ITEM 1. BUSINESS
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us" and "our company" mean Secure Luggage Solutions Inc. unless the context clearly requires or states otherwise.
Corporate History
We were incorporated in the State of Delaware on December 4, 2008. We are a development stage company in the business of luggage wrap. Luggage wrap is a product that is applied to checked luggage in a retail kiosk with the passenger present. Our product is a plastic covering applied by a machine. We intend to offer our luggage wrap product at pre check-in areas of airports to passengers that choose to utilize luggage wrap. As of the date of this filing, we have not entered into any license agreements with airports that would allow us to offer our luggage wrap product at pre check-in areas of airports. We continue to actively promote our luggage wrap services to carriers, airport management and other parties operating within the Vancouver International Airport, which is our initial marketing target we have identified to begin our operations.
Our Business
Our business is luggage wrap. We intend to market and provide the luggage wrap services at various airports in North America. Luggage wrap is a product that is applied to checked luggage in a retail kiosk with the passenger present. Our product is a plastic covering applied by a machine. We offer two different processes that apply the plastic covering. One process we offer rotates the luggage while applying multiple layers of stretchable plastic film around the luggage. The other process we offer conveys checked luggage from entrance to exit while applying a single layer of shrink plastic around the luggage. Our luggage wrap product will be offered at pre check-in areas of airports to passengers that choose to utilize our luggage wrap product. We will charge from $5 to $10 (depending on size) for each piece of luggage wrapped with our luggage wrap product.
We have entered into a relationship with Satel-95 Ltd., a bag wrap equipment manufacturer located in Sofia Bulgaria. There is no written agreement regarding the relationship between our company and Satel and the term of the relationship will continue indefinitely until either party to the relationship desires to terminate the relationship. Pursuant to the terms of the relationship, Satel will provide us with the machines and related equipment to apply our luggage wrap material, in exchange for 50% of the operating profit from our luggage wrap business. We will use the machinery and equipment furnished by Satel to operate our luggage wrap business. Accordingly, after the payment of all related costs and expenses, which include airport concession fees, personnel fees, and product expenses, operating profit from our luggage wrap business will be allocated 50% to us and 50% to Satel, as compensation to Satel for the use of its luggage wrap machines.
We cannot provide any guarantee or assurance regarding the term of our relationship with Satel. We anticipate in the event of the termination of that relationship, we may purchase luggage wrapping machines and equipment from Satel. In the event that the relationship terminates and we cannot purchase luggage wrap machinery or equipment from Satel, we believe that we will be able to purchase similar machinery and equipment from other manufacturers to operate our luggage wrap business.
On November 7, 2010, our company entered into an exclusive license agreement with Secure Luggage Systems Inc. (“SL Systems”), an Alberta, Canada corporation, for a five-year term. SL Systems agreed to appoint our company as the representative of the baggage wrapping systems that conveys checked luggage from entrance to exit while applying a single layer of shrink plastic around the luggage, developed by SL Systems which are protected by US Patent #5,890,345 and Canadian Patent #CA 2, 162,637, for the marketing rights and manufacturing rights of the wrapping systems. Our company is subject to a royalty fee of ten percent (10%) of gross revenue and additional 10% of manufacturing cost. Pursuant to the agreement, our company agreed to pay $500,000 consisting of $30,000 cash and 1,175,000 common shares of our company, at the higher value of $0.40 per share or the market closing price per share, as of the closing date of the agreement. The agreement shall automatically be deemed extended for an additional five (5) year term upon expiry of the first five (5) year term, as long as our company is not in default and successive terms upon mutual agreement by both parties. On November 7, 2010, our company prepaid $30,000 in cash to SL Systems. Pursuant to an oral agreement by parties, the closing date of the agreement will be no later than February 28, 2011.
Our challenge for the next twelve months will be to obtain financing to assist the development of markets for our luggage wrap product at commercially viable locations and then market the luggage wrap product to customers.
We may be unable to raise the financing to develop our intended markets, obtain license agreements with targeted airports, operate in commercially viable locations or our product of wrapping bags may be too narrowly focused to satisfy the needs of the market. In that case, our company may have to research and develop other applications or we may need to abandon our business plans.
Our independent contractor, James Westmacott, is currently negotiating with appropriate personnel at Vancouver International Airport, British Columbia regarding offering our luggage wrap services at that airport. Mr. Westmacott, as a result of his career with Cathay Pacific Airlines and Harmony Airlines, has relationships with various personnel at Vancouver International Airport. We believe that Mr. Westmacott’s relationship with those personnel provides us with an advantage in connection with negotiating a luggage wrap situation at that airport. We anticipate that we should have a decision from Vancouver International Airport regarding our luggage wrap services no later than June 30, 2011.
We anticipate that in addition to Vancouver International Airport, we will approach the appropriate personnel at Seattle-Tacoma International Airport, Toronto International Airport, Los Angeles International Airport, O’Hare (Chicago) International Airport, Hartsfield (Atlanta) International Airport, and San Francisco International Airport to offer our luggage wrap services.
Currently, we have no revenues and no customers. Because of our relationship with Satel, and our license agreement with SL Systems we are able to offer our luggage wrap business immediately. Additionally, we believe our prices will be competitive with our competitors.
In providing our luggage wrap services, we will either utilize Model BW-400 stretch wrapping machines and related equipment furnished by Satel. According to Satel, the Model BW-400 stretch wrapping machine is used world-wide, in countries including, but not limited to, Russia, Venezuela, Germany, the Czech Republic, Pakistan, Canada, Turkey, Spain, Austria, United Arab Emirates, Egypt, and Saudi Arabia. Additionally, in providing our luggage wrap services, we may use equipment available to us under the license agreement that is manufactured by SL Systems or of our manufacture.
On April 4, 2011, the Delaware Secretary of State accepted for filing a Certificate of Amendment, increasing the total number of shares our company is authorized to issue to 120,000,000, which includes the creation of 20,000,000 shares of preferred stock with a par value of $0.001. The increase of our authorized capital and the creation of preferred stock was approved by our directors and a majority of our shareholders on March 31, 2011. Our authorized capital now consists of 100,000,000 shares of common stock with a par value of $0.001 and 20,000,000 shares of preferred stock with a par value of $0.001. The effective date of the amendment is April 8, 2011.
We are a development stage company, have a working capital deficit, have incurred losses from operations since inception, have no sales, may incur further significant losses, have no established source of revenue, and are dependent on our ability to raise capital from shareholders or advances or loans from related parties to sustain operations, and there is a substantial doubt that we will be able to continue as a going concern.
Competition
There can be no assurance that we will be able to compete effectively. We believe that the main competitive factors in our industry include effective marketing and sales, brand recognition, the quality of our products and services, and ease of use of our products and services. We may have competitors that may be able to offer alternative products or services on more attractive terms or with better customer support. Other companies may also enter our market with better products or services, greater financial and human resources and/or greater brand recognition. Competitors may continue to improve or expand current products and services and introduce new products and services. We may be perceived as relatively too small or untested in comparison to our competitors. To be competitive, we will have to invest significant resources in business development, advertising and marketing. We cannot provide any assurance that we will have sufficient resources to make these investments or we will be able to make the advances necessary to be competitive. Increased competition may result in revenue reduction, reduced gross margin and loss of market share. Failure to compete successfully will result in less revenue and have a material adverse effect on our business, operating results and financial condition.
Compliance with Government Regulation
The development of our bag wrap business may be subject to various United States and Canadian federal, state, provincial and local and foreign governmental regulations. We may from time to time, be required to obtain licenses, permits and/or have background checks performed on staff, from various governmental authorities in regards to the operation of our bag wrap business.
Research and Development
We have incurred $Nil in research and development expenditures over the last two fiscal years.
Employees
Currently, our only employees are our directors and officers and various individuals acting as consultants to our company. These individuals only a limited amount of time to our business. We confer with consultants, attorneys and accountants as necessary. We do not anticipate a need to engage any full-time employees so long as we are seeking financing to pursue our business plan.
REPORTS TO SECURITY HOLDERS
We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.
ITEM 1A.
ITEM 1A. RISK FACTORS
Much of the information included in this annual report includes or is based upon estimates, projections or other “forward-looking statements”. Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Such estimates, projections or other “forward-looking statements” involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward-looking statements”. In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.
Risks Related to Our Business
We have a limited operating history, making it difficult to accurately forecast our revenues and appropriately plan our expenses.
We began operations in December 2008. We incurred a net loss of $699,225 and $217,859 for the fiscal year ended December 31, 2011 and 2010. We incurred an accumulated net loss of $1,068,840 since inception.
Because we have a limited operating history, it is difficult to accurately forecast our revenues and expenses. Additionally, our operations will be subject to risks inherent in the establishment of a developing new business, including, among other things, efficiently deploying our capital, developing our products and services, developing and implementing our marketing campaigns and strategies and developing awareness and acceptance of our products and services. Our ability to generate future revenues will be dependent on a number of factors, many of which are beyond our control, including the pricing of other products and services, overall demand for our products and services, market competition and government regulation. As with any investment in a company with no operating history, ownership of our securities may involve significant risks and is not recommended if an investor cannot reasonably accommodate the risk of a total loss of his or her investment.
If we do not receive additional funding to expand operations, the value of our common stock could be adversely affected.
As of December 31, 2011, we had cash reserves of $430. We estimate that such cash reserves are not sufficient to fund our daily operations. To fund our daily operations we must raise additional capital. No assurance can be given that we will receive additional funds required to fund our daily operations. In addition, in the absence of the receipt of additional funding, we may be required to scale back our operations. Currently, we have enough cash to satisfy those obligations that we can’t accrue or defer, and we will require approximately $2,100,000 to operate our business during the next 12 months.
If our relationship with Satel terminates, it may be difficult or impossible to continue to operate our luggage wrap business.
In the event our relationship with Satel does not generate the results expected, that relationship may terminate. In the event of that termination, we may not have sufficient resources to acquire rotating luggage wrap equipment and machinery from either Satel or competing manufacturers. Additionally, airports that may prefer rotating luggage wrapping equipment may not be willing to accept our alternative process whereby luggage is conveyed from entrance to exit while wrapped with a single layer of shrink plastic. Accordingly, in that event, our operations may cease until such time as we can acquire additional rotating luggage wrap machinery and equipment to continue our business, which could have a material adverse effect on our revenues and financial condition.
Our luggage wrap product may not be sufficient to ensure our success in our intended market.
Our survival is, currently, dependent upon the success of our efforts to gain market acceptance of our luggage wrap product. Should our luggage wrap product be too narrowly focused or should the target market not be as responsive as we anticipate, we may not have alternate products or services that we can offer to ensure our continued operations.
Competition from providers of similar products and services could adversely affect our revenues and financial condition.
There can be no assurance that we will be able to compete effectively. We believe that the main competitive factors in our industry include effective marketing and sales, brand recognition, the quality of our products and services, and ease of use of our products and services. We may have competitors that may be able to offer alternative products or services on more attractive terms or with better customer support. Other companies may also enter our market with better products or services, greater financial and human resources and/or greater brand recognition. Competitors may continue to improve or expand current products and services and introduce new products and services. We may be perceived as relatively too small or untested in comparison to our competitors. To be competitive, we will have to invest significant resources in business development, advertising and marketing. We cannot provide any assurance that we will have sufficient resources to make these investments or we will be able to make the advances necessary to be competitive. Increased competition may result in revenue reduction, reduced gross margin and loss of market share. Failure to compete successfully will result in less revenue and have a material adverse effect on our business, operating results and financial condition.
Our License Agreement provides us with a patented process, however our rotating bag wrap process is not protected as intellectual property and our competitors may have greater resources to operate a more successful business than ours.
The process available to us by our license agreement and protected by US Patent #5,890,345 and Canadian Patent #CA 2, 162,637 may afford us with some protection against competitors in certain jurisdictions. However our rotating bag wrap process is not protected as our intellectual property, our competitors, particularly those competitors with greater resources, at any time may enter into the bag wrap business or expand their existing bag wrap business in such a manner that they would be more successful than our bag wrap business.
Our results of operations may fluctuate due to seasonality and other factors associated with the airline industry.
Due to greater demand for air travel during the summer months, our revenues in the second and third quarters of the year may be greater than revenues in the first and fourth quarters of the year. Our results of operations will reflect this seasonality and may, also, be impacted by numerous other factors that are not necessarily seasonal, including, among others, the imposition of fees, extreme or severe weather, changes in the competitive environment and other factors and general economic conditions. As a result, our quarterly operating results may not necessarily be indicative of operating results for an entire year and historical operating results in a quarterly or annual period may not necessarily be indicative of future operating results.
Security requirements may increase our costs and decrease our revenues.
Since September 11, 2001, the Department of Homeland Security and the Transportation Security Administration (“TSA”) have implemented numerous security measures that affect airline operations, including the handling and processing of checked luggage, and may implement additional measures in the future. In addition, foreign governments have also instituted additional security measures at foreign airports at which we may do business. Additional measures taken to enhance either passenger or cargo security procedures and/or to recover associated costs from passengers in the future may result in adverse effects on our results of operations.
Presently, we are not required to obtain approval from TSA for the services that we will offer at those locations at which we intend to conduct business. There can be no assurance, however, that in the future we will not be required to obtain approval from TSA or be required to follow certain procedures mandated by TSA, which, if followed, as a result of the costs associated with, could reduce or, possibly, eliminate the desirability of our services, which could have an adverse effect on our results of operations.
Additionally, the bags that we wrap will be subject to screening by TSA personnel and those bags that are opened by TSA personnel for screening purposes will have to be rewrapped by us and the costs associated with that rewrapping could have an adverse effect on our results of operations.
Our operations could be negatively impacted by terrorist events or war activity.
Our operations are sensitive to changes in the economy and airline industry that are caused by, or related to, past and future terrorist attacks. Such changes include, but are not limited to, the impact of additional airline and security charges included in our costs and reduced customer demand for travel. War or other military action by the United States or other countries could have a significant effect on passenger traffic, which could adversely affect our business, financial condition, operating results and cash flows.
Certain of our management personnel serves us on a part time basis and conflicts may occur.
Mr. Bauer devotes a portion of his working time on our operations. As he devotes his time to other activities, it is probable that conflicts will result regarding his allocation of time and effort. While he will seek to give us sufficient time to allow us to operate on a basis that is beneficial to our shareholders, this goal may not be accomplished and our operating results may be negatively impacted by the unavailability of our key personnel.
Airline industry conditions constantly change, and negative economic conditions may materially and adversely affect our business and results of operations.
The airline industry is significantly affected by general economic conditions, and the global economic recession has resulted in a weaker demand for air travel in general. During recent recessions, most airlines have reduced fares in an effort to increase traffic and overall revenues. Economic and competitive conditions in the airline industry have contributed to certain airline bankruptcies and reorganizations in recent years. A worsening of current economic conditions, or an extended period of recession, whether nationally or regionally, would have a material adverse effect on our business, financial condition, operating results and cash flows.
The majority of the airlines in the United States charge passengers fees or surcharges to check their luggage. As a result, passengers on those airlines may be reluctant to check their baggage and make every effort to carry on as much of their baggage as possible. Additionally, as a result of the general economic conditions in the airline industry, those airlines that do not charge for checking baggage may decide to charge fees or surcharges for checked luggage, and passengers may avoid checking their luggage on those airlines, so as to not pay those fees or surcharges. Accordingly, the reluctance of travelers to check their baggage could have a material adverse effect on our business, financial condition, operating results, and cash flows.
Products and services that we offer may subject us to liability claims.
The products and services that we provide may not meet customer expectations. Such problems would seriously harm our credibility, market acceptance of our products and services, and the value of our brand. In addition, such problems may result in liability for damages resulting from lost luggage or other valuables. The occurrence of some of these types of problems may seriously harm our business, operating results, and financial condition.
Our officers have little or no previous experience in managing a public company, and we do not have any employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees. During the course of our testing, we may identify other deficiencies that we may not be able to remedy in time to meet the requirements imposed by the Sarbanes-Oxley Act for compliance with that Section 404. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such requirements are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
Risks Related to our Common Stock
Our common stock is illiquid and shareholders may be unable to sell their shares.
There is currently no market for our common stock and we can provide no assurance to investors that a market will develop. If a market for our common stock does not develop, our shareholders may not be able to re-sell the shares of our common stock that they have purchased and they may lose all of their investment. Public announcements regarding our company, changes in government regulations, conditions in our market segment or changes in earnings estimates by analysts may cause the price of our common shares to fluctuate substantially. These fluctuations may adversely affect the trading price of our common shares.
Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's sales practice requirements, which may limit a stockholder'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 securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, 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.
Our Certificate of Incorporation provides for indemnification of our officers and directors at our expense and limits their liability, which may result in a major cost to us and damage the interests of our shareholders, because our resources may be expended for the benefit of our officers and/or directors.
Our Certificate of Incorporation and applicable Delaware law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, for attorney’s fees and other expenses incurred by them in any litigation to which they become a party resulting from their association with us or activities on our behalf. We will also pay the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person’s promise to repay us, if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us, which we will be unable to recover.
We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933 and, therefore, unenforceable. In the event that a claim for indemnification against these types of liabilities, other than the payment by us of expenses incurred or paid by a director, officer, or controlling person in the successful defense of any action, lawsuit, or proceeding, is asserted by a director, officer, or controlling person in connection with our securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the issue of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, and we will be governed by the final adjudication of such issue. The legal process relating to this matter, if it were to occur, probably will be very costly and may result in us receiving negative publicity, either of which factors would probably materially reduce the market and price for our common stock, if such a market ever develops.
Because we can issue additional shares of common stock, purchasers of our common stock may experience dilution.
We are authorized to issue up to 100,000,000 shares of common stock and 20,000,000 preferred shares. At present, there are 20,677,000 shares of our common stock issued and outstanding. Our Board of Directors has the authority to cause us to issue additional shares of common stock without consent of any of our stockholders. We anticipate that we will be required to raise additional capital to finance our operations, and that capital may be raised by the sale of additional shares of our common stock. Consequently, upon the sale of additional shares of our common stock, our stockholders will experience dilution in the ownership of our common stock.
One of the effects of the existence of unissued and unreserved common stock may be to enable our Board of Directors to issue shares of our common stock to persons friendly to current management, which issuance could render more difficult or discourage in attempt to obtain control of our Board of Directors by merger, tender offer, proxy contests, or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities to sell their shares of our common stock at prices higher than prevailing market prices.
Because our officers, directors and principal shareholders control a substantial portion of our common stock, investors will have little or no control over our management or other matters requiring shareholder approval.
Our officers and directors, in the aggregate, beneficially own 90.3% of the issued and outstanding shares of our common stock. As a result, these individuals have the ability to exert significant influence over matters affecting minority shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers, directors can exercise such influence over our company, investors may not be able to replace our management if they disagree with the way our business is being run. Because control by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.
Other Risks
Because all of our officers and directors are located in Non-United States jurisdictions, you may have no effective recourse against our management for misconduct and may not be able to enforce judgments and civil liabilities against our officers and directors.
All of our directors and officers are nationals and residents of countries other than the United States, and they all reside in Canada. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
As a "smaller reporting company", we are not required to provide the information required by this Item.
ITEM 2.
ITEM 2. PROPERTIES
Secure Luggage’s principal administrative office is located at 2375 East Camelback Road, 5th Floor, Phoenix, Arizona, 85016. The office is our registered office, and the relevant service expenses, including the secretarial, photocopying, and similar services will be charged on a month-to-month basis depending on the services provided as requirements by our company.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this Annual Report, management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Annual Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock has been quoted on the OTC Bulletin Board under the symbol "SCLG" on December 28, 2010 and commenced trading on approximately June, 2011. The following table sets forth the high and low price information of the Company's common stock for the periods indicated.
OTC Bulletin Board (1) (2)
(1)
Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.
(2)
Source: www.nasdaq.com
SHAREHOLDERS OF RECORD
As of December 31, 2011, there were approximately 66 holders of record of our common stock, not including holders who hold their shares in street name.
DIVIDENDS
We have never declared or paid a cash dividend. At this time, we do not anticipate paying dividends in the future. We are under no legal or contractual obligation to declare or to pay dividends, and the timing and amount of any future cash dividends and distributions is at the discretion of our Board of Directors and will depend, among other things, on our future after-tax earnings, operations, capital requirements, borrowing capacity, financial condition and general business conditions. We plan to retain any earnings for use in the operation of our business and to fund future growth. You should not purchase our Shares on the expectation of future dividends.
RECENT SALES OF UNREGISTERED SECURITIES
Sales of Equity Securities have been conducted and shares of our Company’s stock have been issued during fiscal year ended December 31, 2011.
During fiscal year ended December 31, 2011, we issued 235,000 shares of our restricted common stock for cash of $47,000 at a per share price of $0.20. The shares were issued to two non-U.S. residents. We issued a further 200,000 shares of our restricted common stock for cash of $40,000 at a per share price of $0.20. The 200 shares were issued to one non-U.S. resident. We issued all of the shares in reliance on Regulation S of the Securities Act of 1933, as amended (the "Securities Act"). The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The investors acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
During fiscal year ended December 31, 2011, we issued 240,000 shares and a further 30,000 shares as compensation for services rendered at a per share price of $0.20. The shares were issued to two non-U.S. residents. We issued all of the shares to two non-U.S. residents in reliance on Regulation S of the Securities Act. The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The consultants acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
ISSUER PURCHASE OF SECURITIES
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EXECUTIVE OVERVIEW
The following discussion should be read in conjunction with our audited 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 believes. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such difference 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 10 of this annual report.
Our audited financial statements are stated in United State Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
RESULTS OF OPERATIONS
Fiscal Year Ended December 31, 2011 Compared to Fiscal Year Ended December 31, 2010
Our operating results for years ended December 31, 2011 and 2010 and the changes between those periods for the respective items are summarized as follows:
Our financial statements report a net loss of $699,225 during fiscal year ended December 31, 2011 compared to a net loss of $217,859 during fiscal year ended December 31, 2010 (an increase of $481,336). During fiscal years ended December 31, 2011 and December 31, 2010, we have not generate any revenues. We have not generated revenue since our inception.
During fiscal year ended December 31, 2011, we incurred operating expenses of $456,308 compared to $217,130 incurred during fiscal year ended December 31, 2010 (an increase of $450,224). These operating expenses incurred during fiscal year ended December 31, 2011 consisted of: (i) professional fees of $387,114 (2010: $1982,531); and (ii) general and administrative of $69,194 (2010: $24,599). The increase in professional fees for our year ended December 31, 2011 is due to increased consulting fees, management fees and legal fees related to filings with SEC. The increase in our general and administrative expense for fiscal year ended December 31, 2011 is due to increased transfer agent fees.
During fiscal year ended December 31, 2011, we incurred other expense of: (i) impairment of $242,917 (2010: $-0-); and (ii) interest expense of $-0- (2010: $729).
Thus, we realized a net loss of ($699,225) or ($0.03) for fiscal year ended December 31, 2011 compared to a net loss of ($217,859) or ($0.01) for fiscal year ended December 31, 2010. The weighted average number of shares outstanding was 20,150,506 for fiscal year ended December 31, 2011 compared to 17,477,000 for fiscal year ended December 31, 2010.
LIQUIDITY AND FINANCIAL CONDITION
Fiscal Year Ended December 31, 2011
As of December 31, 2011, our current assets were $430 and our current liabilities were $88,028, which resulted in a working capital deficit of $87,598. As of December 31, 2011, current assets were comprised of $430 in cash. As of December 31, 2011, current liabilities were comprised of $88,028 in accounts payable and accrued expenses.
As of December 31, 2011, our total assets were $430 comprised of current assets. The decrease in total assets during fiscal year ended December 31, 2011 from fiscal year ended December 31, 2010 was primarily due to the substantial decrease in cash and prepayments.
As of December 31, 2011, our total liabilities were $88,028 comprised of current liabilities.
Stockholders’ equity (deficit) decreased from $9,999 for fiscal year ended December 31, 2010 to ($87,598) for fiscal year ended December 31, 2011.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For fiscal year ended December 31, 2011, net cash flows used in operating activities was $125,617 compared to $162,579 for fiscal year ended December 31, 2010. Net cash flows used in operating activities consisted primarily of a net loss of $699,225 (2010: $217,859), which was partially adjusted by: (i) $78,000 (2010: $9,000) in shares to be issued for services; (ii) $-0- (2010: $729) in interest; (iii) $22,083 (2010: $-0-) in depreciation and amortization; and (iv) $201,628 in forgiveness of shareholder loan (2010: $-0-).
Net cash flows used in operating activities was further changed by: (i) increase of $3,750 (2010: $10,094) in prepaid costs; (ii) an increase of $76,778 (2010: $10,094) in accounts payable; and (iii) a decrease of $51,548 (2010: $50,611).
Cash Flows from Investing Activities
For fiscal year ended December 31, 2011, net cash flows used in investing activities was $-0- compared to $30,000 for fiscal year ended December 31, 2010, which related to purchase of assets.
Cash Flows from Financing Activities
We have financed our operations primarily from debt or the issuance of equity instruments. For the fiscal year ended December 31, 2011, net cash flows provided from financing activities was $87,000 compared to $226,000 for fiscal year ended December 31, 2010. Cash flows from financing activities for the fiscal year ended December 31, 2011 consisted of: (i) $87,000 (2010: $-0-) in proceeds from issuance of common stock; (ii) $-0- (2010: $231,000) in share subscriptions received, which was offset by $5,000 in repayment of shareholder loan.
Going Concern
If we cannot obtain financing to fund our operations in 2012, then we may be required to reduce our expenses and scale back our operations. These factors raise substantial doubt of our ability to continue as a going concern. Footnote 2 to our financial statements provides additional explanation of management’s views on our status as a going concern. The audited financial statements contained in this Annual Report do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result should we be unable to continue as a going concern.
Our independent registered accounting firm included an explanatory paragraph December 31, 2011, in their reports on the accompanying financial statements for December 31, 2011 regarding concerns 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 off-balance sheet arrangement that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with our financial statements are critical to an understanding of our financial statements.
Recent Accounting Pronouncements
Other accounting pronouncements that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our company’s financial statements upon adoption.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MAKET RISK
As a "smaller reporting company", we are not required to provide the information required by this Item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information set forth below with respect to our statements of operations for the twelve month periods ended December 31, 2011 and 2010 is audited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the year period ended December 31, 2011 are not necessarily indicative of results to be expected for any subsequent period.
ITEM 9.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective September 10, 2014, we dismissed Chang Lee LLP ("Chang") as our independent registered public accounting firm. We have engaged Terry L. Johnson, CPA ("Johnson") as our principal independent registered public accounting firm. The decision to change its principal independent registered public accounting firm has been approved by our board of directors.
The reports of Chang on our financial statements for fiscal year ended December 31, 2010 (which included the balance sheet as of December 31, 2010 and the statement of operations, cash flows and stockholders' equity as of December 31, 2010), for the past fiscal year, did not contain an adverse opinion or a disclaimer of opinion, nor qualified or modified as to uncertainty, audit scope or accounting principles, other than to state that there is substantial doubt as to our ability to continue as a going concern. During our fiscal year ended December 31, 2010 and during the subsequent period through to the date of Chang's resignation, there were no disagreements between us and Chang, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Chang, would have caused Chang to make reference thereto in its report on our audited financial statements.
We have provided Chang with a copy of a Current Report on Form 8-K and has requested that Chang furnish us with a letter addressed to the Securities and Exchange Commission stating whether or not Chang agrees with the statements made in the Current Report on Form 8-K with respect to Chang and, if not, stating the aspects with which they do not agree. We have received the requested letter from Chang wherein he has confirmed his agreement to our disclosures in the Current Report with respect to Chang. A copy of Chang's letter was filed as an exhibit to the Current Report.
In connection with our appointment of Johnson as our principal registered accounting firm at this time, we have not consulted Johnson on any matter relating to the application of accounting principles to a specific transaction, either completed or contemplated, or the type of audit opinion that might be rendered on our financial statements during the two most recent fiscal years (December 31, 2011 and 2010) and subsequent interim period through the date of engagement.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective.
Management’s report on internal control over financial reporting.
Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on our assessment, our chief executive officer and our chief financial officer believe that, as of December 31, 2011, our internal control over financial reporting is not effective based on those criteria, due to the following:
·
Deficiencies in Segregation of Duties. Lack of proper segregation of functions, duties and responsibilities with respect to our cash and control over the disbursements related thereto due to our very limited staff, including our accounting personnel.
·
Lack of an audit committee and deficiency in the staffing of our financial accounting department. The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.
In light of this conclusion and as part of the preparation of this report, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material face necessary to make the statements made not misleading with respect to the period covered by this report, and (2) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the periods then ended.
This 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 the rules of the SEC that permit us to provide only management’s report in this report.
Changes in internal control over financial reporting.
There were no significant changes in our internal control over financial reporting during the fourth quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
AUDIT COMMITTEE
Our board of directors has not established an audit committee. The respective role of an audit committee has been conducted by our board of directors. We intend to establish an audit committee. When established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our board of directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
All directors of our Company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our Company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of each director and executive officer during the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.
Donald G. Bauer. Donald G. Bauer is the founder of our company and is responsible for the development of our business. Additionally, Mr. Bauer has contributed his time, effort, and funds to our company, to enable our company to commence operations. During the period beginning September 1994, until April 2009, Mr. Bauer was the President, a director, and a shareholder of Secure Luggage Systems Inc, an Alberta corporation, which specialized in designing and manufacturing technology that would secure and protect assorted luggage with a strap and wrap process. At various times during that period that Mr. Bauer was the President of Secure Luggage Systems Inc., an Alberta corporation, that corporation had as many as 2 to 3 employees; provided, however, at certain times during that period that corporation had no employees. The number of persons employed by Secure Luggage Systems Inc., an Alberta corporation, was determined by the operations of that corporation and the need and ability to pay for employees. Additionally, during that period, that corporation retained the services of independent contractors to perform various services for that corporation, as Mr. Bauer determined that it was in the best interest of that corporation that independent contractors, rather than employees, be utilized for those services. At various times during that period, Secure Luggage Systems Inc., an Alberta corporation, had annual sales equal to approximately $25,000 to $50,000; provided, however, during those years, that corporation had no revenue.
Mr. Bauer, while the President, a director and the majority shareholder of Secure Luggage Systems Inc., an Alberta corporation, developed a strap and wrap process to secure and protect individual packages and pieces of luggage. The strap and wrap process is a combination of two processes; first, one or more straps is wrapped around the circumference of the luggage and, second, shrink to fit plastic film is wrapped around that luggage. While with Secure Luggage Systems, Inc., an Alberta corporation, Mr. Bauer worked with various personnel, consultants, service technicians and manufacturers to develop various mechanical components into a system and create the programming necessary to operate that system in an efficient manner. The system was designed to incorporate various technologies, including weighing and measuring each piece of luggage or package processed.
Mr. Bauer spent the majority of his first 25 years in business as owner operator of a number of companies in the domestic and international oil field service sector. Mr. Bauer has been involved as a founding member of the Petroleum Service Association of Canada and a founding member of the Alberta Manufacturer’s Association, now the Canadian Manufacturer’s Association.
INVOLVEMENT IN CERTAIN LEGALPROCEEDINGS
None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:
1. A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
2. Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3. Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
i.
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity
ii.
Engaging in any type of business practice; or
iii.
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
4. Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
5. Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
6. Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
7. Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i.
Any Federal or State securities or commodities law or regulation; or
ii.
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
iii.
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8. Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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 officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
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 fiscal year ended December 31, 2011, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with.
Board and Committee Meetings
Our board of directors held no formal meetings during the year ended December 31, 2011. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to Delaware General Corporate Law and our Bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
Nomination Process
As of December 31, 2011, we did not effect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors has determined that it is in the best position to evaluate our Company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our Company at the address on the cover of this annual report.
Audit Committee and Audit Committee Financial Expert
Our board of directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director 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 and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors.
Code of Ethics
We have not adopted a code of ethics for our principal executive and financial officers for 2011. Our management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations.
Committees
We do not have a standing nominating committee for directors, nor do we have an audit committee with an audit committee financial expert serving on that committee. Our entire board of directors acts as our nominating and audit committee.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of the compensation paid to the following persons:
·
our principal executive officer;
·
each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended December 31, 2011 and 2010; and
·
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended December 31, 2011 and 2010,
who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did exceed $100,000 for the respective fiscal year:
The following table shows the compensation paid to our principal executive officers for the past two fiscal years ended December 31, 2011 and 2010.
(1) Payment for the management fees to Doane Investments Inc., a company owned by our President and CEO.
Stock Option Plan
Currently, we do not have a stock option plan in favour of any director, officer, consultant or employee of our company.
Stock Options/SAR Grants
During our fiscal year ended December 31, 2011 there were no options granted to our named officers or directors.
Outstanding Equity Awards at Fiscal Year End
No equity awards were outstanding as of the year ended December 31, 2011.
Option Exercises
During our Fiscal year ended December 31, 2011 there were no options exercised by our named officers.
Compensation of Directors
We do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
We have determined that none of our directors are independent directors, as that term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
Compensation Committee Interlocks and Insider Participation
During 2011, we did not have a compensation committee or another committee of the board of directors performing equivalent functions. Instead the entire board of directors performed the function of compensation committee. Our board of directors approved the executive compensation, however, there were no deliberations relating to executive officer compensation during 2011.
Compensation Committee Report
None.
Family Relationships
There are no family relationships between any of our directors, executive officers or directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth the beneficial ownership of our outstanding common stock by each person or group known by us to own beneficially 5% or more of our voting stock and ownership of our management. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, the persons named in the table below have sole voting power and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership is based on 20,677,000 shares of common stock outstanding as of December 31, 2011.
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided .In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on December 31, 2011. As of December 31, 2011, there were 20,677,000 shares of our company’s common stock issued and outstanding.
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 in control of our Company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Transactions
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended December 31, 2011, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years.
During fiscal year ended December 31, 2011, we incurred charges and expenses paid by our President/CEO in the amount of $150,080. The officer agreed to forgive the balance owed, which was cumulative equaling $201,628.
Director Independence
We currently act with one director consisting of Donald G. Bauer. We have determined that our directors are not "independent directors" as defined in NASDAQ Marketplace Rule 4200(a)(15).
We do not have a standing audit, compensation or nominating committee, but our entire board of directors acts in such capacities. We believe that our members of our board of directors are 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 an independent director 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 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Auditor Fees
The following table presents the aggregate fees billed for the past two years by our independent registered public accounting firm, Chang, and Johnson, in connection with the audit of our financial statements and other professional services rendered by that accounting firm.
Audit fees represent the professional services rendered for the audit of our annual financial statements and the accounting firm review of our financial statements included in quarterly reports, along with services normally provided by the firm in connection with statutory and regulatory filings or engagements. Audit-related fees represent professional services rendered for assurance and related services by the accounting firm that are reasonably related to the performance of the audit or review of our financial statements that are not reported under audit fees.
Tax fees represent professional services rendered by the accounting firm for tax compliance, tax advice, and tax planning. All other fees represent fees billed for products and services provided by the accounting firm, other than the services reported for the other categories.
Pre-approval Policies
We do not have a standing audit committee currently serving and as a result our board of directors performs the duties of an audit committee. Our board of directors will evaluate and approve in advance, the scope and cost of the engagement of an accounting firm before the accounting firm renders audit and non-audit services. We do not rely on pre-approval policies and procedures.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: October 21, 2014
By:
/s/ Donald G. Bauer
Donald G. Bauer
President, Chief Executive Officer and Director
(Principal Executive Officer, Chief Financial Officer)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and shareholders of
Secure Luggage Solutions, Inc..
We have audited the accompanying consolidated balance sheets of Secure Luggage Solutions, Inc. (the “Company”) as of December 31, 2011 and 2010 and the related statements of operations, stockholders’ deficit and cash flows for the years then ended.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United State of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on my 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010and the results of its operations and its cash flows for the years ended December 31, 2011 and 2010,, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 of the accompanying financial statements, the Company has a significant accumulated deficit and no cash to for payment of ongoing operating expenses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are described in Note 3.The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Terry L. Johnson, CPA
Casselberry, Florida
October 3, 2014
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
From Inception December 4, 2008 to December 31, 2011
The accompanying notes are an integral part of these financial statements.
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Secure Luggage Solutions, Inc. ( the "Company") was organized under the laws of the State of Delaware on December 4, 2008. The Company is a development stage enterprise in the business of luggage wrap. Luggage wrap is a plastic covering that is applied by machine to checked baggage in a retail kiosk with the passenger present. The Company however, has not been able to enter into any license agreement with any airport that would allow it to offer its luggage wrap product on airport premises.
Basis of Presentation
These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.
NOTE 2 - GOING CONCERN
The Company’s financial statements as of December 31, 2011 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company has incurred a cumulative net loss from inception December 4, 2008 through December 31, 2011 of $1,068,840.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Net Loss per Share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share". Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Management believes that the estimates used are reasonable.
In Management's opinion all adjustments necessary for a fair statement of the results for the interim periods have been made. All adjustments are normal and recurring.
Reclassifications
Certain prior year balances have been reclassified to conform to the current year presentation.
Revenue Recognition
The Company recognizes revenue on an accrual basis. Revenue is generally realized or realizable and earned when all of the following criteria are met: 1) persuasive evidence of an arrangement exists between the Company and our customer(s); 2) services have been rendered; 3) our price to our customer is fixed or determinable; and 4) collectability is reasonably assured.
Fair value of financial instruments
The carrying value of cash equivalents and accrued expenses approximates fair value due to the short period of time to maturity.
Stock-based compensation
The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
Recently Issued Accounting Principles
The following accounting standards were issued as of December 26, 2011: ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements. This ASU affects all entities that are required to make disclosures about recurring and nonrecurring fair value measurements under FASB ASC Topic 820, originally issued as FASB Statement No. 157, Fair Value Measurements. The ASU requires certain new disclosures and clarifies two existing disclosure requirements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.
ASU 2011-04, Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU supersedes most of the guidance in Topic 820, although many of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. In addition, certain amendments in ASU 2011-04 change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements. The amendments in ASU 2011-04 are effective for public entities for interim and annual periods beginning after December 15, 2011.
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections and Improvements" in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.
In August 2012, the FASB issued ASU 2012-03, "Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)" in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 4 - IMPAIRMENT-LICENSE USE RIGHT
In 2011 the Company entered into an agreement to purchase licensing rights for their secure wrapping. The Company paid $30,000 in cash and issued 1,175,000 shares valued at .20 cents for a total amount of $265,000. The Company amortized this cost on a straight line basis over 10 years. At December 31, 2011 the Company impaired the balance remaining on the licensing rights of $242,917.
NOTE 5 - EQUITY
On April 11, 2011 the Company increased it authorized shares from 25,000,000 to 100,00,000 with a par value of $.0.001 and the creation of 20,000,000 shares of preferred stock with the same par. The effective date was April 4, 2011 which has been retrospectively applied to the financial statements presented.
During 2011 the Company issued 3,200,000 shares of common stock. Of this amount, 390,000 shares were issued for services valued at .20 or $78,000. 435,000 shares were issued for cash of $87,000. 1,175,000 shares were issued for the licensing agreement, later impaired of $235,000 and 1,200,000 shares for subscriptions previously entered into of $240,000.
NOTE 6 - RELATED PARTY TRANSACTIONS
In 2011 the Company incurred charges and expenses paid by officers in the amount of $150,080. At the year end the officers agreed to forgive the balance owed which was cumulative equaling $201 628. This amount was charged to additional paid in capital as debt forgiveness
NOTE 7 - INCOME TAX
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
NOTE 7 - INCOME TAX (continued)
Net deferred tax assets consist of the following components as of December 31, 2011 and 2010:
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the period ended December 31, 2011 and 2010 due to the following:
SECURE LUGGAGE SOLUTIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
NOTE 7 - INCOME TAX (continued)
At December 31, 2011, the Company had net operating loss carry forwards of approximately $269,677 that may be offset against future taxable income from the year 2011 to 2026. No tax benefit has been reported in the December 31, 2011 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the filing date of these financial statements and has disclosed that there is one such events that are material to the financial statements to be disclosed:
1.
In 2014 the Company incurred a change of control and change in business direction.