Item 1. Business.
Corporate History
We were incorporated in the State of Nevada on November 15, 2006. Our wholly-owned subsidiary, Here Network Corp., was incorporated in the Province of British Columbia on December 12, 2006. We commenced business operations with the acquisition of dinehere.ca on December 12, 2006.
On August 1, 2008, we and Conversational Computing Corporation, a private Washington state based corporation, signed a letter of intent for our company to acquire Conversational Computing Corporation through a share exchange. If the transactions contemplated by the letter of intent were completed, Conversational Computing Corporation would have become our wholly owned subsidiary. This letter of intent expired and we are not pursuing these transactions.
On May 15, 2009, we, certain significant shareholders of our company, and Magnolia Solar, Inc. entered into a memorandum of understanding with respect to the potential acquisition by Magnolia of a majority interest in our company. The memorandum of understanding contemplates that pursuant to a mutually satisfactory definitive agreement between the parties, Magnolia will acquire a majority interest in the issued and outstanding common stock of our company from our company and certain significant shareholders of our company for $300,000. The purchase price of $300,000 is contemplated to be raised by Midtown Partners as part of its $1,500,000 bridge funding.
The parties agreed to use their best efforts to negotiate in good faith the definitive agreement, which is contemplated to contain, among other things, the following provisions: (i) at the closing, Magnolia will own a majority of the fully diluted shares of our common stock, with the understanding that post-bridge funding, Magnolia will hold approximately 85% of the issued and outstanding shares on a fully diluted basis. The certain significant shareholders of our company will sell their shares as part of this transaction and new shares will be issued from authorized, leaving a total post-transaction capitalization to be finalized between the parties, in good faith, in the definitive agreement; (ii) we will eliminate all liabilities from our balance sheet and have no ongoing operations as of the closing date; (iii) we will deliver to Magnolia fiscal years 2007 and 2008 audits by an accounting firm accredited with the PCAOB and a member of the SEC practice section; (iv) we will deliver to Magnolia certified transfer sheets
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(or make same available through the transfer agent) as well as all corporate books and records and support documents for the audits; and (v) all officers and employees will resign from our company in all current capacities, with no further compensation due under their existing employment agreement.
There is no assurance that we will be able to complete the transactions as contemplated above, or on terms acceptable to our company.
Current Business
Through our subsidiary Here Network Corp. incorporated in British Columbia, we operate a website dining guide at www.dinehere.ca called Dine Here. The website contains restaurant listings for British Columbia including Greater Vancouver, Victoria and Whistler. Visitors can view restaurant information for many of the restaurants in the cities covered including user contributed reviews that have a title, description of their experience and ratings for categories including food, service, ambiance and an overall rating. Internet visitors can also register at the website and submit reviews on any restaurant or add new restaurant listings.
Registration is not required to view any of the web pages on Dine Here, only to submit reviews or restaurant listings. Membership on Dine Here is free; anyone can register an account and become a user of the website. In order to add reviews or restaurant listings, registration is required. Registration involves filling in a form with the requested username, password, location and email address. The location is displayed along with your username with every review submitted using that profile. After a user registers with Dine Here, a confirmation email is sent to the email address supplied. In order to complete the registration, a link contained within the registration email must be clicked on which verifies that the email address supplied is valid. Once this final step is completed, the new user can login to the website and submit reviews or new restaurant listings.
For each restaurant listing, Dine Here displays contact information including the restaurant name, address, telephone number and website address (if available). Each restaurant is classified by the price range of meals, the cuisine type they serve and whether they accept reservations. There is a map link that the user can click on that sends the visitor to Google Maps, an external website. The address of the restaurant is passed to Google Maps and a map is displayed containing an image of the geographical location of the restaurant. If the restaurant is associated with other restaurants such as being part of a restaurant chain, links to those restaurant listings are displayed.
Registered users on Dine Here can submit reviews on any restaurant listing. These reviews include the following required information: review title, review description, overall rating, food rating, service rating, and ambiance rating. Each of the ratings is based on a one to five scale; one representing a poor experience and five being incredible. Reviews must be associated with a restaurant and include all of the above information. Once submitted, the review is posted on the site immediately which is displayed as the first review on the associated restaurant listing web page and the main Dine Here home page. The 25 most recent reviews are displayed on Dine Here’s home page.
Every restaurant that has at least one review has an overall rating based on the average review rating given by Dine Here users. When a new review is submitted by a user, this overall rating is modified based on the new average of all review ratings supplied. This rating information is displayed at the top of every restaurant listing.
Every review and restaurant listing submitted to Dine Here is displayed immediately on the website. Despite this fact, every review and restaurant listing is moderated and reviewed by Dine Here staff. Dine Here has a review and restaurant listing submission policy that must be followed in order for the submission to remain on the website. All submissions on Dine Here must conform to the following standards:
Must be well written and contain proper punctuation, grammar and spelling;
Reviews must be justified - all high or low ratings such as a one or five must be discussed in detail in the review for each rating given;
Must not contain remarks about other reviews or reviewers;
Must not discuss owners, managers or servers by specific name in a negative fashion;
Cannot contain objectionable content including foul language or imply any sort of racial discrimination;
Cannot appear to be obviously biased or slanderous in nature;
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Cannot discuss instances of food poisoning or unwanted objects in food; and
Must not contain URLs (website addresses) in content
Failure to conform to the above submission policy will result in the review or restaurant listing being removed. All user submissions are generally moderated within one to two business days, but based on traffic levels, moderation of submissions can sometimes take up to a week.
We are currently developing a new website for Dine Here that will have a new design and will use community based software called Drupal. Drupal is an open sourced software package that simplifies the process of creating a community driven website by providing a basic, common framework with features that most community based websites require. The software also allows customization and feature addition with a module system that simplifies this process.
The next version of the website, Dine Here 2.0, will replicate all current functionality of the site. In addition, it will support the following new features:
Direct advertising - Support for an advertiser to purchase advertising through the web using Paypal as the online payment method. Advertisers can create or modify their ads, renew advertising and view their advertisement statistics; and
New logo and website design - Implement a new look and feel for the website.
The new logo and design for Dine Here 2.0 was completed by Pixelsplitter Design at a cost of CDN$2,000. A portion of the software development and customization for the new website was performed by As If Productions. We paid As If Productions a total $1,650 on January 30, 2007, representing half of their quotation for services. We were unhappy with the quality of their work and verbally terminated our agreement with As If Productions on June 1, 2007. We subsequently retained Wickle Media Corp of Vancouver who will complete the development for $2,000, to be paid in full upon completion, currently estimated to be August 31, 2009. The useful life of the new website and software is expected to be 3 years.
Current and Anticipated Sources of Revenue
We currently have one source of revenue that consists of Google Adsense advertisements. With the development of the new website, we will be adding a new source of revenue offering direct advertising to businesses.
Google Adsense is an advertising solution for web publishers such as Dine Here. The web publisher agrees to place text ads on their website in return for a 50-50 split of all revenue derived from the advertising placed on the website.
Revenue is accrued when visitors click on ads on a pay per click basis. Google Adsense has a sophisticated, contextual ad serving system that allows them to target ads on Dine Here to serve only those that relate geographically or match the theme of the website. Advertisers using Google Adsense generally include local newspapers, phone book companies, restaurants, other local businesses or anyone else that pays for this marketing service. The ads are served within the text-based content of the site and can include up to 3 ads depending on the web page. Google Adsense pays its publishers by corporate check on a monthly basis at the end of the month, for the previous month. This is paid in US dollars and delivered by mail.
With the new version of the website (Dine Here 2.0), we will continue to serve Google Adsense ads. They will be embedded within the textual content of the website such as between each user review on the restaurant listing pages. Embedding Google Adsense ads within the content often derives the highest possible revenue because the ads are integrated into the content and incite the highest click rates. We will reserve traditional advertising space such as at the top of the page for Dine Here’s direct advertising.
Direct Feature Ads
Direct advertising will be primarily marketed to local businesses with the launch of Dine Here 2.0. It will include the ability for advertisers to pay for and setup advertisements on Dine Here. The advertising will work differently than
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Google Adsense. Instead of being based on performance using a pay per click model, they will be impression-based and charged on the number of times they are displayed. Advertisers will pay per CPM (cost per thousand) impressions displayed on the website.
Each city will be broken up into blocks of 50,000 impressions or 50 CPMs. We expect to charge approximately US$5 per CPM. The minimum monthly cost for each advertiser will be $250 which is based on a $5 CPM multiplied by the minimum ad buy of 50,000 impressions. If Dine Here is unable to deliver the necessary ad impressions to fulfill advertising commitments, the advertising will be rolled over to the next month and added to that months sold inventory.
Advertisers will be able to create two types of ads: graphical or text based. They can create the text based ad or upload an image to use for their graphical ad. Once the advertisement has been created, they will be able to type in a URL or website address that the visitor will be sent when clicking on the ad. Finally, the advertiser will be able to select which city or cities that they want to advertise on and how many blocks of 50,000 impressions (50 CPMs) they would like to purchase. We will require a 3 month minimum commitment. Online payments will be accepted by major credit cards or bank transfer using Paypal. Alternatively, we will accept a corporate check as payment.
Once the payment has been received and the advertisement has been approved, we will begin serving the ads.
Advertisers will have a browser-based web interface that allows them to update their advertisements, add new advertisements and view statistics of their current and past advertisement’s performance.
We use PayPal to handle payment transactions from advertisers. PayPal handles the credit card transactions and also delivers payment receipts and user information via e-mail instantly after purchase. Paypal charges the following fees based on the gross monthly transaction amount:
All amounts above shown in US dollars
Marketing
Dine Here relies on organic search engine traffic and word of mouth for nearly all of its website traffic. Dine Here is listed in all major search engines and directories including Google, Yahoo, DMOZ, MSN and Ask. Due to the nature of the site with constantly changing content, the website is ranked well for all related keywords associated with the website such as “Vancouver restaurants” or a specific restaurant name that is listed on the website. We rely on this high placement for the majority of traffic that is received at Dine Here. There are no plans for any online marketing expenditures in the next 12 months. To increase traffic to Dine Here, we are focusing on increasing the content of its website by expanding to new cities and offering restaurant listings in those new areas.
Technology
Our current website was developed from scratch using active server pages scripting technology. The new website (Dine Here 2.0) is based on an open sourced software package called Drupal which is available free of charge. The website has several customizations to the software called modules which are proprietary to Dine Here and that Here Network Corp retains copyright to. The new website is expected to be a significant improvement because rather than being a custom solution, it is using a commercial-grade software package that will be upgraded and maintained at no cost for software maintenance. Drupal is maintained by a community of thousands of developers and users who are constantly making major feature enhancements and bug fixes. This alleviates a significant portion of the development costs required to maintain the software running Dine Here other than costs associated with integration of these new software versions into the website.
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The website is hosted on a dedicated server rented to Here Network Corp. on a month to month basis by Superb Internet Corporation. Superb charges a monthly fee of $282.45. The server is hosted in Seattle, Washington.
Competition
There are a significant number of competitors that offer restaurant information and reviews on dining establishments in Canada. As we expand across Canada, we will face new competition as all major cities have a local dining guide for that region. In addition, there are several travel based websites that will also offer stiff competition to Dine Here.
Competitor
Type Description Advertising Rates
The Vancouver Restaurant Guide (vancouverrestaurantguide.net) Local guide A Vancouver local dining guide with no reviews and links to restaurants Annual listing fee of CDN$199
Food Vancouver, Food Ontario (foodvancouver.com, foodontario.com) Local, regional dining guides Vancouver based dining guides with sister site for Ontario Charges annual fee for listing restaurant ranging from free - $400 per year for a deluxe listing
Fodor’s Travel Guide (fodors.com) Travel guide Worldwide travel guide with restaurant listings reviewed by professional reviewers Advertising based website, restaurant must be reviewed by in-house reviewers to be added.
Where Guide (where.ca) Entertainment guide Canadian shopping, dining and entertainment guide Advertising based website, restaurant must be reviewed by in-house reviewers to be added.
Yahoo Travel (travel.yahoo.com) Travel Guide Worldwide travel guide Advertising based website, reviews accepted from public
Growth Strategy
Our growth strategy involves organic growth by adding new cities to our dining website directory. Over the next 12 months, we plan on adding 3 new cities including Calgary, Toronto and Montreal. As we add each city, we plan to hire a local sales representative to assist with local sales of advertising in that region.
Our goal is to increase monthly page views to 4 million per month within the next 12 months.
Employees
Our President, Secretary, Treasurer and Director, Simon Au, is the only employee of our company. He handles all of the responsibilities in the area of corporate administration, business development and research.
When we expand to a new city, we will be hiring a commission based sales person for that city to assist in local ad sales. This is a part time position which pays 50% commission for all ad sales in that city.
Intellectual Property
We own the domain names dinehere.ca and dinehere.com. All content on the website including restaurant and reviews are considered copyright. Although Dine Here 2.0 is based on Drupal, an open source software package, it also includes custom modules which are proprietary to Dine Here and that Here Network Corp. owns the copyright to.
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We are not aware that our services or proprietary rights infringe the proprietary rights of third parties. However, from time to time, we may receive notices from third parties asserting that we have infringed their trademarks, copyrights or other intellectual property rights. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any such claims could be time-consuming, result in costly litigation, cause service stoppages or lead us to enter into royalty or licensing agreements rather than disputing the merits of such claims. An adverse outcome in litigation or similar proceedings could subject us to significant liabilities to third parties, require expenditure of significant resources to develop non-infringing technology and opportunities, require disputed rights to be licensed from others, or require us to cease the marketing or use of our website, any of which could have a material adverse effect on our business, operating results and financial condition.
Item 1A.
Item 1A. Risk Factors
In addition to other information in this annual report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.
Risks Related to Our Business
Our limited operating history makes evaluation of our business difficult.
We were incorporated in the State of Nevada on November 15, 2006 and our wholly owned subsidiary, Here Network Corp., was incorporated in the Province of British Columbia on December 12, 2006. We commenced business operations with the acquisition of dinehere.ca on December 12, 2006. Our limited operating history makes it difficult to evaluate our business and prospects. We have encountered, and expect to continue to encounter, many of the difficulties and uncertainties frequently encountered by early stage companies, including limited capital, delays in product development, marketing and sales obstacles and delays, inability to gain customer acceptance of our products and services, inability to attract and retain high-quality and talented executives and other personnel and significant competition. We cannot be certain that we will successfully address these risks. If we are unable to address these risks, our business may not grow, our stock price may suffer and/or we may be unable to stay in business.
The fact that we have not generated any significant revenues since our incorporation raises substantial doubt about our ability to continue as a going concern.
We have not generated significant revenues since our inception on November 15, 2006. Since we are still in the early stages of an operating company and because of the lack of operating history, we will, in all likelihood, continue to incur operating expenses without significant revenues until our website gains significant popularity. Our primary source of funds has been the sale of our common stock and promissory note. We cannot assure that we will be able to generate enough interest in our website. If we cannot attract a significant customer base, we will not be able to generate any significant revenues or income. In addition, if we are unable to establish and generate material revenues, or obtain adequate future financing, our business will fail and you may lose some or all of your investment in our common stock.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.
We incurred a net loss of $193,621 for the period from November 15, 2006 (date of inception) to May 31, 2009. On May 31, 2009, we had cash of $7,644. Should we require additional funding, we intend to raise the money required to fund our operations from the sale of our equity securities; however, there can be no assurance that we will be able to do so. Because we have generated minimal revenues and have incurred a loss from operations since our inception,
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our independent auditors included an explanatory paragraph in their report dated August 4, 2009, regarding the substantial doubt about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
We may need additional funding to support our operations and capital expenditures, which may not be available to us and which lack of availability could adversely affect our business.
We have no committed sources of additional capital. For the foreseeable future, we intend to fund our operations and capital expenditures from limited cash flow and our cash on hand. If our capital resources are insufficient, we will have to raise additional funds. We may need additional funds to continue our operations, pursue business opportunities (such as expansion, acquisitions of complementary business or the development of new products or services), to react to unforeseen difficulties or to respond to competitive pressures. There can be no assurance that any financing arrangements will be available in amounts or on terms acceptable to us, if at all. Furthermore, the sale of additional equity or convertible debt securities may result in further dilution to existing shareholders. If adequate additional funds are not available, we may be required to delay, reduce the scope of or eliminate material parts of the implementation of our business strategy, including the possibility of additional acquisitions or internally developed businesses.
We may not be able to effectively manage our growth when we expand by adding new cities to our dining website directory.
We plan to add new cities to our dining website directory. Over the next 12 months, we plan on adding 3 new cities including Calgary, Toronto and Montreal. If we fail to effectively manage our growth, our financial results could be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand our business development capabilities, our systems and processes and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We cannot assure you that we will be able to:
meet our capital needs;
expand our systems effectively or efficiently or in a timely manner;
allocate our human resources optimally;
identify and hire qualified employees or retain valued employees; or
incorporate effectively the components of any business that we may acquire in our effort to achieve growth.
If we are unable to manage our growth, our operations and financial results could be adversely affected.
We compete with many companies, some of whom are more established and better capitalized than us.
There are a significant number of competitors that offer restaurant information and reviews on dining establishments in Canada both through the Internet and in traditional markets. As we expand across Canada, we will face new competition as all major cities have a local dining guide for that region. In addition, there are several travel based websites that will also offer stiff competition to our website. Some of these companies are larger and better capitalized than us. There are also few barriers to entry in our markets and thus above average profit margins will likely attract additional competitors. Our competitors may develop services that are superior to, or have greater market acceptance than our services. For example, many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources and larger customer bases than us. These factors may allow our competitors to respond more quickly than we can to new or emerging technologies and changes in customer requirements. Our competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies which may allow them to build larger registrant and membership bases. In addition, current and potential competitors are making, and are expected to continue to make, strategic acquisitions or establish cooperative, and in
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some cases, exclusive relationships with significant companies or competitors to expand their businesses or to offer more comprehensive products and services. To the extent these competitors or potential competitors establish exclusive relationships with major portals, search engines and ISPs, our ability to reach potential users of our website through online advertising may be restricted. Failure to compete effectively including by developing and enhancing our services offerings would have a material adverse effect on our business, results of operations, financial condition and the trading price of our common stock.
If we are unable to establish a large user base, we may have difficulty in attracting advertisers to our website, which will hinder our ability to generate advertising revenues.
An integral part of our business plan and marketing strategy requires us to establish a large user base. We will only be able to attract advertisers to our website and possibly begin to generate significant revenues if we can obtain a large enough user base. The number of users necessary to attract advertisers will be determined through discussions with the potential advertisers and their input as to whether we can obtain revenues from advertisements based upon the total numbers at that time. If for any reason our website is ineffective at attracting consumers or if we are unable to continue to develop and update our website to keep consumers satisfied with our service, our user base may decrease and our ability to generate advertising revenues may decline.
Our market is characterized by rapid technological change, and if we fail to develop and market new technologies rapidly, we may not become profitable in the future.
The Internet and the online commerce industry are characterized by rapid technological change that could render our existing website obsolete. The development of our website entails significant technical and business risks. We can give no assurance that we will successfully use new technologies effectively or adapt our website to customer requirements or needs. If our management is unable, for technical, legal, financial, or other reasons, to adapt in a timely manner in response to changing market conditions or customer requirements, we may never become profitable which may result in the loss of all or part of your investment.
We may face liability for information displayed on or accessible via our website, and for other content and commerce-related activities, which could reduce our net worth and working capital and increase our operating losses.
We could face claims for errors, defamation, negligence or copyright or trademark infringement based on the nature and content of information displayed on or accessible via our website, which could aversely affect our financial condition. Even to the extent that claims made against us do not result in liability, we may incur substantial costs in investigating and defending such claims.
We may be subject to liability based on statements made and actions taken as a result of participation in restaurant reviews and listings by our registered users. Based on links we provide to third-party websites, we could also be subject to claims based upon online content we do not control that is accessible from our website.
Our insurance, if any, may not cover all potential claims to which we are exposed or may not be adequate to indemnify us for all liabilities that may be exposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage would reduce our net worth and working capital and increase our operating losses.
Our intellectual property rights are valuable and any inability to protect them could reduce the value of our products, services and brand.
Our trademarks, trade secrets, copyrights and other intellectual property rights are important assets to us. There can be no assurance that the protections provided by these intellectual property rights will be adequate to prevent our competitors from misappropriating our technology or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. There are events that are outside our control that could pose a threat to our intellectual property rights. Additionally, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results.
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We may be subject to intellectual property rights claims in the future, which may be costly to defend, could require the payment of damages and could limit our ability to use certain technologies in the future.
Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition, the possibility of intellectual property rights claims increases. Our technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time consuming, expensive to litigate or settle and could divert management resources and attention. An adverse determination also could prevent us from offering our products and services to others and may require that we procure substitute products or services for these members.
With respect to any intellectual property rights claim, we may have to pay damages or stop using technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, which may not be available on reasonable terms and may significantly increase our operating expenses. The technology also may not be available for license to us at all. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense. If we cannot license or develop technology for the infringing aspects of our business, we may be forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our brand and operating results.
Government regulation could adversely affect our business prospects.
We do not know with certainty how existing laws governing issues such as property ownership, copyright and other intellectual property issues, taxation, illegal content, retransmission of media, personal privacy and data protection will apply to the Internet or to the distribution of proprietary content over the Internet. Most of these laws were adopted before the advent of the Internet and related technologies and therefore do not address the unique issues associated with the Internet and related technologies. Depending on how these laws developed and are interpreted by the judicial system, they could have the effect of:
limiting the growth of the Internet;
creating uncertainty in the marketplace that could reduce demand for our products and services;
increasing our cost of doing business;
exposing us to significant liabilities associated with content distributed or accessed through our products or services; or
leading to increased product and applications development costs, or otherwise harm our business.
Our President has had limited experience in managing a publicly traded company.
Our President, Simon Au, has had limited experience in managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. There can be no assurance that our President will be able to implement programs and policies in an effective and timely manner that adequately respond to such legal and regulatory compliance and reporting requirements. Further, this could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002. Our failure to do so could lead to the imposition of fines and penalties and further result in the deterioration of our business.
The loss of the services of our President would disrupt our operations and interfere with our ability to compete.
We depend upon the continued contributions of our President, Simon Au. We only have one employee, our President, Secretary, Treasurer and Director, Simon Au. He handles all of the responsibilities in the area of corporate administration, business development and research. We do not carry key person life insurance on Mr. Au’s life and the loss of his services could disrupt our operations and interfere with our ability to compete with others.
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All of our assets and our officer and director are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or our officer and director.
All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, our sole officer and director, Simon Au, is not a national or resident of the United States, and all or a substantial portion of Mr. Au’s assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our sole officer and director, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against us or our sole officer and director.
Roger Williams’ control may prevent you from causing a change in the course of our operations and may affect the price of our common stock.
Our founder and former President, Roger Williams, beneficially owns 50.06% of our common stock. Accordingly, for as long as Mr. Williams continues to own more than 50% of our common stock, he will be able to elect our entire board of directors, control all matters that require a shareholder vote (such as mergers, acquisitions and other business combinations, and the future issuance of our shares) and exercise a significant amount of influence over our management and operations. Therefore, your ability to cause a change in the course of our operation is eliminated. As such, the value attributable to the right to vote is limited.
Our technical systems are vulnerable to interruption and damage that may be costly and time-consuming to resolve and may harm our business and reputation.
A disaster could interrupt our services for an indeterminate length of time and severely damage our business, prospects, financial condition and results of operations. Our systems and operations are vulnerable to damage or interruption from fire, floods, network failure, hardware failure, software failure, power loss, telecommunication failures, break-ins, terrorism, war or sabotage, computer viruses, denial of service attacks, penetration of our network by unauthorized computer users and “hackers” and other similar events, and other unanticipated problems.
We may not have developed or implemented adequate protections or safeguards to overcome any of these events. We may also not have anticipated or addressed many of the potential events that could threaten or undermine our technology network. Any of these occurrences could cause material interruptions or delays in our business, result in the loss of data or render us unable to provide services to our consumers. In addition, if anyone can circumvent our security measures, he or she could destroy or misappropriate valuable information or disrupt our operations. Our insurance, if any, may not be adequate to compensate us for all the losses that may occur as a result of a catastrophic system failure or other loss, and our insurers may decline to do so for a variety of reasons.
If we fail to address these issues in a timely manner, we may lose the confidence of our online advertisers, and our revenue may decline and our business could suffer.
We rely on an outside firm to host our servers, and a failure of service by these providers could adversely affect our business and reputation.
We rely upon a third party provider to host our main server. In the event that these providers experience any interruption in operations or cease operations for any reason or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to enter into a relationship with other service providers or assume hosting responsibilities ourselves. If we are forced to switch hosting facilities, we may not be successful in finding an alternative service provider on acceptable terms or in hosting the computer server ourselves. We may also be limited in our remedies against these providers in the event of a failure of service. We also rely on a third party provider for revenue, Google Adsense. A failure or limitation of service or available capacity by any of these third party providers could adversely affect our business and reputation.
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Our business depends in part on the growth and maintenance of the Internet and telecommunications infrastructure.
The success of our business depends in part on the continued growth and maintenance of the Internet and telecommunication infrastructure. This includes maintaining a reliable network backbone with the necessary speed, data capacity and security for providing reliable Internet services. Internet infrastructure may be unable to support the demands placed on it if the number of Internet users continue to increase or if existing or future Internet users access the Internet more often or increase their bandwidth requirements. We have no control over the providers of access services to the Internet. Interruptions, delays or capacity problems with any points of access between the Internet and our websites could adversely affect our ability to provide services to users of our websites. The temporary or permanent loss of all or a portion of our services on the Internet, the Internet infrastructure generally, or our users’ ability to access the Internet, could have a material adverse effect on our business, results of operations, financial condition and the trading price of our common stock.
Risks Associated With Our Common Stock
There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares.
There has been a limited trading market for our common shares on the OTC Bulletin Board. As a result, our shareholder may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common shares. This severely limits the liquidity of our common shares and has a material adverse effect on the market price for our common shares and on our ability to raise additional capital. An active public market for our common shares may not develop, or if one should develop, it may not be sustained, and as a result, investors may not be able to resell our common shares that they have purchased and may lose all of their investment
We do not intend to pay dividends on any investment in the shares of stock of our company.
We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.
Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a shareholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these 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 agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our
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securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a shareholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Because we can issue additional common shares, our shareholders may experience dilution.
We are authorized to issue up to 75,000,000 common shares, of which 8,190,000 are issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock without the consent of any of our shareholders. Consequently, our shareholders may experience dilution in their ownership of our company in the future.
If we fail to file our required filings with the Securities and Exchange Commission in an accurate and timely manner, our common stock may be no longer quoted on the OTC Bulletin Board. If this happens, our stockholders would have difficulty in reselling any of their shares.
If we fail to file our required filings with the Securities and Exchange Commission in an accurate and timely manner, the Financial Industry Regulatory Authority may determine that our common stock is no longer eligible for quotation on the OTC Bulletin Board and remove our common stock from the OTC Bulletin Board quotations. If this happens, then market makers would no longer be able to enter quotations for our common stock through the OTC Bulletin Board and our stockholders would have difficulty in reselling any of their shares.
A prolonged decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.
A prolonged decline in the price of our common stock could reduce liquidity of our common stock and reduce our ability to raise capital. Because a significant portion of our operations have been and will be financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to continue our current operations. If our stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor, may have a material adverse effect on the market price of our common stock.
Item 1B.
Item 1B. Unresolved Staff Comments.
Not applicable.
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Item 2.
Item 2. Properties.
Our executive and head office is located at 2908 - 30 Harrison Garden Blvd., Toronto, Ontario M2N 7A9, Canada, which is the located residence of our President, Simon Au.
We own the domain names dinehere.ca and dinehere.com. All content on the website including restaurant and reviews are considered copyright. Although Dine Here 2.0 is based on Drupal, an open source software package, it also includes custom modules which are proprietary to Dine Here and that Here Network Corp. owns the copyright to. We have registered the dinehere.ca domain until October 27, 2013 and maintaining the registration costs $14/year thereafter. We have registered the domain www.dinehere.com until February 9, 2010 and maintaining the registration costs $10/year thereafter.
Item 3.
Item 3. Legal Proceedings.
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director and officer, or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common shares are quoted on the OTC Bulletin Board under the trading symbol “HRTE.OB”. There were very few trades in our common shares. The following quotations obtained from the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
There were no quotations reported for our common shares as reported on the OTC Bulletin Board prior to January 2008. The last sale price of our common shares on July 31, 2009, was $1.01 per share.
There are currently 33 holders of record of our common stock.
There are no outstanding options or warrants to purchase, or securities convertible into, our common shares. None of our issued and outstanding shares can be sold pursuant to Rule 144 of the Securities Act of 1933.
We have not declared or paid any cash dividends since inception. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future. There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The
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Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
we would not be able to pay our debts as they become due in the usual course of business; or
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
Item 6.
Item 6. Selected Financial Data.
Not applicable.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report, particularly in the section entitled “Risk Factors” beginning on page 8.
Our audited consolidated financial statements are stated in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles.
Overview
We were incorporated in the State of Nevada on November 15, 2006. Our wholly-owned subsidiary, Here Network Corp., was incorporated in the Province of British Columbia on December 12, 2006. We commenced business operations with the acquisition of dinehere.ca on December 12, 2006.
Through our subsidiary, Here Network Corp., we operate a website dining guide at www.dinehere.ca called Dine Here. The website contains restaurant listings for British Columbia including Greater Vancouver, Victoria and Whistler. Visitors can view restaurant information for many of the restaurants in the cities covered including user contributed reviews that have a title, description of their experience and ratings for categories including food, service, ambiance and an overall rating. Internet visitors can also register at the website and submit reviews on any restaurant or add new restaurant listings.
Sources of Revenue
We currently have one source of revenue that consists of Google Adsense advertisements. Google Adsense is an advertising solution for web publishers such as Dine Here. The web publisher agrees to place text advertisements on their website in return for a 50-50 split of all revenue derived from the advertising placed on the website.
Revenue is accrued when visitors click on advertisements on a pay per click basis. Google Adsense has a sophisticated, contextual advertisement serving system that allows them to target advertisements on Dine Here to serve only those that relate geographically or match the theme of the website. Advertisers using Google Adsense generally include local newspapers, phone book companies, restaurants, other local businesses or anyone else that pays for this marketing service. The advertisements are served within the text-based content of the site and can include up to three advertisements depending on the web page. Google Adsense pays its publishers by corporate check on a monthly basis at the end of the month, for the previous month. This is paid in US dollars and delivered by mail.
We are currently developing a new version of the website for Dine Here. With the development of the new website, we intend to add a new source of revenue by offering direct advertising to businesses. The direct advertising is planned to work differently than Google Adsense. Instead of being based on performance using a pay per click
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model, the direct advertising is planned to be impression-based and charged on the number of times the advertisements are displayed.
Website
Our website is hosted on a dedicated server rented to Here Network Corp. on a month to month basis by Superb Internet Corporation. Superb charges a monthly fee of $282.45. The server is hosted in Seattle, Washington. We retained Wickle Media Corp. of Vancouver, Canada to complete the development of the new website for $2,000, to be paid in full upon completion. We expect to launch the new website on September 30, 2009.
Results of Operations
Year ended May 31, 2009 to May 31, 2008
The following table summarizes our operating results for the years ended May 31, 2009 and 2008:
During the year ended May 31, 2009, we generated revenues of $5,559 and our operating expenses were $88,900 as compared to revenues of $9,749 and operating expenses of $104,595 for the year ended May 31, 2008. The decrease in revenues was caused by lower advertising rates from Google Adsense and a decrease in traffic due to increased competition. The decrease in operating expenses was primarily attributable to the cost of becoming a public company in the United States that was incurred during the year ended May 31, 2008.
General and administrative costs were $83,018 for the year ended May 31, 2008 as compared to $99,777 for the year ended May 31, 2008. The decrease in general and administrative costs was primarily attributable to the cost of becoming a public company in the United States that was incurred during the year ended May 31, 2008.
One of our employees provided management services, valued at $2,000 per month, and office premises, valued at $250 per month, to us at no charge. During the year ended May 31, 2009, $24,000 in these donated services and $3,000 in donated rent were charged to operations as compared to $24,000 in donated services and $3,000 in donated rent for the year ended May 31, 2008.
Liquidity and Capital Resources
Working Capital
As of May 31, 2008, we had cash of $7,644 and a working capital deficit of $54,292 as compared to cash of $9,628 and working capital deficit of $4,092 as of May 31, 2008. We have suffered a net loss from inception. The ability of our company to meet our financial liabilities and commitments is primarily dependent upon the continued financial support of our director and shareholders, the continued issuance of equity to new shareholders, and our ability to achieve and maintain profitable operations.
On October 8, 2008, we issued to Mountain Equity Ltd., a demand promissory note in the amount of $30,000. The promissory note is not subject to any specific repayment terms, and will accrue interest at the rate of 20% per annum
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on the principal amount remaining unpaid, after as well as before demand or maturity or default occurs. If we fail to pay the principal amount of the promissory note or any interested thereon upon demand, then the entire unpaid principal and all accrued and unpaid interest becomes payable immediately.
On April 8, 2009, we issued to Minerco Resources, Inc., a promissory note in the amount of $10,000. The promissory note bears no interest and is unsecured. If we fail to pay on demand any payment of principal on the promissory note, then in such event the entire unpaid principal becomes due and payable immediately.
Management believes that our company’s cash will not be sufficient to meet our working capital requirements for the next twelve month period. We plan to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next twelve months primarily through future debt or equity financing. There is no assurance that our company will be able to obtain further funds required for our continued working capital requirements. If we are not able to obtain additional funds on a timely basis, we will be unable to conduct our operations as planned. In such event, we will be forced to scale down or perhaps even cease our operations.
Going Concern
There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon the continued financial support from our shareholders, our ability to obtain necessary equity financing to continue operations, and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current shareholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Because we have a working capital deficit, have generated minimal revenues, and have incurred losses from operations since inception, in their report on our audited financial statements for the year ended May 31, 2009, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 7A.
Item 7A. Quantitative And Qualitative Disclosures About Market Risk.
Not Applicable.
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Item 8.
Item 8. Financial Statements and Supplementary Data.
Here Enterprises, Inc.
(A Development Stage Company)
May 31, 2009
Report of Independent Registered Public Accounting Firm
To the Directors and Stockholders of
Here Enterprises, Inc. (A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Here Enterprises, Inc. (A Development Stage Company) as of May 31, 2009 and 2008 and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and accumulated from November 15, 2006 (Date of Inception) to May 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control over financial reporting. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Here Enterprises, Inc. (A Development Stage Company) as of May 31, 2009 and 2008, and the results of its operations and its cash flows for the years ended, and accumulated from November 15, 2006 (Date of Inception) to May 31, 2009 in conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a working capital deficit, has generated minimal revenues, and has incurred losses from operations since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ “MANNING ELLIOTT LLP”
CHARTERED ACCOUNTANTS
Vancouver, Canada
August 4, 2009
Here Enterprises, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in U.S. dollars)
(The accompanying notes are an integral part of these consolidated financial statements)
Here Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in U.S. dollars)
(The accompanying notes are an integral part of these consolidated financial statements)
Here Enterprises, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders’ Deficit
For the period from November 15, 2006 (Date of Inception) to May 31, 2009
(expressed in U.S. dollars)
(The accompanying notes are an integral part of these consolidated financial statements)
Here Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(The accompanying notes are an integral part of these consolidated financial statements)
Here Enterprises, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
1. Nature of Operations and Going Concern
Here Enterprises, Inc. (the “Company”) was incorporated in the state of Nevada on November 15, 2006. On December 12, 2006, the Company incorporated Here Network Corp. (the “Subsidiary”), a company incorporated in the province of British Columbia, Canada. On December 12, 2006, the Subsidiary acquired a website www. dinehere.ca which provides restaurant listings and reviews to a broad spectrum of Internet visitors. The Company derives advertising revenue from this website. The Company is a development stage company as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting for Enterprises in the Development Stage”.
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of May 31, 2009, the Company has generated minimal revenue, has a working capital deficit of $54,292, and has incurred losses from operations of $193,621 since inception. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company intends to fund operations through revenue and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending May 31, 2010. There is no assurance that the Company will obtain the necessary financing to complete its objectives.
2. Summary of Significant Accounting Policies
a)
Basis of Presentation
These consolidated financial statements and notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its wholly-owned Canadian subsidiary, Here Network Corp. All significant inter-company transactions and balances have been eliminated. The Company’s fiscal year end is May 31.
b) Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to the useful lives and recoverability of long-lived assets, allowance for doubtful accounts, donated expenses and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Here Enterprises, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
d) Financial Instruments and Concentrations
SFAS No. 157 “Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation
methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, accounts receivable, accounts payable, amounts due to related parties and short-term notes payable. Pursuant to SFAS No. 157, the fair value of the Company’s cash equivalents, when applicable, is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company estimates that the carrying values of all of its other financial instruments approximate their fair values due to the immediate or relatively short maturities of these instruments.
The Company’s operations are in Canada and virtually all of its assets and liabilities are giving rise to significant 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.
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and accounts receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. The Company does not require collateral and establishes an allowance for doubtful accounts based on the age of the receivable and the specific identification of receivables the Company considers at risk.
For the years ended May 31, 2009 and 2008, revenue from a single customer represented 100% of total revenue. As at May 31, 2009 and 2008, 100% of accounts receivable is with this customer.
e) Property and Equipment
Property and equipment are recorded at cost. Amortization has been provided using the following rates and methods:
f) Website
The Company recognizes the costs associated with developing a website in accordance with the American Institute of Certified Public Accountants Statement of Position No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Relating to website development costs the Company follows the guidance pursuant to the Emerging Issues Task Force No. 00-2, “Accounting for Website Development Costs”.
Here Enterprises, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
f) Website (continued)
The Company acquired its website from a third party. The Company is capitalizing costs of computer software obtained for internal use in web design and network operations. These capitalized costs will be amortized based on their estimated useful life over three years. Payroll and related costs will not be capitalized, as the amounts principally relate to maintenance. Internal costs related to the development of website content will be expensed as incurred.
g) Long-lived Assets
In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the carrying values of intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
h) Foreign Currency Translation
The functional currency of the Subsidiary is the Canadian dollar. The financial statements of the Subsidiary are translated to United States dollars under the current rate method in accordance with SFAS No. 52 “Foreign Currency Translation”. Under the current rate method, all assets and liabilities are translated at the rates of exchange in effect at the balance sheet date and revenues and expenses are translated at the average rates of exchange during the year. The effect of this translation is recorded in a separate component of stockholders’ equity. A cumulative translation adjustment of $874 as of May 31, 2009 has been included in accumulated other comprehensive loss in the accompanying consolidated balance sheet.
Transactions in foreign currencies are recorded at the approximate rate of exchange at the transaction date. Assets and liabilities resulting from these transactions are translated at the rate of exchange in effect at the balance sheet date. All differences are recorded in the results of operations.
i) Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
j) Revenue Recognition
The Company’s revenue is derived from pay per click advertising placed on its website. The Company recognizes this advertising revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” when the price is fixed or determinable, persuasive evidence of an arrangement exists, the revenue has been earned, and collectibility is reasonably assured.
k) Comprehensive Income
SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at May 31, 2009 and 2008, the Company’s only component of comprehensive loss consisted of foreign currency translation adjustments.
Here Enterprises, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
l) Earnings (Loss) per Share
The Company computes earnings (loss) per share in accordance with SFAS No. 128, "Earnings per Share" (“SFAS No. 128”). SFAS No. 128 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 by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, 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 common shares if their effect is anti-dilutive. As at May 31, 2009, the Company had no dilutive securities outstanding.
m) Recent Accounting Pronouncements
In May 2008, the FASB issued SFAS No. 162, “The hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 Identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS No. 141 (revised 2007) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141 (revised 2007) will become effective for the fiscal year beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB NO. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 will become effective for the fiscal year beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
Here Enterprises, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
n) Recently Adopted Accounting Pronouncements (continued)
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. In October 2008, the FASB issued FSP 157-3 “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active, and provides guidance on the key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. Effective June 1, 2008, the Company adopted the measurement and disclosure requirements related to financial assets and financial liabilities. The adoption of SFAS 157 for financial assets and financial liabilities did not have a material impact on the Company’s results of operations or the fair values of its financial assets and liabilities.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115” (“SFAS 159”). Under SFAS 159, a company may choose, at specified election dates, to measure eligible items at fair value and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Effective June 1, 2008, the Company adopted SFAS 159, but the Company has not elected the fair value option for any eligible financial instruments as of May 31, 2009.
3. Property and Equipment
4. Website
Here Enterprises, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
6. Short-term Loans Payable
On October 8, 2008, the Company issued a promissory note to an unrelated company in exchange for $30,000. The promissory note bears interest at 20% per annum, is unsecured and repayable on demand.
On April 8, 2009, the Company issued a promissory note to an unrelated company in exchange for $10,000. The promissory note bears no interest, is unsecured and has no fixed term for repayment.
7. Income Taxes
The Company has incurred net operating losses totalling $127,247, which begin to expire in 2027.
The income tax recovery reported in the statement of operations differs from the amount computed by applying the federal income tax rate of 35% to net loss before income taxes for the years ended May 31, 2009 and May 31, 2008 as follows:
Significant components of the Company’s deferred tax assets and liabilities as at May 31, 2009 and 2008 were as follows:
8. Commitment
On May 15, 2009, the Company signed Memorandum of Understanding with Magnolia Solar, Inc. ( “Magnolia” ) and the Company’s controlling shareholders to enter into a reverse takeover transaction. Under the reverse takeover transaction, Magnolia shall acquire a majority interest in the issued and outstanding common stock of the Company from the Company’s controlling shareholders for $300,000.
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Item 9.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A(T).
Item 9A(T). Controls and Procedures.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being May 31, 2009. This evaluation was carried out under the supervision and with the participation of our management, including our President (our principal executive officer, principal financial officer, and principal accounting officer).
Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of 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 override of a control. The design of a control system is also based upon certain assumptions about potential future conditions; over time, currently implemented controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Based upon that evaluation, our President concluded that our disclosure controls and procedures were effective as at the end of the period covered by this annual report.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the applicable time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures which are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our President to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of May 31, 2009 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of May 31, 2009, our internal control over financial reporting was not effective. The ineffectiveness of our internal control over financial reporting was due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Our management identified the following material weaknesses in our internal control over financial reporting:
Lack of independent directors and an audit committee - Our management believes that an audit committee is an utmost important entity level control over our financial reporting. We currently do not have an audit committee and have no independent director. Our board of directors consists solely of our President, who is not independent of management and lacks sufficient financial expertise for overseeing financial reporting responsibilities;
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Insufficient segregation of duties in our finance and accounting functions due to limited personnel - During the year ended May 31, 2009, we had limited personnel that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the Securities and Exchange Commission. These control deficiencies could result in a material misstatement of our annual or interim financial statements that would not be prevented or detected; and
Lack of accounting staff with sufficient technical accounting knowledge - We do not have accounting staff with sufficient technical accounting knowledge relating to accounting for complex U.S. generally accepted accounting principles matters.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. To remediate the material weaknesses identified, we plan to implement the following changes during the year ending May 31, 2010:
We intend to recruit two or more additional independent directors and create an audit committee at such time as additional directors are retained; and
We intend to hire additional personnel to assist with the preparation of our financial statements, which is expected to allow for proper segregation of duties, as well as additional manpower for proper documentation.
The above remediation efforts are largely dependent on our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, the remediation efforts may be adversely affected in a material manner.
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 our company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter ended May 31, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
April 8, 2009 Promissory Note
On April 8, 2009, we issued to Minerco Resources, Inc., a promissory note in the amount of $10,000. The promissory note bears no interest and is unsecured. If we fail to pay on demand any payment of principal on the promissory note, then in such event the entire unpaid principal becomes due and payable immediately.
Memorandum of Understanding with Magnolia Solar, Inc.
On May 15, 2009, we, certain significant shareholders of our company, and Magnolia Solar, Inc. entered into a memorandum of understanding with respect to the potential acquisition by Magnolia of a majority interest in our company. The memorandum of understanding contemplates that pursuant to a mutually satisfactory definitive agreement between the parties, Magnolia will acquire a majority interest in the issued and outstanding common stock of our company from our company and certain significant shareholders of our company for $300,000. The
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purchase price of $300,000 is contemplated to be raised by Midtown Partners as part of its $1,500,000 bridge funding.
The parties agreed to use their best efforts to negotiate in good faith the definitive agreement, which is contemplated to contain, among other things, the following provisions: (i) at the closing, Magnolia will own a majority of the fully diluted shares of our common stock, with the understanding that post-bridge funding, Magnolia will hold approximately 85% of the issued and outstanding shares on a fully diluted basis. The certain significant shareholders of our company will sell their shares as part of this transaction and new shares will be issued from authorized, leaving a total post-transaction capitalization to be finalized between the parties, in good faith, in the definitive agreement; (ii) we will eliminate all liabilities from our balance sheet and have no ongoing operations as of the closing date; (iii) we will deliver to Magnolia fiscal years 2007 and 2008 audits by an accounting firm accredited with the PCAOB and a member of the SEC practice section; (iv) we will deliver to Magnolia certified transfer sheets (or make same available through the transfer agent) as well as all corporate books and records and support documents for the audits; and (v) all officers and employees will resign from our company in all current capacities, with no further compensation due under their existing employment agreement.
There is no assurance that we will be able to complete the transactions as contemplated above, or on terms acceptable to our company.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
A director of our company holds office until the next annual meeting of the shareholders or until his successors has been elected and qualified. An officer of our company is appointed by our board of directors and holds office until his death, resignation or removal from office. Our director and executive officer, his age, positions held, and duration as such, are as follows:
Business Experience
The following is a brief account of the education and business experience of our sole officer and director during at least the past five years, indicating his business experience, principal occupation during the period, and the name and principal business of the organization by which he was employed.
Simon Au, President, Secretary, Treasurer and Director
On September 10, 2008, Simon Au was appointed as a director of our company and on September 12, 2008, he was appointed as our President, Secretary, and Treasurer. Mr. Au is a mechanical engineer specializing in manufacturing process. Mr. Au also has experience in Internet marketing and the development of web based businesses having started his own Internet audio parts retailing operation called Audiyo Inc. in June, 2003 which operated its website at www.audiyo.com. From June, 2003 to present, Mr. Au has also served as the Vice-President of Marketing/Development with Audiyo Inc., where he is responsible for website design, management of the launch of the company’s website, development of a supplier base of products to be sold through the website and development of Audiyo Inc.’s marketing strategy. From July 1999 to present, Mr. Au has been the manufacturing and process engineer with the Rollstamp Manufacturing Division of Decoma International, where his responsibilities include design workcell layout and plant layout, implementing continuous improvement projects for manufacturing processes including metal stamping, injection molding and painting. Rollstamp is a supplier of automotive exterior trim products. From September 1997 to July 1999, Mr. Au was the programmer/project coordinator with Schukra Manufacturing, a company involved in manufacturing seat lumbar supports for the automotive industry. Mr. Au’s
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education background includes Magna International Training Certificates: (2000-2002), where he studied design for manufacturing and assembly, mistake proofing, occupational health and safety and supervisor competency training; Concordia University where he received a Bachelor Degree in Mechanical Engineering (1992-1996); Dawson College where he studied mechanical engineering technology (1989-1992) and Dawson College where he studied applied sciences (1987-1989).
Family Relationships
There are no family relationships between any director or executive officer.
Involvement in Certain Legal Proceedings
None of our director and executive officer has been involved in any of the following events during the past five years:
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 involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity 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 Exchange Act of 1934 requires our executive officer and director, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended May 31, 2009, all filing requirements applicable to our former officers and directors and greater than ten percent beneficial owners were complied with.
Corporate Governance
All proceedings of our board of directors for the year ended May 31, 2009 were conducted by resolutions consented to in writing by our former directors or current director and filed with the minutes of the proceedings of the board of directors. A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our President, at the address appearing on the first page of this annual report.
Code of Ethics
We have not adopted a code of ethics because our board of directors believes that our small size does not merit the expense of preparing, adopting and administering a code of ethics. Our board of directors intends to adopt a code of ethics when circumstances warrant.
Nominating and Compensation Committees
We do not have standing nominating or compensation committees, or committees performing similar functions. Our board of directors believe that it is not necessary to have a standing compensation committee at this time because the
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functions of such committee are adequately performed by our board of directors. Our board of directors has not adopted a charter for the compensation committee.
Our board of directors also is of the view that it is appropriate for us not to have a standing nominating committee because our board of directors has performed and will perform adequately the functions of a nominating committee. Our board of directors has not adopted a charter for the nomination committee. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors. Our board of directors does not believe that a defined policy with regard to the consideration of candidates recommended by shareholders is necessary at this time because we believe that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level. There are no specific, minimum qualifications that our board of directors believes must be met by a candidate recommended by our board of directors. The process of identifying and evaluating nominees for director typically begins with our board of directors soliciting professional firms with whom we have an existing business relationship, such as law firms, accounting firms or financial advisory firms, for suitable candidates to serve as directors. It is followed by our board of directors’ review of the candidates’ resumes and interview of candidates. Based on the information gathered, our board of directors then makes a decision on whether to recommend the candidates as nominees for director. We do not pay any fee to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominee.
Audit Committee
We do not have a standing audit committee or an audit committee charter at the present time. Our board of directors has determined that we do not have a board member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K.
We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The board of directors of our company does not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the board of directors. In addition, we believe that retaining a person who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.
Item 11.
Item 11. Executive Compensation.
The following table shows the compensation received by our executive officers for the fiscal years ended May 31, 2009 and 2008:
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(1) Mr. Au became our director on September 10, 2008 and our President, Secretary, and Treasurer on September 12, 2008.
(2) Mr. Williams became our President, Secretary, Treasurer and director on November 15, 2006. He resigned as our director on September 10, 2008 and as our President, Secretary, and Treasurer on September 12, 2008.
(3) Mr. McFadyen became our Vice President, Director of Sales and director on March 15, 2007. He resigned as our director on September 10, 2008 and as our Vice President, Director of Sales on September 12, 2008.
We have not entered into written employment agreements with our former directors and officers. We have not entered into a written employment agreement with our current director and officer.
There have been no arrangements or plans in which we have provided pension, retirement or similar benefits for our former directors and officers or our current director and officer. We have not had any material bonus or profit sharing plans pursuant to which cash or non-cash compensation has been or may be paid to our former directors and officers or our current director and officer, except that stock options may be granted at the discretion of our board of directors in the future.
We have no plans or arrangements in respect of remuneration received or that may be received by our former officers or our current officer to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.
Outstanding Equity Awards at Fiscal Year-End
As at May 31, 2009, we had not adopted any equity compensation plan and no stock, options, or other equity securities were awarded to our former executive officers or current executive officer.
Director Compensation
Our former directors or current director did not receive or accrue any compensation for their services as a director during the fiscal year ended May 31, 2009. We have no formal plan for compensating our director for his service in his capacity as a director. A director is entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
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Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of August 27, 2009, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than 5% of our common stock, as well as by our current director and executive officer. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
(1)
Based on 8,190,000 shares of common stock issued and outstanding as of August 27, 2009. Except as otherwise indicated, we believe that the beneficial owner of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our company, except for the memorandum of understanding that we entered into with certain significant shareholders of our company and Magnolia Solar, Inc. on May 15, 2009. Please see “Item 1. Business” of Part I and “Item 9B. Other Information” of Part II for more information regarding this memorandum of understanding.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with related persons
Other than as disclosed below and elsewhere, there has been no transaction, since the beginning of the year ended May 31, 2008, or currently proposed transaction, in which we were or are to be a participant and the amount
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involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest.
(i)
any director or executive officer of our company;
(ii)
any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; and
(iii)
any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.
As at May 31, 2009, we were indebted to Roger Williams, our former President, Secretary, Treasurer and director, and a holder of 50.06% of issued and outstanding shares of our common stock, in the amount of $3,781 and to Michael McFadyen, our former Vice President, Director of Sales and director, and a holder of 18.32% of issued and outstanding shares of our common stock, in the amount of $6,315. Our indebtedness to Mr. Williams and Mr. McFadyen is non-interest bearing, unsecured, and due on demand. The largest amount of principal outstanding since the beginning of the year ended May 31, 2008 was $4,059 for Mr. Williams and $8,879 for McFadyen. Since the beginning of the year ended May 31, 2008, we have not repaid any amount of principal to Mr. Williams or Mr. McFadyen.
Also Mr. Williams provided management services and office premises to us at no charge. The donated services are valued at $2,000 per month and office premises are valued at $250 per month. During the year ended May 31, 2009, $24,000 (2008 - $24,000) in donated services and $3,000 (2008 - $3,000) in donated rent were charged to operations and recorded as donated capital.
Director Independence
We currently act with one director, Simon Au. As Mr. Au is our President, he is not an “independent director” as the term is used in NASDAQ rule 5605(a)(2).
Item 14.
Item 14. Principal Accounting Fees and Services.
The aggregate fees billed or expected to be billed for the most recently completed fiscal years ended May 31, 2009 and 2008 for professional services rendered by Manning Elliott LLP for the audit of our annual financial statements and review of the financial statements included in our quarterly reports and services that are normally provided by Manning Elliott LLP in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Our board of directors, which acts as our audit committee, has adopted a policy governing the pre-approval by our board of directors of all services, audit and non-audit, to be provided to our company by our independent auditors. Under the policy, our board or directors has pre-approved the provision by our independent auditors of specific audit, audit related, tax and other non-audit services as being consistent with auditor independence. Requests or applications to provide services that require the specific pre-approval of our board of directors must be submitted to our board of directors by our independent auditors, and our independent auditors must advise our board of directors
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as to whether, in the independent auditor’s view, the request or application is consistent with the Securities and Exchange Commission’s rules on auditor independence.
Our board of directors has considered the nature and amount of the fees billed by Manning Elliott LLP and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of Manning Elliott LLP.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 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.
HERE ENTERPRISES, INC.
/s/ Simon Au
By: Simon Au
President, Secretary, Treasurer and Director
(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
Date: August 28, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated.
/s/ Simon Au
By: Simon Au
President, Secretary, Treasurer and Director
(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
Date: August 28, 2009