ITEM 1. BUSINESS.
General
We were incorporated in the State of Nevada on June 19, 2007. We maintain our statutory registered agent’s office at The Corporation Trust Company of Nevada, 6100 Neil Road, Suite 500, Reno, Nevada 89511 and our business office is located at 12901 South Buttercup Lane, Spokane, Washington 99224. This is our mailing address as well. Our telephone number is (509) 991-5761. This is the home of Gregory Ruff, our president. Mr. Ruff supplies this office space to us on a rent-free basis.
We have limited revenues, have achieved losses since inception, have minimal operations, have been issued a going concern opinion and rely primarily upon the sale of our securities to fund operations.
We have developed and manufactured a steak timer. The timer is owned by Mr. Ruff and licensed to us.
Steak Timer Description
The steak timer is the size of an individual hand held computer device. The timer has input fields that the user needs to make selections for such as cooking choices, if they want their steaks to finish cooking at the same time or independently of each other regardless of thickness/doneness combinations. The user can input up to four different thickness / doneness combinations. Thicknesses range from ¾ to 1 ¾ inches. Doneness ranges from rare to well done. Once this is done, the user starts the timer. The timer alerts the user when to start, rotate each steak for grill marks on both sides, flip and take steaks off heating source by audio beeps and flashing icon fields on the LCD screen. The cooking time is based upon the cooking recommendations of a well known cooking chart. Both the grill and broiler are set to high temperatures.
Manufacturing
The steak timer was designed in Spokane, Washington as well as the software programming and the filing of the patent application. In February 2010, we entered into a manufacturing contract with Meri LLC in February 2010, a top end line assembly manufacturer located in China. The contract was for Meri to manufacture, package and ship 10,000 units to our company headquarters. Payment terms required a 50% down payment and the balance due upon receipt of the timers. The terms of this contract have been fulfilled. The steak timer is now being sold through two retailers, Sharper Image and Amazon.
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License
We obtained an exclusive three year license from Mr. Ruff, to market and manufacture the steak timer. We have agreed to pay all costs associated with the development, manufacturing, and marketing of the steak timer. We also will pay Mr. Ruff a 20% royalty on the Net Factory Sales Price defined as follows: The gross factory selling price of the product or the US importer’s gross selling price if the steak timer is manufactured abroad, less usual trade discounts actually allowed, but not including advertising allowances or fees or commissions paid to our employees or agents. The Net Factory Sales Price shall not include packing costs, if itemized separately, import and export taxes, excise and other sales taxes, and custom duties, and costs of insurance and transportation, if billed separately, from the place of manufacture if in the US, or from the place of importation if manufactured abroad, to the customer’s premises or next point of distribution or sale. Bona fide returns may be deducted from units shipped into computing the royalty payable after such returns are made.
Patents, Trademarks and Copyrights
We do not own any patents or copyrights; however, we do own the trademark to “My Steak Chef”. We do not know if we are or will be infringing on any patents, copyrights or trademarks. If we infringe on any patents, trademarks or copyrights we will be liable for damages and may be enjoined from conducting our proposed business. Further, because we have no patent or copyright covering our product, someone could use the information and compete with us and we will have no recourse against him.
On April 26, 2009, Mr. Ruff filed a patent application for the steak timer with the United States Patent and Trademark office, application number 12/386,769. The Company decided not to pursue a patent after receiving the first round of comments from the U.S. Patent Office. We also applied for a trademark with the United States Patent and Trademark office, application number 76/701614 on February 16, 2010. This trademark has been subsequently issued to Koko, LTD.
Website
The Company has its own website describing the steak timer at www.mysteakchef.com.
Distributors process the entire order which includes product delivery. To ensure the security of transactions occurring over the Internet, U.S. federal regulations require that any computer software used within the United States contain a 128-bit encoding encryption, while any computer software exported to a foreign country contain a 40-bit encoding encryption. There is uncertainty as to whether the 128-bit encoding encryption required by the U.S. is sufficient security for transaction occurring over the Internet. Accordingly, there is a danger that any financial (credit card) transaction via the Internet will not be a secure transaction. Accordingly, risks such as the loss of data or loss of service on the Internet from technical failure or criminal acts are now being considered in the system specifications and in the security precautions in the development of the website. There is no assurance that such security precautions will be successful.
The Internet is a world-wide medium of interconnected electronic and/or computer networks. Individuals and companies have recently recognized that the communication capabilities of the Internet provide a medium for not only the promotion and communication of ideas and concepts, but also for the presentation and sale of information, goods and services.
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Convenient Shopping Experience
The Sharper Image and Amazon websites provide customers with easy-to-use websites. Amazon and Sharper Image are available 24 hours a day, seven days a week and can be reached from the shopper's home or office. Our online store will enable us to deliver our steak timer to customers in rural or other locations that do not have convenient access to physical stores.
Online Retail Store
Sharper Image and Amazon are the two online retailers where our steak timer may be purchased.
Competition
The electronic commerce market is intensely competitive. The market for information resources is more mature but also intensely competitive. We expect competition to continue to intensify in the future. Competitors include companies with substantial customer bases in the computer and other technical fields. There can be no assurance that we can maintain a competitive position against current or future competitors, particularly those with greater financial, marketing, service, and support, technical and other resources. Our failure to maintain a competitive position within the market could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that we will be able to compete successfully against current and future competitors, and competitive pressures faced by us may have a material adverse effect on our business, financial condition and results of operations.
Marketing
We are marketing our steak timer through our distributors Sharper Image and Amazon. Also, in December 2010, we sent a one million mass blast email marketing our steak timer. The steak timer is on their web sites. Sharper Image also included our steak timer in their 2010 Holiday magazine. We have our own web site about our steak timer - www.mysteakchef.com. Our website refers customers to Sharper Image and/or Amazon for purchase of our steak timer. In December 2010, we completed a one million email blast campaign advertising our steak timer. We plan to market the steak timer through other retail outlets. We have not yet contacted any other retail outlet and no assurance can be given we will be successful in market our steak timer to any other retail outlet. Future advertising will depend upon our budget and financial needs.
Insurance
We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party of a products liability action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us, which could cause us to cease operations.
Employees; Identification of Certain Significant Employees
We are a development stage company and currently have no employees, other than our officers and sole director. We intend to hire additional employees on an as needed basis.
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Offices
Our offices are currently located at 12901 South Buttercup Lane, Spokane, Washington 99224. Our telephone number is (509) 991-5761. This is the home office of our president, Mr. Ruff. We do not pay any rent to Mr. Ruff and there is no agreement to pay any rent in the future.
Government Regulation
We are not currently subject to direct federal, state or local regulation other than regulations applicable to businesses generally or directly applicable to electronic commerce. However, the Internet is increasingly popular. As a result, it is possible that a number of laws and regulations may be adopted with respect to the Internet. These laws may cover issues such as user privacy, freedom of expression, pricing, content and quality of products and services, taxation, advertising, intellectual property rights and information security. Furthermore, the growth of electronic commerce may prompt calls for more stringent consumer protection laws. Several states have proposed legislation to limit the uses of personal user information gathered online or require online services to establish privacy policies. The Federal Trade Commission has also initiated action against at least one online service regarding the manner in which personal information is collected from users and provided to third parties. We will not provide personal information regarding our users to third parties. However, the adoption of such consumer protection laws could create uncertainty in Web usage and reduce the demand for our products.
We are not certain how business may be affected by the application of existing laws governing issues such as property ownership, copyrights, encryption and other intellectual property issues, and import and export matters. The vast majority of such laws were adopted prior to the advent of the Internet. As a result, they do not contemplate or address the unique issues of the Internet and related technologies. Changes in laws intended to address such issues could create uncertainty in the Internet market place. Such uncertainty could reduce demand for services or increase the cost of doing business as a result of litigation costs or increased service delivery costs. In addition, because our services are available over the
Internet in multiple states and foreign countries, other jurisdictions may claim that we are required to qualify to do business in each such state or foreign country. We are qualified to do business only in Nevada. Our failure to qualify in a jurisdiction where it is required to do so could subject it to taxes and penalties. It could also hamper our ability to enforce contracts in such jurisdictions. The application of laws or regulations from jurisdictions whose laws currently apply to our business could have a material adverse affect on our business, results of operations and financial condition.
Other than the foregoing, no governmental approval is needed for the sale of our steak timer.
ITEM 1A.
ITEM 1A.
RISK FACTORS.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 1B.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
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ITEM 2.
ITEM 2.
PROPERTIES.
None.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS.
We are not a party to any litigation.
PART II
ITEM 5.
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our stock is listed for trading on the Bulletin Board operated the Financial Industry Regulatory Authority (FINRA) on OTCBB under the symbol “KOKX.” There are no outstanding options or warrants to purchase, or securities convertible into, our common stock.
Holders
On April 3, 2012, we had 61 shareholders of record of our common stock.
Dividend Policy
We have never paid cash dividends on our capital stock. We currently intend to retain any profits we earn to finance the growth and development of our business. We do not anticipate paying any cash dividends in the foreseeable future.
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Section 15(g) of the Securities Exchange Act of 1934
Our shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser’s written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.
Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as bid and offer quotes, a dealers spread and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the FINRA’s toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.
Securities authorized for issuance under equity compensation plans
We have no equity compensation plans and accordingly we have no shares authorized for issuance under an equity compensation plan.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This section of the quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results of our predictions.
We are a start-up corporation and have generated only limited revenues to date. Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital or generate a significant increase in sales in order to fund our operating activities. The going concern opinion has been issued because the company has generated only a limited amount of revenue through December 31, 2011 through the sale of our steak timers.
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We are not going to buy or sell any plant or significant equipment during the next twelve months. We believe we can satisfy our cash requirements during the next 12 months. We do not expect to purchase or sell plant or significant equipment. Further we do not expect significant changes in the number of employees.
Results of Operations
For the year ended December 31, 2011, the Company generated gross revenues of $465, compared with $5,760 in revenues for the year ended December 31, 2010. Operating expenses were $78,986 for the year ended December 31, 2011, compared to $57,374 for the year ended December 31, 2010. This increase was primarily due to an increase in professional fees, and officer compensation. The net loss increased from $56,164 in 2010 to $173,084 in 2011. This increased loss was predicated by the Company’s 100% write-off of its inventory of $94,335 during the fourth quarter of 2011 owing to the lack of sales during 2011.
Milestones
Our goal for the next twelve months is to concentrate increasing sales of our steak timers.
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us upon which to base an evaluation of our performance. We have generated a limited amount of revenue from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services.
To become profitable and competitive, we have to be able to attract customers and generate revenues. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Liquidity
Since our inception on June 19, 2007, we have generated limited cumulative revenues of $6,225. We are considered in the start-up stage of our operations.
In order to meet our needs for cash, we sold 582,500 shares of common stock in 2010 at $0.20 per share for total proceeds of $116,500, and we sold 42,500 shares of common stock also at $0.20 per share in 2011 for total proceeds of $8,500.
Our common stock trades on the Bulletin Board operated by the Financial Industry Regulatory Authority (FINRA). We have 61 shareholders of record.
As of December 31, 2011, our only asset is cash of $41,111.
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Capital Resources
As of December 31, 2011, we had current assets of $41,111 (cash) compared to current assets of $206,586 as of December 31, 2010 (cash and inventory). The primary reasons for the decrease were the cash needs in order to cover operating expenses and the write off of the inventory balance of $94,335. Current liabilities decreased from $1,000 as of December 31, 2010 to $109 as of December 31, 2011.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Koko, Ltd.
(a development stage company)
Spokane, Washington
We have audited the accompanying balance sheets of Koko, Ltd. (a development stage company) (“Koko”, the “Company”) as of December 31, 2011 and 2010 and the related statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2011 and 2010 and the period from June 19, 2007 (inception) to December 31, 2011. These financial statements are the responsibility of Koko’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Koko as of December 31, 2011 and 2010 and the results of its operations and its cash flows for the years ended December 31, 2011 and 2010 and the period from June 19, 2007 (inception) through December 31, 2011 to described in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Koko will continue as a going concern. As discussed in Note 2 to the financial statements, Koko has suffered losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty
MALONEBAILEY, LLP
www.malonebailey.com
Houston, Texas
April 4, 2012
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The accompanying notes are an integral part of these audited financial statements.
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The accompanying notes are an integral part of these audited financial statements.
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The accompanying notes are an integral part of these audited financial statements.
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The accompanying notes are an integral part of these audited financial statements.
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KOKO, LTD.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization:
Koko, Ltd. (“Koko” or the “Company”) was incorporated on June 19, 2007, in the State of Nevada. Koko is a Development Stage Company as defined by ASC 915-10, Accounting and Reporting by Development Stage Enterprises. Koko is currently seeking funding in order to begin operations to complete the final design, outsource manufacturing and market a freestanding steak timer that predetermines and regulates the cooking time of a steak, based on simple data inputted by the user.
The accompanying audited financial statements of Koko, Ltd., have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission.
Summary of Significant Accounting Policies:
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 assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates used herein include those relating to management’s estimate of market value of contracts and real estate held in inventory. It is reasonably possible that actual results could differ from those and other estimates used in preparing these financial statements and such differences could be material.
Cash and cash equivalents - Cash and cash equivalents consist of demand deposits, including interest-bearing accounts, held in a local bank. The Company considers all highly liquid investments purchased, with an original maturity of three months or less, to be a cash equivalent.
Inventory policy - Inventories are stated at the lower of cost or market. The first-in, first-out (FIFO) method is used to determine cost. During the fourth quarter of 2011, the Company determined to write off all of its inventory of steak timers due to the inability to create a viable sales market for these items.
Revenue recognition - Revenue is derived exclusively from the sale of goods and is measured at the fair value of consideration received or receivable. All revenue is recognized at the point of sale as all products are sold exclusive of a right of return. The point of sale is when title has passed to the customer, a purchase order has been received, collectivity is certain, and the goods have been delivered.
Income tax - Deferred taxes are provided, when material, on a liability method whereby deferred tax assets are recognized for deductible temporary differences 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, subject to a valuation allowance, are recognized for future benefits of net operating losses being carried forward.
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KOKO, LTD.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
Earnings per share - Basic earnings per common share has been computed on the basis of the weighted-average number of common shares outstanding during the period presented.
Stock-based Compensation - Koko accounts for stock options as prescribed by ASC 718 and discloses pro forma information as also provided by ASC 718, “Accounting for Stock Based Compensation,” when applicable. Shares of restricted common stock that are issued to employees and consultants for services are recorded as expense based upon management’s estimate of the fair value of the shares at the time of issuance and the value of services rendered.
Accounting Pronouncements - Koko does not believe the adoption of recently issued accounting pronouncements will have an impact on The Company’s financial position, results of operations, or cash flows.
NOTE 2- GOING CONCERN
During 2011, Koko incurred a net loss and had negative cash flows from operations. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if Koko is unable to continue as a going concern.
The Company is aware that in order to become profitable and competitive, they will have to be able to attract customers and generate significant revenues. Koko has no assurance that future equity or debt financing will be available to the Company. If this additional financing is not available, Koko may be unable to continue, develop or expand their operations. In addition, equity financing could result in additional dilution to existing shareholders.
NOTE 3 - COMMON STOCK
During the year ended December 31, 2011, the Company sold 42,500 shares of common stock to accredited and non-accredited investors at $.20 per share for total consideration of $8,500. No commissions or expenses were incurred in connection with this private placement.
NOTE 4 - INCOME TAXES
Koko has incurred losses since its inception and, therefore, has not been subject to federal income taxes. As of December 31, 2011, Koko had net operating losses of $254,263, which begin to expire in 2029.
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KOKO, LTD.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
Significant components of Koko’s deferred income tax assets at December 31, 2011 and 2010 are as follows:
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ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosures from the inception of our company through the date of this Form 10-K. Our financial statements for the period from inception to December 31, 2011, included in this report have been audited by MaloneBailey LLP, as set forth in this annual report.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were ineffective as of the end of the period covered by this report. Any material that may occur is first reported to our security attorney so that it is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Any material event that does occur unexpectedly is also reported immediately to our security attorney so that it is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
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The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. This being said, limited access and usage to and of company records, bank account, credit card, the company office and premises, computers, and decision making has assisted Koko in meeting these objectives and criteria as evidenced that there have been no errors or fraud to date since the company’s inception.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Periodic re assessment of these controls may assist Koko in these future control risks.
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Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of December 31, 2011, the Company’s internal control over financial reporting was effective. Should the facts or operations of the Company change in the future, the Company will change and adjust these policies to reflect these changes.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the year ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE.
Officers and Directors
Our sole director will serve until his successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serves until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.
The names, ages and positions of our present officers and director are set forth below:
Name and Address
Age
Position(s)
Gregory Ruff
president, principal accounting officer, principal
executive officer, principal financial officer, secretary,
treasurer and sole member of the board of directors
Craig Littler
vice president
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Background of officers and directors
Gregory Ruff
Since our inception, Gregory Ruff has been our president, principal accounting officer, principal executive officer, principal financial officer, secretary, treasurer and sole member of our board of directors. From January 1, 2009 to August 2009, Mr. Ruff was a registered representative with Spartan Securities Group Ltd. in its Spokane, Washington office. Spartan Securities Group Ltd. is a broker-dealer registered with the Securities and Exchange Commission and the Financial Industry Regulatory Authority. From July 2007 to July 2010, Mr. Ruff was the president, principal executive officer, secretary, treasurer, principal financial officer, principal accounting officer, and a member of the board of directors of QE Brushes, Inc., a Nevada corporation. QE Brushes completed a reverse merger with Virtual Medical International, Inc. Mr. Ruff resigned as its president, secretary, treasurer, and CFO. Since December 2006, Mr. Ruff has been engaged in making personal investments for his own benefit. From 1996 to December 2006, Mr. Ruff was employed as a trader and registered representative with Public Securities Company, a broker-dealer registered with the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) located in Spokane, Washington. Mr. Ruff’s duties included assisting companies in their 15C2-11 filing process for listings on the OTCBB and Pink Sheets as well as raising venture capital. Mr. Ruff graduated from Gonzaga University in 1981 with a BBA in accounting and from Pepperdine School of Law in 1984 with a Juris Doctorate.
Craig Littler
Since our inception, Craig Littler has been our vice president. From July 2007 to July 2010, Mr. Littler was a member of the board of directors of QE Brushes, Inc., a Nevada corporation. QE Brushes completed a reverse merger with Virtual Medical International, Inc. and Mr. Littler resigned as its vice president. From 1995 to 2002, Mr. Littler owned and operated Executive Recruiting Company. Mr. Littler graduated from the American Academy of Dramatic Arts with a theatre/drama degree in 1963. Mr. Littler has worked as an actor since 1961.
Conflicts of Interest
We believe that Messrs. Ruff and Littler will not be subject to conflicts of interest. No policy has been implemented or will be implemented to address conflicts of interest.
In the event both Messrs. Ruff and Littler resign as officers and director, there will be no one to run our operations and our operations will be suspended or cease entirely.
Audit Committee Financial Expert
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we are only beginning our commercial operations, at the present time, we believe the services of a financial expert are not warranted.
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Involvement in Certain Legal Proceedings
During the past ten years, Messrs. Ruff and Littler have not been the subject of the following events:
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.
Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
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.
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 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;
5.
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.
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.
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:
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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.
Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Audit Committee and Charter
We have a separately-designated audit committee of the board. Audit committee functions are performed by our board of directors. None of our directors are deemed independent. All directors also hold positions as our officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee. A copy of the audit committee charter was filed as Exhibit 99.1 to our 2009 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 1, 2010.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics was filed as Exhibit 14.1 our 2009 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 1, 2010.
Disclosure Committee and Charter
We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports. A copy of the disclosure committee charter was filed as Exhibit 99.2 our 2009 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 1, 2010.
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Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities 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 shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, or written representations that no other reports were required, and to the best of our knowledge, we believe that all of our officers, directors, and owners of 10% or more of our common stock filed all required Forms 3, 4, and 5.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by us for the last two years through December 31, 2011, to our officers. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to our named executive officers.
Summary Compensation Table
We have not paid any salaries in 2011 and we do not anticipate paying any salaries at any time in 2012. We will not begin paying salaries until we have adequate funds to do so.
The following table sets forth the compensation paid by us from to our sole director for the year ending December 31, 2011. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to our named director.
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Director Compensation Table
All compensation received by our officers and directors has been disclosed.
There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance at this time.
Indemnification
Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney’s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against policy, as expressed in the Act and is, therefore, unenforceable.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth, as of the date of this report, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholders listed below have direct ownership of his/her shares and possess voting and dispositive power with respect to the shares.
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ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
On August 14, 2007, we issued 5,000,000 restricted shares of common stock to Gregory Ruff, our president and sole director, in consideration of $1,300. On August 14, 2007, we issued 1,250,000 restricted shares of common stock to Craig Littler, our vice president, in consideration of $2,800 and $10,000 was an advance for our attorney’s legal services. The shares were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933. Messrs. Ruff and Littler were furnished with all of the information that is contained in a registration statement and are sophisticated investors. No commission was paid to anyone in connection with the sale of shares to Messrs. Ruff and Littler.
We obtained an exclusive three year license from Mr. Ruff, to market and manufacture the steak timer. We have agreed to pay all costs associated with the development, manufacturing, and marketing of the steak timer. We also will pay Mr. Ruff a 20% royalty on the Net Factory Sales Price defined as follows: The gross factory selling price of the product or the US importer’s gross selling price if the steak timer is manufactured abroad, less usual trade discounts actually allowed, but not including advertising allowances or fees or commissions paid to our employees or agents. The Net Factory Sales Price shall not include packing costs, if itemized separately, import and export taxes, excise and other sales taxes, and custom duties, and costs of insurance and transportation, if billed separately, from the place of manufacture if in the US, or from the place of importation if manufactured abroad, to the customer’s premises or next point of distribution or sale. Bona fide returns may be deducted from units shipped into computing the royalty payable after such returns are made.
Mr. Ruff allows us to use approximately 144 square feet of space at this home for our operations. Mr. Ruff does not charge us for the use of the space.
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ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(1) Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
(4) All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:
(5) Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
(6) The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was 0%.
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PART IV
ITEM 15.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities and Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 4th day of April, 2012.
KOKO LTD.
BY:
GREGORY RUFF
Gregory Ruff
President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole member of the Board of Directors
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
GREGORY RUFF
President, Principal Executive Officer, Principal Accounting Officer, Principal
April 4, 2012
Gregory Ruff
Financial Officer, Secretary, Treasurer and sole member of the Board of Directors
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EXHIBIT INDEX
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