ITEM 1.
BUSINESS.
Company Overview
Journal of Radiology, Inc. ("the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this
time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
The Company has been in the development stage since its formation and has realized revenues of $105,000
from its planned operations.
Employees
Journal of Radiology, Inc. currently has no employees.
Office and Facilities
Our corporate headquarters are located at 2230 Michigan Avenue, Santa Monica, California 90404.
ITEM 1A.
ITEM 1A. RISK FACTORS.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our common stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occurs, our business, financial condition or results of operations could be seriously harmed.
RISK FACTORS CONCERNING OUR BUSINESS
Our business is subject to numerous risk factors, including the following:
We have had little operating history and no revenues or earnings from operations.
We have no assets. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in us incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business entity. There is no assurance that we can identify such a business entity and consummate such an agreement or combination.
Our auditor's going concern opinion and the notation in the financial statements indicate that we do not have significant cash or other material assets and we are relying on advances from stockholders, officers and directors to meet our limited operating expenses. We may become insolvent if we are unable to pay our debts in the ordinary course of business as they become due.
Our proposed plan of operation is speculative.
The success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the business opportunity which we identify, if any is identified. While management intends to seek business agreement(s) or combination(s) with entities having established operating histories, there can be no assurance that we will be successful in locating candidates meeting such criteria.
We face intense competition for business combination opportunities.
We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities,
including venture capital firms, are active in mergers and acquisitions of companies that may be our desirable target candidates. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we have and, consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will also compete in seeking merger or acquisition candidates with numerous other small public companies.
We have no agreements for a business combination or licensing transaction and have established no standards for such transactions.
We have no arrangement, agreement or understanding with respect to entering into an agreement or engaging in a merger with, joint venture with or acquisition of, a private or public entity. There can be no assurance that we will be successful in identifying and evaluating suitable business opportunities or in concluding a business transaction. Management has not identified any particular business for our evaluation. There is no assurance that we will be able to negotiate a business combination on terms favorable to us. We have not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which we will require a target business opportunity to have achieved, and without which we would not consider a business transaction in any form with such business opportunity. Accordingly, we may enter into a business agreement or a business combination with a business having no significant operating history, losses, limited potential or no potential for earnings, limited assets, negative net worth or other negative characteristics.
Our success is dependent on management that has other full time employment, has limited experience and will only devote limited time (part time) to working for the Company, all of which makes our future even more uncertain.
Aaron Shrira is the President and Chief Executive Officer of the Company and Elana Berman-Shrira is the Secretary and Treasurer and CFO of the Company. Both Mr. Shrira and Ms. Berman-Shrira will serve without pay while maintaining other employment. Although both Mr. Shrira and Ms. Berman-Shrira have considerable business and marketing experience, neither has any experience in the publishing industry or in mergers and acquisitions.
Notwithstanding the limited experience and availability of management, loss of the services of either officer would adversely affect development of our business and its likelihood of continuing in operation.
The reporting requirements under federal securities law may delay or prevent us from making certain acquisitions.
Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, (the "1934 Act"), require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the 1934 Act are applicable.
In addition to the audited financial statements, the time and additional costs that may be incurred by some target entities to prepare and disclose such information may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company.
An acquisition could create a situation wherein we would be required to register under The Investment Company Act of 1940 and thus be required to incur substantial additional costs and expenses.
Although we will be subject to regulation under the 1934 Act, management believes the Company will not be subject to regulation under the Investment Company Act of 1940, insofar as we will not be engaged in the business of investing or trading in securities. In the event we engage in a business combination that results in us holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940. In such event, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the Securities and Exchange Commission as to the status of our Company under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject us to material adverse consequences.
A merger, acquisition, or licensing agreement would most likely be exclusive, resulting in a lack of diversification.
Management anticipates that it may be able to participate in only one potential business venture because a business partner might require exclusivity. This lack of diversification should be considered a substantial risk to our shareholders because it will not permit us to offset potential losses from one venture against gains from another.
If we do any business combination, each shareholder will most likely hold a substantially lesser percentage ownership in the Company.
If we enter a business combination with a private concern, that, in all likelihood, would result in the Company issuing securities to shareholders of any such private company. The issuance of our previously authorized and unissued Common Stock would result in reduction in percentage of shares owned by our present and prospective shareholders.
The requirement of audited financial statements may disqualify some business opportunities seeking a business combination with us.
Our management believes that any potential business combination opportunity must provide audited financial statements for review, for the protection of all parties to the business combination. One or more attractive business opportunities may choose to forego the possibility of a business combination with us, rather than incur the expenses associated with preparing audited financial statements.
Our officers and directors are the principal shareholders and will be able to approve all corporate actions without shareholder consent and will control our Company.
Our principal shareholder, Aaron Shrira, currently owns approximately 85% of our Common Stock. He will have significant influence over all matters requiring approval by our shareholders, but not requiring the approval of the
minority shareholders. In addition, he is now an officer and director. Because he is the majority shareholder, he will be able to elect all of the members of our board of directors, allowing him to exercise significant control of our
affairs and management. In addition, he may transact most corporate matters requiring shareholder approval by written consent, without a duly-noticed and duly-held meeting of shareholders.
If our Common Stock does not meet blue sky resale requirements, certain shareholders may be unable to resell our Common Stock.
The resale of Common Stock must meet the blue sky resale requirements in the states in which the proposed purchasers reside. If we are unable to qualify the Common Stock and there is no exemption from qualification in certain states, the holders of the Common Stock or the purchasers of the Common Stock may be unable to sell them.
Our shareholders may face significant restrictions on the resale of our Common Stock due to state "blue sky" laws or if we are determined to be a "blank check" company.
There are state regulations that may adversely affect the transferability of our Common Stock. We have not registered our Common Stock for resale under the securities or "blue sky" laws of any state. We may seek qualification or advise our shareholders of the availability of an exemption. We are under no obligation to register or qualify our Common Stock in any state or to advise the shareholders of any exemptions.
Current shareholders, and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that there might be significant state restrictions upon the ability of new investors to purchase the Common Stock.
Blue sky laws, regulations, orders, or interpretations place limitations on offerings or sales of securities by "blank check" companies or in "blind-pool" offerings, or if such securities represent "cheap stock" previously issued to
promoters or others. Our majority shareholder, because he received stock at a price of $.001 for each share, may be deemed to hold "cheap stock." These limitations typically provide, in the form of one or more of the following
limitations, that such securities are:
(a) Not eligible for sale under exemption provisions permitting sales without registration to accredited investors or qualified purchasers;
(b) Not eligible for the transaction exemption from registration for non-issuer transactions by a registered broker-dealer;
(c) Not eligible for registration under the simplified small corporate offering registration (SCOR) form available in many states;
(d) Not eligible for the "solicitations of interest" exception to securities registration requirements available in many states;
(e) Not permitted to be registered or exempted from registration, and thus not permitted to be sold in the state under any circumstances.
Virtually all 50 states have adopted one or more of these limitations, or other limitations or restrictions affecting the sale or resale of stock of blank check companies or securities sold in "blind pool" offerings or "cheap stock" issued to promoters or others. Specific limitations on such offerings have been adopted in:
Alaska
Nevada
Tennessee
Arkansas
New Mexico
Texas
California
Ohio
Utah
Delaware
Oklahoma
Vermont
Florida
Oregon
Washington
Georgia
Pennsylvania
Idaho
Rhode Island
Indiana
South Carolina
Nebraska
South Dakota
Any secondary trading market which may develop may only be conducted in those jurisdictions where an applicable exemption is available or where the shares have been registered.
Current shareholders and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that we are under no obligation to register the shares on behalf of our shareholders under the Securities Act of 1933, as amended.
The Company's officers, directors and majority shareholders have expressed their intentions not to engage in any transactions with respect to the Company's Common Stock except in connection with or following a business combination resulting in us no longer being defined as a blank check issuer. Any transactions in our Common Stock by said shareholders will require compliance with the registration requirements under the Securities Act of 1933, as amended.
Our Common Stock may be subject to significant restriction on resale due to federal penny stock restrictions.
The Securities and Exchange Commission has adopted rules that regulate broker or dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange
system). The penny stock rules require a broker or dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Securities and Exchange
Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker or dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker or 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 penny stock rules also require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker or dealer must make a special written determination that a 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 any secondary market for our stock that becomes subject to the penny stock rules, and accordingly, shareholders of our Common Stock may find it difficult to sell their securities, if at all.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our fiscal year 2010 that remain unresolved.
ITEM 2.
ITEM 2.
PROPERTIES.
The Company owns no real property.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS.
None.
ITEM 4.
ITEM 4.
[REMOVED AND RESERVED]
PART II.
ITEM 5.
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
There is presently no public market for our Common Stock. Although JRRD is listed on the OTC:BB, if traded, there is no assurance that a public market will materialize.
The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the Securities and Exchange Commission shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a suitably written statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, if our common stock becomes subject to the penny stock rules, stockholders may have difficulty selling those securities.
The following table provides information about purchases by us and our affiliated purchasers during the year ended June 30, 2011 of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934:
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA.
Not Applicable.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Journal of Radiology, Inc. was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED JUNE 30, 2011 COMPARED TO THE FISCAL YEAR ENDED JUNE 30, 2010
REVENUES
For the fiscal year ended June 30, 2011 and fiscal year ended June 30, 2010 we generated $105,000 and $0 revenue, respectively. We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer. The Company has been in the development stage since its formation and has not yet realized a profit from its planned operations.
COSTS OF GOODS SOLD
We did not incur cost of sales for the fiscal year ended June 30, 2011 or fiscal year ended June 30, 2010
OPERATING COSTS
General and administrative expenses were $265 for the fiscal year ended June 30, 2011, compared to $801 for the fiscal year ended June 30, 2010 and professional fees were $131,174 for the fiscal year ended June 30, 2011, compared to $3,000 an increase of $128,174. The increase in professional fees primarily relate to filing costs, transfer agent fees and one contract accounting for all our recorded revenue. The previous year had minimal activity in comparison.
NET INCOME/LOSS
Our net loss for the year ended June 30, 2011 and the fiscal year ended June 30, 2010 was $(26,439) and $(3,801), respectively. For the year ended June 30, 2011, our net loss was attributed to incurred costs associated with professional fees.
LIQUIDITY
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As of June 30, 2011, we had cash of $5,760 and total liabilities of $135,000. Our cash flows from operating activities for the fiscal year ended June 30, 2011 resulted in cash used of $30,439. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. Our cash flow provided by financing activities for the fiscal year ended June 30, 2011 and 2010 was $31,500 and $2,500, respectively. The Company has an accumulated deficit during development stage at June 30, 2011 and June 30, 2010 of $31,325 and $4,886, respectively. The deficit reported at June 30, 2011 is largely a result of operating expenses for professional fees. These conditions led to our auditor reporting substantial doubt about our ability to continue as a going concern.
Over the next 12 months we expect to expend approximately $30,000 in cash for legal, accounting and related services. Cash used for other expenditures is expected to be minimal. We hope to be able to attract suitable investors for our business plan, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.
We expect to be able to secure capital through advances from our Chief Executive Officer in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely.
The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for acquiring suitable partners or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We are currently funding our initial operations by way of issuing 6,000,000 shares of our common stock valued at $0.001 per share to our Chief Executive Officer. We had hoped to be able to attract suitable publishing partners seeking the benefits of stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. Our Chief Executive Officer has committed to advancing us an additional $30,000 for certain operating costs in order to start implementing our business plan, the funds are loaned to the company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer. The loans from our Chief Executive
Officer are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.
PLAN OF OPERATION AND FUNDING
We do not currently engage in enough business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with amounts to be loaned to or invested in us by our stockholders, management or other investors.
During the next twelve months we anticipate incurring costs related to:
(i) filing of Exchange Act reports, and
(ii) costs relating to developing our new business plan
We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Going Concern
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have material assets, nor does it have operations or a source of revenue to cover its operating costs and allow it to continue as a going concern. The Company has a deficit accumulated during development stage at June 30, 2011 and 2010 of $31,325 and $4,886, respectively. The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement its business plan. There can be no assurance that the Company will be successful in this situation.
Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might result from this uncertainty. The Company is funding its initial operations by way of loans from its Chief Executive Officer. The Company's officers and directors have committed to advancing certain operating costs of the Company.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and related notes are included as part of this report as indexed in the appendix on page through.
ITEM 9.
ITEM 9.
CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On May 9, 2011, the Company dismissed Chang G. Park, CPA as independent auditors for the Company. The decision to dismiss Chang G. Park, CPA and to seek new independent auditors was approved by the Company’s Board of Directors.
The reports of Chang G. Park, CPA on the Company’s financial statements for the fiscal years ended June 30, 2010 and 2009 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audits of the Company’s financial statements for the fiscal years ended June 30, 2010 and 2009 and any subsequent interim periods through the date the relationship with Chang G. Park, CPA ceased, (1) there were no disagreements with Chang G. Park, CPA on any matter of accounting principles, except that the reports of Chang G. Park, CPA., for the fiscal years ended June 30, 2010, and 2009 indicated conditions which raised substantial doubt about our ability to continue as a going concern, or practices, financial statement disclosure or auditing scope and procedure which, if not resolved to the satisfaction of Chang G. Park, CPA, would have caused Chang G. Park, CPA to make reference to the matter in its report and (2) there were no “reportable events” as that term is defined in Item 304 of Regulation S-K promulgated under the Securities Exchange Act of 1934 (“Item 304”).
On May 10, 2011, the Company engaged DeJoya Griffith & Company, LLC as the Company's independent accountant to audit the Company’s financial statements and to perform reviews of interim financial statements. During the fiscal years ended June 30, 2010 and 2009 and from June 30, 2010 through May 9, 2011 neither the Company nor anyone acting on its behalf consulted with DeJoya Griffith & Company, LLC regarding (i) either the application of any accounting principles to a specific completed or contemplated transaction of the Company, or the type of audit opinion that might be rendered by DeJoya Griffith & Company, LLC on the Company's financial statements; or (ii) any matter that was either the subject of a disagreement with Chang G. Park, CPA or a reportable event with respect to Chang G. Park, CPA.
ITEM 9A.
ITEM 9A.
CONTROLS AND PROCEDURES.
Management, including our chief executive officer and chief financial officer, as of the end of the period covered by this Annual Report on Form 10-K, have concluded our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) were effective to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
Changes in Internal Controls. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses and therefore there were no corrective actions taken. However, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events and there is no certainty that any design will succeed in achieving its stated goal under all potential future considerations, regardless of how remote.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting refers to a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in connection with generally accepted accounting principles, including 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 our management and 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 our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of the prevention or detection of misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of this Annual Report on Form 10-K for the year ended June 30, 2011, management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal controls over financial reporting, pursuant to Rule 13a-15 under the Exchange Act. Our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our internal controls and procedures are effective as of June 30, 2011. There were no significant changes in our internal controls over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
This Annual Report on Form 10-K does not include an attestation report of the Company’s independent 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 on Form 10-K.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting identified in connection with the requisite evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The executive officers and directors of the Company as of September 21, 2011 are as follows:
Name
Age
Position
Aaron Shrira
President and Director
Elana Berman-Shrira
Secretary, Treasurer and Director
Duties, Responsibilities and Experience
Biographical Information
Aaron Shrira, age 69, has been the President and CEO of the Company since its incorporation. He is also the founder, and has been the CEO since 1983, of Reliable Printing Solutions and its affiliates including Century Computer Products, Inc. These companies, based in Santa Monica, California, market toner and ink jet cartridges and related products and employ approximately 130 people. Prior to 1983 Mr. Shrira owned a construction company that built and operated Gasoline Stations. He began his business career in Real Estate, buying and selling real estate investments. Mr. Shrira received his BS degree in Mechanical Engineering from Indiana Institute of Technology. He is married to Elana Berman-Shrira, the other officer and director of the Company.
Elana Berman-Shrira, age 61, has been the Secretary, Treasurer and CFO of the Company since its incorporation. She has been involved in design, manufacturing and distribution of collectable jewelry for both private and public clientele since 1997. In addition she has been actively involved in consulting others in the purchasing of real estate, and the design and renovation/restoration of properties since 1995. Prior to that, Ms. Berman-Shrira received a B.A. in Sociology from California State University, Northridge and worked as a medical social worker for the County of Los Angeles. Subsequently, she earned a Master's Degree from Antioch University in Clinical Psychology. She is married to Aaron Shrira, the other officer and director of the Company.
CONFLICTS OF INTEREST
As noted above, the two members of the Company's management have other business interests, however, these other businesses are not seeking mergers or acquisitions and have entirely different business plans from that of this Issuer. Consequently, there are no known potential conflicts of interest in the different businesses. However there is a potential conflict of interest in the time which the officers and directors devote to this Company and to their other interests. We do not currently have an agreement as to the amount of time that will be devoted to the Company's affairs. Management has stated that it will devote such time as it believes necessary to seeking out potential business combination targets for the Company.
The officers and directors are, so long as they are officers or directors of the Company, subject to the restriction that all opportunities contemplated by the Company's plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to the Company. A breach of this requirement will be a breach of the fiduciary duties of the officer or director.
However, all directors may still individually take advantage of opportunities if the Company should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION.
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the compensation earned by the named executive officers for the fiscal years ended June 30, 2011 and 2010, for services rendered in all capacities to Journal of Radiology, Inc.:
Name & Principal Position
Year
Salary ($)
Bonus
($)
Stock Awards ($)
Option Awards ($)
Non-Equity Incentive Plan Compensation ($)
Nonqualified Deferred Compensation Earnings ($)
All Other Compensation ($)
Total ($)
Aaron Shrira, President and Director
$-
$ -
$ -
$ -
$-
$ -
$ -
$ -
$-
$ -
$ -
$ -
$-
$ -
$ -
$ -
Elana Berman-Shrira,
Secretary, Treasurer and Director
$-
$ -
$ -
$ -
$-
$ -
$ -
$ -
$-
$ -
$ -
$ -
$-
$ -
$ -
$ -
Director Compensation
The following table provides compensation summary concerning the compensation earned by the named directors for the years ended June 30, 2011 and 2010.
Name
Year
Fees Earned or Paid in Cash
Stock Awards
Option Awards
Non-Equity Incentive Plan Compensation
Non-Qualified Deferred Compensation Earnings
All Other Compensation
Total
Aaron Shrira, Director
$-
$ -
$ -
$ -
$ -
$ -
$-
$-
$ -
$ -
$ -
$ -
$ -
$-
Elana Berman-Shrira, Director
$-
$ -
$ -
$ -
$ -
$ -
$-
$-
$ -
$ -
$ -
$ -
$ -
$-
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of September 20, 2011, information about the beneficial ownership of our capital stock with respect to each person known by Journal of Radiology, Inc. to own beneficially more than 5% of the outstanding capital stock, each director and officer, and all directors and officers as a group.
1) Unless noted otherwise, the address for all persons listed is c/o the Company at 2230 Michigan Avenue,
Santa Monica, California 90404.
2) The above percentages are based on 7,085,000 shares of common stock outstanding as September 20, 2011.
3) Elana Berman-Shrira may be considered the beneficial owner of 6,000,000 shares owned by her husband Aaron Shrira.
“Beneficial ownership” means the sole or shared power to vote or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of or to direct the disposition of, a security).
There are no arrangements, known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of Journal of Radiology, Inc.
There are no arrangements or understandings among members of both the former and the new control groups and their associates with respect to election of directors or other matters.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
None.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
The aggregate fees billed by the Company's auditors for the professional services rendered in connection with the audit of the Company's annual financial statements, review of our Form 10 and reviews of the financial statements included in the Company's Forms 10-Qs and Form 10-Ks for fiscal 2011 and 2010 were approximately $9,250 and $2,500, respectively.
Audit-Related Fees
None.
Tax Fees
None.
All Other Fees
Fees billed in connection with subsidiary stand alone audits in fiscal 2011 and 2010 were approximately $0 and $0, respectively.
PART IV.
ITEM 15.
ITEM 15.
EXHIBITS.
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.
JOURNAL OF RADIOLOGY, INC.
Date: September 26, 2011
By:
/s/ Aaron Shrira
Aaron Shrira
President and Director (Principal Executive Officer)
Date: September 26, 2011
By:
/s/ Elana Berman-Shrira
Elana Berman-Shrira
Treasurer and Director (Principal Accounting and Financial Officer)
JOURNAL OF RADIOLOGY, INC.
FINANCIAL STATEMENTS
JUNE 30, 2011 AND 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Journal of Radiology, Inc.
We have audited the accompanying balance sheet of Journal of Radiology, Inc. (A Development Stage Company) as of June 30, 2011 and the related statements of operations, stockholder’s equity (deficit) and cash flows for the year ended June 30, 2011 and from inception (May 21, 2009) through June 30, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of Journal of Radiology, Inc. (A Development Stage Company) for the year ended June 30, 2010 and from inception (May 21, 2009) to June 30, 2010. Those statements were audited by other auditors whose report has been furnished to us and our opinion, in so far as it relates to the amounts included in the year ended June 30, 2010 and from inception (May 9, 2009) to June 30, 2010, is based solely on the report of other auditors.
We conducted our audit 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 audit 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 audit provides 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 Journal of Radiology, Inc. (A Development Stage Company) as of June 30, 2011 and the results of its operations and cash flows for the year ended June 30, 2011 and from inception (May 21, 2009) through June 30, 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ De Joya Griffith & Company, LLC
Henderson, Nevada
September 20, 2011
2580 Anthem Village Dr., Henderson, NV 89052
Telephone (702) 563-1600 ● Facsimile (702) 920-8049
Member Firm with
Russell Bedford International
Chang G. Park, CPA, Ph. D.
t 2667 CAMINO DEL RIO S. PLAZA B t SAN DIEGO t CALIFORNIA 92108-3707t
t TELEPHONE (858)722-5953 t FAX (858) 761-0341 t FAX (858) 764-5480
t E-MAIL changgpark@gmail.com t
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Journal of Radiology, Inc.
We have audited the accompanying balance sheet of Journal of Radiology, Inc. (A Development Stage “Company”) as of June 30, 2010 and the related statements of operations, changes in shareholders’ equity and cash flows for the years then ended June 30, 2010, and for the period from May 21, 2009 (inception) to June 30, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Journal of Radiology, Inc. as of June 30, 2010, and the result of its operations and its cash flows for the years then ended and for the period from May 21, 2009 (inception) to June 30, 2010 in conformity with U.S. generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s losses from operations raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Chang G. Park
Chang G. Park
May 5, 2011
San Diego, CA. 92108
Registered with the Public Company Accounting Oversight Board
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
BALANCE SHEETS
As of Year End June 30,
As of Year End June 30,
Assets
Cash
$
5,760
$
4,699
Accounts receivable
105,000
-
Total assets
$
110,760
$
4,699
Liabilities and Stockholders’ Equity (Deficit)
Accounts payable
101,000
-
Due to director
34,000
2,500
Total liabilities
$
135,000
$
2,500
Stockholders’ Equity (Deficit) :
Common tock; par value $0.001; 75,000,000 shares authorized, 7,085,000 and 7,085,000 issued and outstanding, respectively.
7,085
7,085
Deficit accumulated during development stage
(31,325)
(4,886)
Total stockholders’ equity (deficit)
(24,240)
2,199
Total liabilities and stockholders' equity (deficit)
$
110,760
$
4,699
See Notes to Financial Statements.
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Year ended
June 30,
For the Year ended
June 30,
From Inception
(May 21, 2009) to June 30,
Revenue
$ 105,000
$ -
$ 105,000
Total revenue
105,000
-
105,000
Operating costs:
Professional fees
131,174
3,000
135,259
Administrative expenses
1,066
Total operating costs
131,439
3,801
136,325
Net loss
$ (26,439)
$ (3,801)
$ (31,325)
Basic loss per share
(0.00)
(0.00)
Weighted average number of common shares outstanding- basic
7,085,000
6,986,370
See Notes to Financial Statements.
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (MAY 21, 2009) TO JUNE 30, 2011
Common
Shares
Common
Stock
Deficit
Accumulated
During Development
Stage
Total Stockholders’ Equity (Deficit)
Common stock issued per court order May 21, 2009
1,085,000
$ 1,085
$ -
$ 1,085
Net loss
-
-
(1,085)
(1,085)
Balance June 30, 2009
1,085,000
1,085
(1,085)
-
Common stock issued July 6, 2009
6,000,000
6,000
-
6,000
Net loss
-
-
(3,801)
(3,801)
Balance June 30, 2010
7,085,000
7,085
(4,886)
2,199
Net loss
-
-
(26,439)
(26,439)
Balance June 30, 2011
7,085,000
$ 7,085
$ (31,325)
$ (24,240)
See Notes to Financial Statements.
JOURNAL OF RADIOLOGY, INC.
STATEMENTS OF CASH FLOWS
(A Development Stage Company)
For the Year Ended
June 30,
For the Year Ended
June 30,
From Inception
(May 21, 2009) to June 30,
Cash Flows from Operating Activities
Net loss
$ (26,439)
$ (3,801)
$ (31,325)
Adjustments to reconcile net loss to net cash used in operating activities and liabilities:
Issuance of common stock per court order
-
-
1,085
Changes in operating assets and liabilities:
Increase in accounts receivable
(105,000)
-
(105,000)
Increase in accounts payable
101,000
-
101,000
Net cash used in operating activities
(30,439)
(1,301)
(34,240)
Cash Flows from Financing Activities:
Increase in advance from director
31,500
2,500
34,000
Issuance of common stock
-
6,000
6,000
Net cash provided by financing activities
31,500
6,000
40,000
Net change in cash
1,061
4,699
5,760
Cash beginning of year
4,699
-
-
Cash end of year
5,760
4,699
5,760
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest paid
$ -
$ -
$ -
Income taxes paid
$ -
$ -
$ -
See Notes to Financial Statements.
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2011
NOTE 1. NATURE AND BACKGROUND OF BUSINESS
Journal of Radiology, Inc. ("the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
The Company has been in the development stage since its formation and has only one client from its planned operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF ACCOUNTING
The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a June 30 year-end.
b. BASIC EARNINGS PER SHARE
ASC No. 260, “Earnings Per Share”, specifies the computation, presentation, and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. The Company has adopted the provisions of ASC No. 260.
Basic net loss per share amount is computed by dividing the net loss by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Common stock equivalents, which include warrants to purchase common stock, on June 30, 2011 and 2010 were not included in the computation of diluted earnings per share because the effect would be antidilutive.
c. ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
d. CASH AND CASH EQUIVALENTS
Investments with maturity of three months or less are considered to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At June 30, 2011 and June 30, 2010, the balance did not exceed the federally insured limit.
e. REVENUE RECOGNITION
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts, and other allowances based on its historical experience.
f. STOCK-BASED COMPENSATION
We follow ASC 718-10, "Stock Compensation", which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options. The Company granted stock awards, at par value, to its officers, directors and advisors for services rendered in its formation. Accordingly, stock-based compensation has been recorded to date.
g. INCOME TAXES
Income taxes are provided in accordance with Codification topic 740, “Income Taxes”, which requires an asset and liability approach for the financial accounting and reporting of income taxes. Current income tax expense (benefit) is the amount of income taxes expected to be payable (receivable) for the current year. A deferred tax asset and/or liability is computed for both the expected future impact of differences between the financial statement and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. Deferred income tax expense is generally the net change during the year in the deferred income tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be “more likely than not” realized in future tax returns. Tax rate changes and changes in tax law are reflected in income in the period such changes are enacted.
h. IMPACT OF NEW ACCOUNTING STANDARDS
In February 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-09, “Amendments to Certain Recognition and Disclosure Requirements” (“ASU 2010-09”), which is included in the FASB Accounting Standards Codification (the “ASC”) Topic 855 (Subsequent Events). ASU 2010-09 clarifies that an SEC filer is required to evaluate subsequent events through the date that the financial statements are issued. ASU 2010-09 is effective upon the issuance of the final update and did not have a significant impact on the Company’s financial statements.
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Management plans to seek a strategic partner to assist in the development of the journal business, or a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders. Management has yet to identify any of these and there is no guarantee that the Company will be able to identify such opportunities in the future.
NOTE 4. FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels
which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The carrying value of the Company’s financial assets and liabilities which consist of cash, accounts receivable, accounts payable and due to director in management’s opinion approximate their fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
NOTE 5. STOCKHOLDERS' EQUITY - COMMON STOCK
The authorized common stock of the Company consists of 75,000,000 shares with $0.001 par value. No other class of stock is authorized. As of June 30, 2011, there were a total of 7,085,000 common shares issued and outstanding.
The Company's first stock issuance, totaling 1,085,000 shares, took place on May 21, 2009 pursuant to the Chapter 11 Plan of Reorganization confirmed by the U.S. Bankruptcy Court in the matter of AP Corporate Services, Inc. ("AP").
1.
The Court ordered the distribution of shares in Journal of Radiology, Inc. to all general unsecured creditors of AP, with these creditors to receive their PRO RATA share (according to amount of debt held) of a pool of 80,000 shares in the Company.
2.
The Court also ordered the distribution of shares in the Company to all shareholders of AP, with these shareholders to receive their PRO RATA share (according to number of shares held) of a pool of 5,000 shares in the Company.
3.
The Court also ordered the distribution of shares and warrants in the Company to all administrative creditors of AP, with these creditors to receive one share and five warrants in the Company for each $0.10 of AP's administrative debt which they held. These creditors received an aggregate of 1,000,000 common shares in the Company and
5,000,000 warrants consisting of 1,000,000 "A Warrants" each convertible into one share of common stock at an exercise price of $1.00; 1,000,000 "B Warrants" each convertible into one share of common stock at an exercise price of $2.00; 1,000,000 "C Warrants" each convertible into one share of common stock at an exercise price of $3.00; 1,000,000 "D Warrants" each convertible into one share of common stock at an exercise price of $4.00; and 1,000,000 "E Warrants" each convertible into one share of common stock at an exercise price of $5.00. All warrants are exercisable at any time during the five year period immediately following the effective date January 4, 2009.
On July 6, 2009 the President of the Issuer acquired 6,000,000 common shares from the Issuer in a private placement for cash. The shares were purchased at par value ($0.001 per share) for a total investment of $6,000.
As a result of these issuances there were a total 7,085,000 common shares issued and outstanding, and a total of 5,000,000 warrants issued and outstanding, at June 30, 2011.
NOTE 6 - INCOME TAXES
Deferred tax assets
At June 30, 2011, the Company had net operating loss (“NOL”) carry-forwards for Federal income tax purposes of $31,325 that may be offset against future taxable income through 2031. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets of approximately $10,651 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a valuation allowance of $10,651.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance increased $8,990 for the period from June 30, 2010 through June 30, 2011.
Components of deferred tax assets for June 30, 2011 and 2010 are as follows:
Income taxes in the statements of operations
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
NOTE 7. RELATED PARTY TRANSACTIONS
During the fiscal years June 30, 2011 and 2010, the Company received from a director $34,000 and $2,500, respectively for payment of expenses. These amounts are included on the balance sheet as a current liability. The advance is non-interest bearing, unsecured, and due on demand.
The Company neither owns nor leases any real or personal property. An officer of the corporation provides office services without charge. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
NOTE 8. WARRANTS AND OPTIONS
On May 21, 2009 (inception), the Company issued 5,000,000 warrants exercisable into 5,000,000 shares of the Company's common stock. These warrants were issued per order of the U.S. Bankruptcy Court in the matter of AP Corporate Services, Inc. ("AP") to the administrative creditors of AP. These creditors received an aggregate of 5,000,000 warrants consisting of 1,000,000 "A Warrants" each convertible into one share of common stock at an exercise price of $1.00; 1,000,000 "B Warrants" each convertible into one share of common stock at an exercise price of $2.00; 1,000,000 "C Warrants" each convertible into one share of common stock at an exercise price of $3.00; 1,000,000 "D Warrants" each convertible into one share of common stock at an exercise price of $4.00; and 1,000,000 "E Warrants" each convertible into one share of common stock at an exercise price of $5.00. All warrants are exercisable at any time prior to January 4, 2014. As of the date of this report, no warrants have been exercised.
The fair value of these warrants was estimated at the date of the Company's inception, May 21, 2009, which was also the date of the grant, using the Black-Scholes Option Pricing Model with current value of the stock at $0.001 (par value) since there is no market for the stock at the time; dividend yield of 0%; risk-free interest rate of 2.16% (5 year Treasury Note rate at the issue date); and expiration date of 5 years. Since the stock does not trade, and since its par value is $0.001, the fair value of the warrants came out to be zero.
The following is a summary of warrants activity during the years ended July 31, 2011 and 2010:
Number of Shares
Weighted Average Exercise Price
Balance, July 31, 2009
5,000,000
$3.00
Warrants granted and assumed
Warrants expired
Balance, July 31, 2010
5,000,000
$3.00
Warrants granted and assumed
Warrants expired
Balance, July 31, 2011
5,000,000
$3.00
All warrants outstanding as of June 30, 2011 are exercisable.