securities are subject to the penny stock rules, which apply generally to equity securities with a price of less than $5.00 per share, other than securities registered on certain national exchanges or quoted on the NASDAQ system. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers willing to engage in the trading of our shares. This results in reduced liquidity and an increase in the spread between the bid and ask price. Investors should be aware that the level of trading activity on the secondary market can be very illiquid and investors may find it expensive and difficult to sell their shares.
Our President owns 73.6% of the shares in the company, allowing him to control the company's future direction. Our president controls all matters subject to stockholder's vote. See "Security Ownership of Certain Beneficial Owners and Management."
(c) Reports to security holders
This 10K is filed voluntarily and we intend to continue filing periodic reports even if our obligations are suspended under the Exchange Act as far as it is required under the Exchange Act. You may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding us at the SEC website (http://www.sec.gov).
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal executive operations office is located at 268 Bush Street Suite 4205, San Francisco, CA 94104, and our agent for service office is 5190 Neil Road Suite 430 Reno, NV 89502.
ITEM 3
ITEM 3 . LEGAL PROCEEDINGS
There are no material legal proceedings to which we are subject to or which are anticipated or threatened.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Registrant’s shareholders in the fourth quarter of the Registrant’s fiscal year.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
(a) Market information
Our shares trade on the OTC Bulletin Board under the symbol RPHA. The shares commenced trading on August 3, 2007.
(1) OTCBB quotations may reflect interdealer prices, without retail markup, markdown or commission and may not necessarily reflect actual transactions.
(2) All quotations are from the website located at www.quotemedia.com.
At January 13, 2010, there were 9,511,500 common shares issued and outstanding.
(b) Holders
At January 13, 2010, there were 62 holders of record.
(c) Dividends
We have not declared any cash dividends nor are any intended to be declared. We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent. Dividend policy will be based on our cash resources and needs and it is anticipated that all available cash will be needed for property acquisition, exploration and development for the foreseeable future.
(d) Securities authorized for issuance under equity compensation plans
Plan category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and right
Weighted-average
exercise price of
outstanding
options, warrants
and rights
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
(a)
(b)
(c)
Equity compensation plans approved by
security holders
Equity compensation plans approved by
security holders
Total
Recent sales of Unregistered Securities and Use of Proceeds
Since inception, the Registrant has sold the following securities which were not registered under the Securities Act of 1933, as amended.
We have completed two offerings for a total of 7,000,000 shares of our common stock at a price of $0.01 per share to our founder and president. The first offering, for $5,000 and 500,000 shares was completed on November 28, 2005 and the second for $65,000 and 6,500,000 shares was completed on April 30, 2006. The total cash amount we received from these offerings was $70,000. We completed the offerings pursuant to Regulation S of the Securities Act. The executive officer represented to us that he was a non-US person as defined in Regulation S. We did not engage in a distribution of this offering in the United States. He represented his intention to acquire the securities for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued in accordance with Regulation S and the transfer agent affixed the appropriate legends. Theexecutive officer had adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved. No registration rights were granted.
We issued the foregoing restricted shares of common stock to our present officer and director, Arne Raabe pursuant to Section 4(2) of the Securities Act of 1933. He was a sophisticated investor, was officer and director at the time of purchase, and was in possession of all material information relating to the company. Further, no commissions were paid to anyone in connection with the sale of the shares and general solicitation was not made to anyone.
Penny Stock
The Securities Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and; (f) contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that is subject to these penny stock rules. Therefore, because our common stock is subject to the penny stock rules, stockholders may have difficulty selling those securities.
Our securities consist of common stock with a par value of $0.0001 per share. Our authorized capital is 50,000,000 common shares of which 9,511,500 common shares are issued and outstanding as of January 13, 2010. All of our common stock, issued and unissued, is of the same class and ranks equally as to dividends, voting powers and participation in our assets on a winding-up or dissolution. No common shares have been issued subject to call or assessment. Each common share is entitled to one vote with respect to the election of directors and other matters. The shares of common stock do not have cumulative voting rights.
Therefore, the holders of a majority of shares voting for the election of directors can elect all the directors then standing for election, if they chose to do so, and in such event the holders of the remaining shares will not be able to elect any directors. Our President currently beneficially owns 73.6% of the outstanding shares of the company's common stock and is in a position to control all matters subject to stockholder vote. See "Security Ownership of Certain Beneficial Owners and Management."
The common shares have no preemptive or conversion rights, and no provisions for redemption, purchase for cancellation, surrender of sinking fund or purchase fund.
Neither our Articles of Incorporation nor our Bylaws contain specific provisions that would delay, defer or prevent a change in control. However, approximately 40,488,500 common stock shares are authorized but unissued as of January 13, 2010. All of such authorized but unissued shares will be available for future issuance by the Board of Directors without additional shareholder approval. These additional shares may be used for a variety of purposes, including future offerings to raise additional capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved common stock may be to enable the Board of Directors to issue shares to persons friendly to current management, which could render more difficult or discourage an attempt to obtain control of Raphael Industries by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of management. Such additional shares also could be used to dilute the stock ownership of persons seeking to obtain control of Raphael Industries.
Preferred Stock
Our articles of incorporation do not authorize any shares of preferred stock.
Share Purchase Warrants
We have not issued and do not have outstanding any warrants to purchase shares of our common stock.
Options
We have not issued and do not have outstanding any options to purchase shares of our common stock.
Convertible Securities
We have not issued and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock.
Nevada Anti-Takeover Laws
Nevada Revised Statutes sections 78.378 to 78.379 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person or entity to acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition attempt, among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200 or more stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business in the State of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does not apply to our company.
Use of Proceeds from Registered Securities
This use of proceeds information is being disclosed pursuant to our SB-2 registration statement file # 333-135331 declared effective on November 9, 2006. The offering commenced on November 9, 2006 and was terminated on April 30, 2006 with 2,511,500 shares of common stock issued and $251,150 raised.
Pursuant to the SB-2 registration statement we registered 5,000,000 shares for sale by the issuer for maximum proceeds of $500,000 of which 2,511,500 shares were sold for total proceeds of $251,150.
There was no underwriter in the offering and no funds have been paid for underwriting discounts or commissions, finders’ fees, or to underwriters in connection with the offering.
We paid total expenses of $10,787 including legal, audit, and transfer agent fees related to the offering. All these fees were paid directly by the issuer and none of the fees were paid to a director, officer, 10% security owners, or any individual or firm with insider or related party affiliation with the issuer.
Net proceeds to the issuer after taking account of expense related to the registration statement were $239,299. The following table details the use of proceeds from April 30, 2007 through September 30, 2009
List and services marketing
$
Web site and material design
Rent, Audit, General Legal and Office Expenses
53,732
List updating and enhancement
1,000
TOTAL
$
54,809
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not required as the Company is a small business issuer, in accordance with Section 12(b)-2 of the Act.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(b) Results of Operations
During the fiscal year ending September 30, 2009, we realized revenue of $11,533 compared to $ 48,281 for the year ending September 30, 2008. Gross profit for the year was $6,674 as compared to $22,702 in 2008. We incurred an operating loss of $69,354 as compared to a loss of $93,376 for the period ending September 30, 2008. The major components to expenses faced by the company during the last year were general and administrative of $72,160 (2008 - $91,708), cost of sales of $4,879 (2008 - $25,579), and foreign exchange loss of $2,161(2008 - $24,370). The foreign exchange loss was caused by the strengthening of the dollar vs. the Canadian dollar. The Company has been maintaining a portion of its cash in Canadian dollars.
As of September 30, 2009 the Company had $239,248 (2008 - $241,589) in cash, $nil (2008 - $16,920) in accounts receivable, $100 (2008 - $25) in prepaid expenses, $nil (2008 - $7,480) in website development, $434 (2008 - $1,114) in property and equipment, $2,891 (2008 - $2,023) in accounts payable, $2,500 (2008 - $5,003) in accrued liabilities, and $43,410 (2008 - $35,767) in licensee fee payable. There is no long-term debt. The Company may in the future invest in short-term investments from time to time but there can be no assurance that these investments will result in profit or loss.
Our future growth and success will be dependent on our ability to market lists for our clients and to secure additional lists. If we cannot succeed in marketing licensed lists and to secure contracts to market lists then our prospects for growth are limited. We are in discussions with list brokers to secure list agreements and other possible business opportunities.
As of September 30, 2009, our sole source of revenue has been the list rental and brokerage services. Accordingly, no table showing percentage breakdown of revenue by business segment or product line is included.
Liquidity and Capital Resources
During the year ended September 30, 2007 we secured $251,150 in capital through the issuing of 2,511,500 common stock pursuant to an SB2 registration statement.
Cash on hand is currently our only source of liquidity. We do not have any lending arrangements in place with banking or financial institutions and we do not anticipate that we will be able to secure these funding arrangements in the near future.
We have sufficient cash to carry out our normal operations for the next twelve months. To the extent that we may require additional funds to support our operations or the expansion of our business, we may sell additional equity or issue debt. Any sale of additional equity securities will result in dilution to our stockholders. There can be no assurance that additional financing, if required, will be available to our company or on acceptable terms.
We do not expect any significant purchases of plant and equipment or any increase in the number of employees in the near future.
(c) Off-balance sheet arrangements
We do not have any off-balance sheet arrangements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required as the Company is a small business issuer, in accordance with Section 12(b)-2 of the Act.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Raphael Industries Ltd.
(A Development Stage Company)
September 30, 2009
Index
Balance Sheets
Statements of Operations
Statements of Cash Flows
Statements of Stockholders’ Equity
Notes to the Financial Statements
K. R. Margetson Ltd.
Chartered Accountant
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders,
Raphael Industries Ltd.
We have audited the accompanying balance sheets of Raphael Industries Ltd. (A Development Stage Company) as of September 30, 2009 and 2008 and the related statements of operations, stockholders' equity and cash flows for the years ended September 30, 2009 and 2008 and for the period from October 31, 2005 (Date of Inception) to September 30, 2009. 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 did not audit the period from October 31, 2005 to September 30, 2006. That period was audited by other auditors, whose report dated February 6, 2007, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance 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 these financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2009 and 2008 and the results of its operations and its cash flows for years ended September 30, 2009 and 2008 and for the period from October 31, 2005 (Date of Inception) to September 30, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared using accounting principles generally accepted in the Unites States of America assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is a development stage company and has yet to attain profitable operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to their planned financing and other matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
North Vancouver, Canada
“K R. Margetson Ltd.”
January 22, 2010
331 East 5th Street
North Vancouver BC
V7L 1M1
Chartered Accountant
Telephone: (604) 929-0919
Facsimile: 1(877) -874-9583
email: keith@krmargetson.com
Raphael Industries Ltd.
(A Development Stage Company)
Balance Sheets
(Expressed in US dollars)
The accompanying notes are an integral part of these financial statements
Raphael Industries Ltd.
(A Development Stage Company)
Statements of Operations
(Expressed in US dollars)
The accompanying notes are an integral part of these financial statements
Raphael Industries Ltd.
(A Development Stage Company)
Statements of Cash Flows
(Expressed in US dollars)
The accompanying notes are an integral part of these financial statements
Raphael Industries Ltd.
(A Development Stage Company)
Statements of Stockholders’ Equity
For the Period from October 31, 2005 (Date of Inception) to September 30, 2009
(Expressed in US dollars)
The accompanying notes are an integral part of these financial statements
Raphael Industries Ltd.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2009
(Expressed in US dollars)
NOTE 1 - NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
Raphael Industries Ltd. (“the Company”) was incorporated on October 31, 2005 under the laws of the State of Nevada. Its principal business is to market database for commercial use in newsletters, direct mail, and internet marketing promotions..
The financial statements are prepared in accordance with generally accepted accounting principles in the United States on a going concern basis which contemplates the realization of assets and discharge of liabilities and commitments in the normal course of business. To date the Company has funded operations through the issuance of capital stock and the limited generation of revenues. The Company has limited operating history, has generated limited revenues from operations, is dependent on a limited number of databases, is dependent on the owners of the license agreements for the renewal of the license agreements, and may require additional capital requirements. The Company currently has one license to two databases resulting in a limited ability to market databases. The Company does not have sufficient marketing capability to consistently undertake rentals independent of third party marketing and management agents. As at September 30, 2009, the Company has an accumulated deficit of $334,169. As a result, the Company is dependent on third party agents to successfully market and rent the databases. These factors raise 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.
Management’s plan is to continue raising additional funds through future equity or debt financings, as needed, until it can generate sufficient revenues to maintain sustainable profitable operations. On October 25, 2006, the Company filed an amended SB-2 Registration Statement with the United States Securities and Exchange Commission and raised $251,150 It has sufficient capital to maintain operations for the next 12 months.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation and Fiscal Year
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is September 30.
(b) 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.
(c) 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 accounts receivable, donated services, and deferred income tax asset valuations. 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.
(d) Comprehensive Loss
The Company follows FASB ASC 220 “Comprehensive Income” which establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at September 30, 2009, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
Raphael Industries Ltd.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2009
(Expressed in US dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e) Basic and Diluted Earnings Per Share
The Company computes earnings per share in accordance Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 260, “Earnings per Share” which 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 income (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. For the period ended September 30, 2009, there were no dilutive securities outstanding and therefore, diluted earnings per share is not presented.
(f) Financial Instruments and Concentrations
The fair value of financial instruments, which include cash, accounts receivable, accounts payable, accrued liabilities and licensee fee payable were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company has some exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. The Company has cash balances in Canadian and US dollars. Balances in U.S. dollars at Canadian institutions are not protected by insurance and are therefore subject to deposit risk. In 2009, approximately $95,000 was protected by insurance (2008 $95,000).
(g) Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with FASB ASC 830 “Foreign Currency Translation”, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
(h) Property and Equipment
Property and equipment consists of computer hardware and is recorded at cost and is amortized on a straight-line basis over an estimated life of three years.
(i) Long-Lived Assets
In accordance with FASB ASC 360 Impairment or “Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.
Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
(j) Advertising
The Company expenses advertising costs as incurred. There have been no advertising expenses incurred by the Company since inception.
Raphael Industries Ltd.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2009
(Expressed in US dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(k) Website Development Costs
The Company recognizes the costs associated with developing a website in accordance with FASB ASC 350-50 “Website Development Costs”. Accordingly costs associated with the website consist primarily of website development costs paid to a third party. These capitalized costs will be amortized based on their estimated useful life over three years upon the website becoming operational. Internal costs related to the development of website content will be charged to operations as incurred.
(l) Revenue Recognition
The Company recognizes revenue from the licensing of databases in accordance with FASB ASC 650-45 “Reporting Revenue Gross as a Principal vs. Net as an Agent”. Revenue consists of licensing fees and is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists such as a contract or a written request from the customer, the product has been transferred, and collectability is reasonably assured. An order from a customer will include the quantity requested and the price paid by a customer. Revenues are recognized when the Company has delivered the ordered names to a customer. A customer has the authority to use the list immediately upon receipt from the Company. To reasonably assure collectibility, the Company requests pre-payments on orders from customers without an established credit history. Otherwise, the Company awards credit under terms standard in the industry and regularly review accounts receivable for any bad debts. At the completion of the transfer of names to a customer the Company has fulfilled all obligations to that customer. As of September 30, 2009, $5,872 was written off as unrecoverable revenue. ($nil in 2008)
(m) Income Taxes
The Company has adopted FASB ASC 740 “Accounting for Income Taxes” as of its inception wherein the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
(n) Stock-based Compensation
The Company records stock-based compensation in accordance with FASB ASC 718 “Stock Compensation”. Accordingly, compensation costs attributable to stock options or similar equity instruments granted to employees are measured at the fair value at the grant date, and expensed over the expected service period with a corresponding increase to additional paid-in capital. Transactions in which goods or services based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company does not have a stock option plan and has not issued any share based payments since inception.
(o) Fair Value Measurements
The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures”, for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. This new accounting standard establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. The Company has adopted FASB ASC 825, “Financial Instruments”, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.
Raphael Industries Ltd.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2009
(Expressed in US dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) Derivative Instruments
The Company follows FASB ASC 815, “Derivatives and Hedges”. This standard establish accounting and reporting requirements for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. The Company has not entered into derivative contracts to hedge existing risks or for speculative purposes.
(q) Recent Accounting Pronouncements
In June 2008, FASB issued ASC Topic 815, “Derivatives and Hedging,” which provides a two-step model to determine whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception in ASC 815-10-15-74. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2008. This standard triggers liability accounting on all instruments and embedded features exercisable at strike prices denominated in any currency other than the functional currency of the operating. The adoption of this pronouncement did not have a material impact on the Company’s financial statements.
On January 1, 2009, the Company adopted ASC sub-topic 810-10 (formerly SFAS No. 160, “Accounting and Reporting on Non-controlling Interest in Consolidated Financial Statements, an Amendment of ARB 51”). ASC 810-10 states that accounting and reporting for minority interests are to be recharacterized as noncontrolling interests and classified as a component of equity. The calculation of earnings per share continues to be based on income amounts attributable to the parent. ASC 810-10 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but affects only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The adoption of ASC 810-10 did not have a material impact on the Company’s financial statements.
During the second quarter of 2009, the Company adopted guidance issued by the FASB in April 2009 that is intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of securities and guidance that expanded the fair value disclosures required for all financial instruments within the scope of ASC Topic 825 “Financial Instruments” to interim periods. The adoption of this guidance did not materially impact the financial statements.
In April 2009, the FASB issued an accounting standard to make the other-than-temporary impairments guidance more operational and to improve the presentation of other-than-temporary impairments in the financial statements. This standard will replace the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert it does not have the intent to sell the security, and it is more likely than not it will not have to sell the security before recovery of its cost basis. This standard provides increased disclosure about the credit and noncredit components of impaired debt securities that are not expected to be sold and also requires increased and more frequent disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. Although this standard does not result in a change in the carrying amount of debt securities, it does require that the portion of an other-than-temporary impairment not related to a credit loss for a held-to-maturity security be recognized in a new category of other comprehensive income and be amortized over the remaining life of the debt security as an increase in the carrying value of the security. This standard became effective for interim and annual periods ending after June 15, 2009. The adoption of this standard did not have a material impact on the Company’s financial statements.
In April 2009, the FASB issued an accounting standard that requires disclosures about fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in annual financial statements. Prior to this accounting standard, fair values for these assets and liabilities were only disclosed annually. This standard applies to all financial instruments within its scope and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. This standard does not require disclosures for earlier periods presented for comparative purposes at initial adoption, but in periods after the initial adoption, this standard requires comparative disclosures only for periods ending after initial adoption. The adoption of this standard did not have a material impact on the disclosures related to its financial statements.
Raphael Industries Ltd.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2009
(Expressed in US dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q) Recent Accounting Pronouncements (continued)
In June 2009, the FASB issued an accounting standard amending the accounting and disclosure requirements for transfers of financial assets. This accounting standard requires greater transparency and additional disclosures for transfers of financial assets and the entity’s continuing involvement with them and changes the requirements for derecognizing financial assets. In addition, it eliminates the concept of a qualifying special-purpose entity (“QSPE”). This accounting standard is effective for financial statements issued for fiscal years beginning after November 15, 2009. The Company has not completed the assessment of the impact this new standard will have on the Company’s financial condition, results of operations or cash flows.
NOTE 3 - PROPERTY AND EQUIPMENT
September 30,
September 30,
Accumulated
Net Carrying
Net Carrying
Cost
amortization
Value
Value
$
$
$
$
Computer hardware
2,469
2,035
1,114
NOTE 4 - WEBSITE DEVELOPMENT
September 30,
September 30,
Accumulated
Net Carrying
Net Carrying
Cost
amortization
Value
Value
$
$
$
$
Website development
22,000
22,000
7,480
In September 2006, the Company entered into an agreement with a marketing company to develop a website and corporate identity for the Company for $30,000, of which $22,000 was capitalized in accordance with FASB ASC 350-50, “Accounting for Web Site Development Costs”. In 2009, the amortization was completed with a charge of $7,480.
NOTE 5 - COMMON STOCK
On April 30, 2007, the Company issued 2,511,500 shares of common stock pursuant to the Company’s SB-2 registration statement at $0.10 per share for cash proceeds of $251,150.
On April 30, 2006, the Company issued 6,500,000 shares of common stock to the President of the Company at $0.01 per share for cash proceeds of $65,000.
Raphael Industries Ltd.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2009
(Expressed in US dollars)
NOTE 5 - COMMON STOCK (continued)
On November 28, 2005, the Company issued 500,000 shares of common stock to the President of the Company at $0.01 per share for cash proceeds of $5,000.
On October 31, 2005, the Company issued 1 share of common stock to the President of the Company at $1.00 per share for cash proceeds of $1. The share of common stock was cancelled on November 28, 2005.
As at September 30, 2009, there were no shares subject to options, warrants or other agreements.
NOTE 6 - RELATED PARTY TRANSACTIONS
Consulting fees of $36,000 ($57,600 in 2008) were recorded as donated services by the President of the Company for consulting services provided to the Company during the year ended September 30, 2009. These fees are included in general and administrative, and recorded as donated capital.
NOTE 7 - COMMITMENTS
The Company entered into a license agreement dated December 1, 2007 for the exclusive use of a database for a period of 24 months. The Company has the exclusive right to market the database. The agreement calls for the payment of 30% of the generated revenues to the Company. The license agreement lapsed and has not been renewed.
NOTE 8 - INCOME TAXES
The Company provides deferred income taxes for differences between the tax reporting basis and the financial reporting basis of assets and liabilities. The Company follows the provisions of FASB ASC 740, Accounting for Income Taxes. The impact of differences between the Company’s reported income tax provision on operating income and the benefit that would otherwise result from the application of statutory rates is noted below. As management cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the deferred tax asset has been recorded.
Balance September 30
$
$
30%
32%
Net loss before income taxes
(67,647)
(93,376)
Expected Statutory rate- 30% in 2009; 32% in 2008
Income tax recovery at statutory rates
20,294
29,880
Permanent differences
(10,800)
(18,432)
Temporary difference
(1,081)
(569)
Income tax rate change
(1,818)
(1,708)
Valuation allowance
(6,595)
(9,171)
Net income tax benefit
-
-
Raphael Industries Ltd.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2009
(Expressed in US dollars)
NOTE 8 - INCOME TAXES (continued)
The net deferred tax asset is as follows:
Balance September 30
Net Operating loss carry forward of $118,965
$
$
($90,923 in 2008)
35,690
29,095
Valuation allowance
(35,690)
(29,095)
Net deferred asset
-
-
Under normal circumstances the ability to apply the tax loss of $118,965 will expire as follows: expiring in 2027 - $56,926; expiring in 2028 - $33,997; expiring in 2029 - $28,042.
NOTE 9 - PRESENTATION
Certain 2008 figures have been reclassified in order to conform to the presentation used in 2009.
NOTE 10 - SUBSEQUENT EVENTS
Other than the lapse of the license agreement noted above, the Company did not have any subsequent events up to January 22, 2010.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On November 16, 2007, Manning Elliott, Chartered Accountants LLP ("Manning Elliott") resigned as our independent registered public accounting firm. On November 19, 2007 we engaged K.R. Margetson Ltd. an incorporated professional, as our principal independent accountant with the approval of our company's board of directors.
The reports of Manning Elliott on the financial statements of the Company as of and for the year ended September 30, 2006 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles except that Manning Elliott's report contained an explanatory paragraph expressing substantial doubt about the Registrant's ability to continue as a going concern.
During the year ended September 30, 2006 and through the date of resignation, there were no disagreements with Manning Elliott on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Manning Elliott, would have caused Manning Elliott to make reference to the subject matter of the disagreement in its reports on the Company's financial statements for such periods.
During the most recent two fiscal years and the portion of time preceding the decision to engage K.R. Margetson Ltd. neither the Registrant nor anyone engaged on its behalf has consulted with K.R. Margetson Ltd. regarding (i) either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Registrant's financial statements; or (ii) any matter that was either the subject of a disagreement or a "reportable event" (as defined in Item 304(a)(1)(iv) of Regulation S-B).
There have not been any disagreements with the auditor on any audit or accounting issues.
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.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. 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.
Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of September 30, 2009, the Company's internal control over financial reporting was effective based on those criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Directors and executive officers
Directors are elected for a term of one year at the company's annual meeting of shareholders and until his or her successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serve until his or her successor is duly elected and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees. The name, age and position of the Company's director and executive officer is as follows:
Name
Age
Position
Arne Raabe
President, Secretary, Treasurer, Chief Executive Officer, and Director
Craig Wacaser
Director
Term of Office
Mr. Raabe has been a director of the company since its inception on October 31, 2005 and he was appointed for a term of one year. Mr. Wacaser has been a director since July 20, 2006 and was appointed until the next annual meeting of shareholders.
Work Experience of officers and directors
Arne Raabe
Mr. Raabe received his Bachelor of Finance and Masters of Economics from the University of South Florida in 1993 and 1996, respectively. Since 2000, Mr. Raabe has worked as a self employed independent management consultant, specializing in corporate finance for start up companies. He has held various positions, including officer and director and advisor to various companies including GSH Enterprises Limited, Hampton Financial Partners, Secure Automated Filing Enterprises Inc., Gondwana Energy Ltd., American Media Systems Co. and Crestview Energy Partners. From November 2000 to September 2005 he acted as director for Hampton Financial Partners providing the company general consulting services in the area of corporate governance compliance. In 2003 he acted as director and officer for Secure Automated Filing Enterprises Inc., a startup company providing Edgarizing and filing services for companies reporting to the Securities and Exchange Commission. Mr. Raabe resigned his position in October of 2003. In December of 2004 he held the position of Director for American Media Systems Co. assisting in the startup of the company. Mr. Raabe resigned as a director for American Media Systems Co. on December 31, 2004 and started Raphael Industries Ltd. in October of 2005. On December 5th, 2005 he was appointed director and Officer and on June 29, 2006 he consented to act as interim President of Gondwana Energy Ltd. On October 22, 2006 Mr. Raabe resigned from his positions with Gondwana Energy Ltd. On December 29, 2008 Mr. Raabe was appointed director and on March 2nd 2008 he was appointed as Chief Financial Officer of of Sentry Petroleum Ltd. Sentry Petroleum Ltd is a fully reporting issuer under the 1934 Act. Mr. Raabe spends approximately 50% of his time on our business.
Craig Wacaser
Mr. Wacaser holds a bachelor of science degree from Arizona State University and an MBA from the UCLA Anderson Graduate School of Management where he graduated Magna Cum Laude. In 2001 and 2002 he worked as regional sales manager for Emperative, Inc. where he was responsible for developing the western region territory. From 2002 through 2004 he worked for Iron Mountain, Inc. as regional product manager. His responsibilities with Iron Mountain included responsibility for developing messaging and market segmentation for the new electronic vaulting market for Iron Mountain. He developed marketing communications, and targeted campaigns and trained sales reps in solutions selling strategies. From 2004 through 2006 he held the position of principal consultant, sales and marketing solutions with Dun & Bradstreet. At D&B he was responsible for developing account strategies for the company's largest telecommunications accounts in the southwest. Since September of 2006 he has held position of account executive with SAS Institute Inc.
(b) Significant Employees
We have no significant employees other than our executive management team.
(c) Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers.
(d) Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires officers, directors and persons who own more than ten percent of a registered class of a company’s equity securities to file initial reports of beneficial ownership and to report changes in ownership of those securities with the Securities and Exchange Commission. They are also required to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of Forms 3, 4 and 5 furnished to the Company we have determined the following:
Based solely on our review of these reports or written representations from certain reporting persons, the Registrant believes that during the fiscal year ended September 30, 2009 and during the current fiscal year, all filing requirements applicable to our officers, directors, greater-than-ten-percent beneficial owners and other persons subject to Section 16(a) of the Exchange Act were met.
(e) Audit committee financial expert
The Issuer has determined that it does not have an audit committee financial expert serving on its audit committee. The Issuer has been unable to nominate an individual with the required expertise to stand for election to the Issuer's Board of Directors.
(f) Audit Committee and Charter
We have an audit committee and audit committee charter. Our audit committee is comprised of all of our directors. A copy of our audit committee charter is filed as an exhibit to this Form 10-K. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.
(g) Code of Ethics
We have adopted a corporate code of ethics that applies to our chief executive officer and our chief financial officer. A copy of the code of ethics was filed as an exhibit to Form 10-KSB for the year ending September 30, 2006. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Upon written request at our corporate executive office we will deliver to any person free of charge a copy of such code of ethics.
(h) Nominating Committee
We do not have a standing nominating committee separate from all of our directors. We have not adopted procedures by which security holders may recommend nominees to our Board of Directors.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
We do not currently have employment agreements with our executive officer, but expect to sign an employment agreement with him in the next approximately twelve (12) months. To date no officer or director has drawn any salary and neither Mr. Raabe nor any other person will be compensated in the future for past services. We do not currently have a stock option plan.
Name and principal
position
Year
Salary
($)
Bonus
($)
Stock
awards
($)
Option
awards
($)
Nonequity
incentive plan compensation
($)
Nonqualified
deferred
compensation
earnings
($)
All other
compensation
($)
Total
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Arne Raabe
President, CEO & Director
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Option/SAR Grants
There were no option/SAR Grants during the 2008 or 2009 fiscal years.
Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year-End Option Values
No stock options were exercised by any named executive officer during the 2008 or 2009 fiscal years and there are no stock options outstanding at September 30, 2009 or at the date of this report.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance to occur over a period longer than one fiscal year, whether such performance is measured by reference to our financial performance, our stock price, or any other measure.
Compensation of directors.
Our Directors do not and will not receive a salary or fees for serving as a director, nor do they receive any compensation for attending meetings of the Board of Directors or serving on committees of the Board of Directors. They are not entitled to reimbursement of expenses incurred in attending meetings. There are no compensation arrangements for employment, termination of employment or change-in-control between the named Executive Officers and the company.
Name
Fees earned or paid in
cash
($)
Stock
awards
($)
Option
awards
($)
Non-equity
incentive
plan
compensation
($)
Nonqualified
deferred
compensation
earnings
($)
All other
compensation
($)
Total
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Arne Raabe
President, CEO & Director
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Craig Wacaser
Director
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Indemnification
Pursuant to the articles of incorporation and bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the state of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933 which may be permitted to directors or officers pursuant to the foregoing provisions, we are informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy, as expressed in the Act and is, therefore unenforceable.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
(a) Security ownership of certain beneficial owners and management
We are not directly or indirectly owned or controlled by a corporation or foreign government. As of January 13, 2010, we had an authorized share capital of 50,000,000 common shares with a par value of $0.0001 per share of which 9,511,500 shares are issued and outstanding.
The following table sets forth, as of January 13, 2010, the beneficial shareholdings of persons or entities holding five per cent or more of our common stock, each director individually, each named executive officer and all of our directors and officers as a group. Each person has sole voting and investment power with respect to the shares of Common Stock shown, and all ownership is of record and beneficial.
(1)
(2)
(3)
(4)
Title of Class
Name and
Address of Beneficial Owner
Amount and
Nature of Beneficial Owner
Percent of Class
Common
Arne Raabe, 241-1027 Davie Street
Vancouver, BC V6E 4L2
Canada
7,000,000
73.6%
Common
All Officers and Directors as a Group
(two persons)
7,000,000
73.6%
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
There are no limitations on future issuance of our common stock to management, promoters or their affiliates or associates. We may issue stock to these individuals for services rendered in lieu of cash payments. An issuance of stock will dilute your ownership in our company and might result in a reduction of your share value. We currently have no plans for the issuance of shares to management or promoters or their affiliates or associates for services rendered.
(c) Changes in Control of the Registrant
To the knowledge of management there are no present arrangements or pledges of our securities that may result in a change of control of our Company.
See Item 12 - Certain Relationships and Related Transactions
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Parties
Our directors and officers nor any person who beneficially owns, directly or indirectly, shares carrying more than five percent of our outstanding shares, has any material interest, direct or indirect, in any transaction exceeding $60,000 during the last two years or in any proposed transaction which, in either case, has or will materially affect us, or any subsidiaries.
Transactions with Promoter
In addition to his position in our management, Mr. Raabe is also our only promoter.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
For the fiscal years ended September 30, 2009 and 2008, the aggregate fees billed for services rendered for the audits of the annual financial statements and the review of the financial statements included in the quarterly reports on Form 10-QSB/Form 10-Q and the services provided in connection with the statutory and regulatory filings or engagements for those fiscal years and registration statements filed with the SEC were $7,219 and $9,960, respectively.
1. Audit-Related Fees
Our auditors did not bill any additional fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.
Tax Fees
The aggregate fees billed by our auditors for professional services for tax compliance, tax advice, and tax planning were $0 and $0 for the fiscal years ended September 30, 2008 and 2009.
All Other Fees
The aggregate fees billed by our auditors for all other non-audit services, such as attending meetings and other miscellaneous financial consulting, for the fiscal years ended September 30, 2008 and 2009 were $0.
ITEM 15.
ITEM 15. EXHIBITS.
Exhibit Number
Description
3.1
Articles of Incorporation (1)
3.3
By-Laws (1)
4.1
Specimen Stock Certificate (1)
5.1
Opinion on legality (1)
10.1
License agreement with Free Enterprise Press (1)
10.2
License agreement with Global Commodity Press (1)
10.3
Agreement with Kroll Direct Marketing (1)
10.4
Agreement with Infomat Inc. (1)
10.5
Agreement with Marketing Software Company (1)
10.6
Agreement with List Fusion (1)
10.7
Agreement with Global Commodity Press (3)
14.1
Code of ethics (2)
23.1
Consent from Conrad Lysiak (1)
31.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief Financial Officer).
99.1
Audit committee charter
(1) Incorporated herein by reference from our Form SB-2 registration statement and all amendments thereto filed with the Securities and Exchange Commission, and amendments thereto, SEC file No. 333-135331.
(2) Incorporated herein by reference from our Form 10KSB for the year ended September 30, 2006 filed with the Securities and Exchange Commission on February 14, 2007.
(3) Incorporated herein by reference from our Form 10KSB for the year ended September 30, 2007 filed with the Securities and Exchange Commission on January 15, 2008.
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Raphael Industries Ltd.
(Registrant)
Date: January 18, 2010
By: ARNE RAABE
Arne Raabe,
Chief Executive Officer, Chief Financial Officer and principal accounting officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: January 18, 2010
By: ARNE RAABE
Arne Raabe,
Chief Executive Officer, Chief Financial Officer, principal accounting officer, and director