ITEM 1: DESCRIPTION OF BUSINESS
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
As used in this annual report, the terms "we", "us", "our", "the Company", mean Logan Sound Inc. unless otherwise indicated.
All dollar amounts refer to US dollars unless otherwise indicated.
OVERVIEW
We intend to commence business operations by developing, manufacturing, marketing and selling electric guitar effects pedals. We were incorporated in the State of Nevada on January 30, 2007, but were essentially dormant until April 29, 2009 when we entered into an agreement with our president, Ken Logan, to acquire all the property, assets and intellectual property necessary for the development, manufacture and marketing of the wah anti wah guitar effects pedal. In consideration of the purchase of these assets, we issued 4,000,000 shares of our common stock to Mr. Logan.
Mr. Logan commenced developing and manufacturing the wah anti wah guitar effects pedal in December 2006. Prior to selling his interest in the pedal to us, Mr. Logan sold approximately 40 wah anti wah pedals at prices ranging from $149 to $199. He also developed a website promoting the features of the wah anti wah pedal at www.logansoundinc.com.
GUITAR EFFECTS PEDALS
A guitar effects pedal, also known as a stomp box, is an electronic unit that is typically housed in a small metal or plastic box. Most professional and many amateur electric guitar players use effects pedals to alter their instrument's sound in a particular manner by changing the sound quality or timbre of the input signal. The most common types of guitar effects pedals are the distortion, overdrive, wah, flange, delay and reverb pedals.
A guitar effects pedal is connected to a guitar and amplifier using two instrument cables with one-quarter inch jack plugs. The input jack is usually on the right side of the pedal and the output is on the left. Several pedals can be linked together in a chain. The signal path for a chain of guitar pedals that are used concurrently is usually right-to-left.
When a pedal is off or inactive, the signal coming in to the pedal is shunted onto a bypass, so that the clean, unaffected signal can go on to other effects down the chain, and thus any combination of effects on a chain can be created without having to reconnect boxes during a performance. The instrument signal can be routed through the guitar pedals in any combination, but to shape and preserve the clarity of the basic distortion tone, it is most common to put wah and overdrive pedals at the start of the chain; pedals which alter the pitch or color of the tone in the middle; and boxes which modify the resonance, such as flanging, delay (echo) and reverb units at the end.
Effects pedals can be used together with other effects units and a guitar amplifier's built-in effects. However, when too many effect pedals are used, unwanted noise and hum can be introduced into the sound. Some performers use a noise gate pedal to reduce the unwanted noise and hum.
WAH PEDALS
The wah pedal, one of the most popular guitar effects, works by varying the frequency of the guitar signal's tone through a foot pedal. The variation in the peak response frequency of the filter resembles the change in frequency in the human voice when saying the word "wah," making the wah-wah pedal a crude form of speech synthesizer. The traditional "wah wah" effect does not affect the guitar's volume, although many modern models offer a volume boost and distortion options.
The essential function of the wah-wah pedal is as a lead guitar booster. Frequently, lead guitar lines do not cut through the mix of the band sufficiently, so some sort of effect is utilized to push the lead part to the front. A wah-wah inflected lead guitar part varies its timbre with the motion of the pedal. It also mimics some of the sounds of human speech, which are typically picked up more readily by the human ear. A common wah-wah technique involves moving the foot pedal in time with the music creating rhythmic effects.
THE WAH ANTI WAH PEDAL
In contrast to the wah pedal, our Logan Sound wah anti wah guitar effects pedal contains two analog wah filters that are each set to two different frequency ranges. One wah filter is centered on the low frequency range of the guitar, while the other filter is centered on the high frequency range. The pedal's effect is controlled by one knob that causes one of the filters to go up in pitch and the other to go down in pitch automatically. This produces complex filtering effects that make a unique, full sounding guitar tone. As well, rather than creating the sweeping sound of an automatic wah pedal, the sound created by the wah anti wah pedal remains at the tone level set by the user. The wah anti wah features components that are hand matched to less than 1% tolerance for consistent musical tone. Sound samples of the wah anti wah pedal's impact on guitar sound are contained on our website located at www.logansoundinc.com.
Features of the Logan Sound wah anti wah guitar effects pedal include:
* an all analog circuit * simple one knob operation * an LED indicator * a solid cast aluminum box with Switchcraft connectors that houses the unit * nine volt battery or DC adapter options * diode protection in case the DC input power polarity is reversed or AC is inputted
The Logan Sound wah anti wah pedal also has true bypass switching. This means that when in bypass mode, both the input and output of the effect are disconnected and the guitar signal passes straight through. Some manufacturers only switch the output of the effect on their pedals while leaving the input to
the effect circuit still connected. This can load down the guitar's pickups causing what is known as tone sucking. As well, transistor switching systems lose some of the guitar sound.
The pedal uses the standard negative center external power connector. If the user happens to plug in the wrong polarity DC or AC power adapter, the protection diode contained in the pedal will prevent damage from occurring. The common user mistake of not using the correct adapter destroys guitar pedals that other manufacturers produce.
MARKET FOR OUR PRODUCT
While most amateur guitarists choose to purchase mass-made guitar pedals from large manufacturers, a niche market exists for boutique and hand-made effects pedals. Our aim is to provide consumers with pedals that include superior quality components, innovative circuit design, component matching and voltage tolerance. To ensure quality control, all of our wah anti wah guitar effects pedals are hand-made and individually tested. Because our product design involves additional component and labor costs, and because we do not realize the economies of scale that larger manufacturers do, we currently sell our wah anti wah guitar effects pedal for a price of $199. Some guitar effects pedals sell for about half this price.
PRODUCT SALE AND DISTRIBUTION
Currently, we sell the wah anti wah guitar effects pedal through our website located at www.logansoundinc.com and periodically via listings on www.ebay.com. We receive payment from purchasers through PayPal and ship our guitar pedals using Canada Post. We charge our customers $15 for shipping and handling. Prior to our acquisition of the wah anti wah pedal from our president, Ken Logan, product sales were primarily to U.S. and Canadian consumers, although sales were also made to the United Kingdom, France, Spain, Norway, Romania and Australia. We anticipate that this trend of selling guitar effects pedals primarily in North America will continue.
If we are successful in expanding our operations and product sales, we would like to enter into distribution and sales agreements with guitar and musical instrument stores whereby they would carry our products in their stores. However, there is no guarantee that we will be successful in reaching such arrangements.
COMPETITION
We compete with other effects pedal manufacturers that are primarily based in the United States, including Boss Corporation, Robert Keeley Electronics, Fulltone Musical Products Inc., Lovepedal L.L.C. Boss Corporation is a mass manufacturer of guitar pedals, while Keeley, Fulltone and Lovepedal produce higher priced, quality pedals and have similar market position to us. Competition with these companies is based on price, quality, service, product features, product innovation, marketing and distribution. These companies have greater financial and technical resources, industry expertise and managerial capabilities than we do.
Our success depends on our ability to introduce innovative products before our competitors do and to design, manufacture and market a broad range of reliable products that incorporate technological innovations that satisfy current consumer needs. Notably, none of our competitors currently manufacture a wah anti wah guitar effects pedal.
SOURCE OF COMPONENTS
While the design of our wah anti wah pedal is unique, the components that we use to manufacture them are commodity-like in nature and are not difficult to source. Supplies of the electronic components, connectors, switches and enclosures that we require in order to produce our guitar pedals are readily available from online distributors such as Mouser Electronics, Inc., DigiKey Corp. and Newark Electronics. If, for some reason, we were unable to obtain components from our current suppliers, we do not believe that we would have any difficulties obtaining alternative sources, though our component costs could increase slightly.
PATENTS AND TRADEMARKS
Due to the costs involved, we have not filed for patent protection of our wah anti wah guitar effects pedal technology or of our business trademarks. We have also not sought legal advice regarding whether or not patent protection of our technology is possible. Accordingly, our business is subject to the risk that competitors could either copy or reverse engineer our technology and release a competing product with similar features to our guitar effects pedal.
GOVERNMENT REGULATION
We are not currently subject to direct federal, state or local regulation other than regulations applicable to businesses generally.
RESEARCH AND DEVELOPMENT
We have not incurred any expenditures on research and development activities since our incorporation. Our president, Ken Logan, conducted all research and development relating to the design of the wah anti wah pedal prior to his sale of the technology to us on April 29, 2009.
EMPLOYEES
We have no employees as of the date of this prospectus other than our sole director, Ken Logan. Mr. Logan devotes 100% of his business time to our company.
SUBSIDIARIES
We do not have any subsidiaries.
ITEM 1A:
ITEM 1A: RISK FACTORS
Not applicable.
ITEM 1B:
ITEM 1B: UNRESOLVED STAFF COMMENTS
None.
ITEM 2:
ITEM 2: PROPERTIES
We do not own any real property interest. Our offices are located at 1 Hunter Street East, Suite G100, Hamilton, Ontario, Canada.
ITEM 3:
ITEM 3: LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings. Our address for service of process in Nevada is 1802 North Carson Street, Suite 202 Carson City, Nevada, 89701.
ITEM 4:
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5:
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our shares of common stock are not quoted for trading on any recognized stock exchange or quotation system. There are no warrants, options convertible securities outstanding by which any person has the right to acquire any additional shares of our common stock. As of the date of this annual report we have 31 shareholders of record.
Our shares of common stock are not currently available for resale to the public in accordance with the volume and trading limitations of Rule 144 of the Act because we are a shell company. Our president and sole director, Ken Logan, cannot rely on Rule 144 for the resale of our common stock until the following have occurred:
1. we have ceased to be a shell company; 2. we are subject to the reporting requirements of the Exchange Act; 3. we have filed all Exchange Act reports required for the past 12 months; and 4. a minimum of one year has elapsed since we filed current Form 10 information on Form 8-K changing our status from a shell company to a non-shell company.
When Rule 144 is available, our affiliate stockholder shall be entitled to sell within any three month period a number of shares that does not exceed the greater of:
1. 1% of the number of shares of the company's common stock then outstanding; or 2. the average weekly trading volume of the company's common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the company.
DIVIDENDS
We have never paid or declared any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We currently do not have any equity compensation plans.
PURCHASES OF EQUITY SECURITIES BY THE REGISTRANT AND AFFILIATED PURCHASERS
No purchases of any of our registered equity securities have been made by us, on our behalf, or by any affiliated purchaser during the fourth quarter of the fiscal year covered by this annual report.
ITEM 6:
ITEM 6: SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
RESULTS OF OPERATIONS
We have not earned any revenue from our incorporation on January 30, 2007 to April 30, 2011. We incurred operating expenses in the amount of $82,834 during this period. These operating expenses were comprised of management fees that were paid or accrued to our president, Ken Logan, of $48,300, professional fees of $13,048, office expenses of $1,168, bank fees of $318 and $20,000 representing the recorded value of the common stock that we issued to our president in consideration for the acquisition of the guitar pedal assets.
During the fiscal year ended April 30, 2011, we incurred net losses of $24,517 consisting of $18,400 in management fees paid or accrued to Ken Logan, professional fees of $5,400, office expenses of $590, and bank charges of $127. Compared to our net losses in fiscal 2010 of $35,992, our losses in the current fiscal year were significantly lower due to higher management fees and professional fees in fiscal 2010 in connection with our filing of a registration statement and compliance with our filing requirements as a reporting issuer.
We have not attained profitable operations and are dependent upon obtaining financing to complete our proposed business plan. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 2011, our current assets consisted of $1,366 in cash and our total liabilities were $50,200, which consisted in its entirety of loans from our president and sole director. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
CASH FLOWS FROM OPERATING ACTIVITIES
We have not generated positive cash flows from operating activities. For the fiscal year ended April 30, 2011, net cash flows used in operating activities were ($24,517) consisting of our net loss for the period.
CASH FLOWS FROM FINANCING ACTIVITIES
We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the fiscal year ended April 30, 2011, net cash from financing activities was $24,200 and consisted of $18,200 in loans from our president and $6,000 in share subscriptions.
PLAN OF OPERATION
We were incorporated pursuant to the laws of Nevada on January 30, 2009, but were essentially dormant until April 29, 2009 when we entered into an agreement with our president, Ken Logan, to acquire all the property, assets and intellectual property necessary for the development, manufacture and marketing of the wah anti wah guitar effects pedal. As a result of this acquisition, we own a website located at www.logansoundinc.com through which we sell our wah anti wah guitar effects pedal.
Our plan of operation for the twelve months following the date of this annual report, subject to financing, is to expand our business operations by acquiring additional guitar pedal components, hiring additional labor, marketing and advertising our guitar effects pedal and potentially designing a new guitar effects pedal.
In order to implement our business plan, we require approximately $190,000. Of this amount, we would allocate $10,000 towards the purchase of guitar pedal components. This will provide us with enough components to manufacture approximately 250 pedals. It will also allow us to pay our president, Ken Logan, $2,300 per month for his management services, as well as the time necessary to manufacture and test the wah anti wah pedals by hand, for a period of 12 months. It would also allow us to hire a full-time employee for a 12 month period for $19,200 in salary. Our president would train this employee to assemble the guitar effects pedal components into a finished product. We estimate that one full-time employee would be able to produce five guitar pedals per week.
We would also allocate $115,000 of required funding to marketing and advertising costs. This will allow us to upgrade our website, place advertisements for our product in appropriate guitar and music magazines, musical product catalogues, pursue product placement in musical equipment stores and pursue product endorsements. Our president, Ken Logan, would be responsible for undertaking our marketing efforts once a new employee is able to assume his previous product assembly duties.
We anticipate that revenue from the sale of our pedals will be $214 per unit, including charges for shipping and handling. However, there is no guarantee that we will be able to successfully sell our guitar effects pedals at a sufficient sales volume at this price level.
The expansion of our operations in the period subsequent to the next 12 months will depend on our success in generating revenue to that point, as well as raising further funding.
As well, we anticipate spending an additional $16,000 on administrative costs such as accounting and auditing fees, legal fees and fees payable in connection with reporting obligations.
MATERIAL COMMITMENTS
As of the date of this annual report, we do not have any material commitments.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this annual report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
GOING CONCERN
The independent auditors' report accompanying our April 30, 2011 and 2010 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
ITEM 7A:
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8:
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm Balance Sheets Statements of Operations Statement of Stockholder's Equity Statements of Cash Flows Notes to Financial Statements
GEORGE STEWART, CPA 316 17TH AVENUE SOUTH SEATTLE, WASHINGTON 98144 (206) 328-8554 FAX (206) 328-0383
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors Logan Sound Inc.
I have audited the accompanying balance sheets of Logan Sound Inc. (A Development Stage Company) as of April 30, 2011 and 2010, and the related statements of operations, stockholders' equity and cash flows for the years ended April 30, 2011 and 2010 and for the period from January 30, 2007 (inception), to April 30, 2011. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Logan Sound Inc., (A Development Stage Company) as of April 30, 2011 and 2010, and the results of its operations and cash flows for the years ended April 30, 2011 and 2010 and the period from January 30, 2007 (inception), to April 30, 2011 in conformity with generally accepted accounting principles 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 # 1 to the financial statements, the Company has had no operations and has no established source of revenue. This raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters is also described in Note #1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ George Stewart -------------------------------- Seattle, Washington July 9, 2012
LOGAN SOUND INC. (A Development Stage Company) Balance Sheets --------------------------------------------------------------------------------
Nature and continuance of operations (Note 1)
See Accompanying Notes
LOGAN SOUND INC. (A Development Stage Company) Statements of Operations --------------------------------------------------------------------------------
See Accompanying Notes
LOGAN SOUND INC. (A Development Stage Company) Statement of Changes in Stockholders' Equity --------------------------------------------------------------------------------
See Accompanying Notes
LOGAN SOUND INC. (A Development Stage Company) Statements of Cash Flows --------------------------------------------------------------------------------
See Accompanying Notes
LOGAN SOUND INC. (A Development Stage Company) Notes To The Financial Statements April 30, 2011 --------------------------------------------------------------------------------
1. NATURE AND CONTINUANCE OF OPERATIONS
Logan Sound Inc. ("the Company") was incorporated under the laws of State of Nevada, U.S. on January 30, 2007, with an authorized capital of 75,000,000 common shares with a par value of $0.001. The Company's year end is the end of April. During the year ended April 30, 2009, the Company commenced operations by issuing shares and acquiring a 100% right, title and interest in and to all the property, assets and intellectual property necessary for the development, manufacture and marketing of the wah-anti-wah guitar effects pedal.
These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $82,834 as at April 30, 2011 and further losses are anticipated in the development of its business raising substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Use of Estimates and Assumptions
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 period. Actual results could differ from those estimates.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non monetary assets and liabilities are translated at the exchange rates prevailing on the transaction date. Revenue and expenses are translated at average rates of exchange during the year. Gains or losses resulting from foreign currency transactions are included in results of operations.
LOGAN SOUND INC. (A Development Stage Company) Notes To The Financial Statements April 30, 2011 --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
The carrying value of cash and accounts payable and accrued liabilities approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management's opinion the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Income Taxes
The Company follows the assets and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
At April 30, 2011, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.
Basic and Diluted Loss Per Share
The Company computes loss per share in accordance with SFAS No. 128, "Earnings per Share" which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
The Company has no potential dilutive instruments and accordingly basic loss and diluted loss per share are equal.
Stock-based Compensation
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment", which replaced SFAS No. 123, "Accounting for Stock-Based Compensation" and superseded APB Opinion No. 25, "Accounting for Stock Issued to Employees". In January 2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 107, "Share-Based Payment", which provides supplemental implementation guidance for SFAS No. 123R. SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. SFAS No. 123R was to be effective for interim or annual reporting periods beginning on or after June 15, 2005, but in April 2005 the SEC issued a rule that will permit most registrants to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period as required by SFAS No. 123R. The pro-forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition. Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption.
LOGAN SOUND INC. (A Development Stage Company) Notes To The Financial Statements April 30, 2011 --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The transition methods include prospective and retroactive adoption options. Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company adopted the modified prospective approach of SFAS No. 123R for the year ended April 30, 2009. The Company did not record any compensation expense for the period ended April 30, 2011 because there were no stock options outstanding prior to the adoption or at April 30, 2011.
Intangible assets
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", the Company recorded Wah-Anti-Wah Guitar Effects Pedal at cost and those with finite lives are amortized over the estimated periods of benefit. Wah-Anti-Wah Guitar Effects Pedal would be amortized over 10 years.
Impairments
The Company's management evaluates its tangible and definite-lived intangible assets for impairment under Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144) annually or in the presence of circumstances or trends that may be indicators of impairment. Our evaluation is a two step process. The first step is to compare our undiscounted cash flows, as projected over the remaining useful lives of the assets, to their respective carrying values. In the event that the carrying values are not recovered by future undiscounted cash flows, as a second step, we compare the carrying values to the related fair values and, if lower, record an impairment adjustment. For purposes of fair value, we generally use replacement costs for tangible fixed assets and discounted cash flows, using risk-adjusted discount rates, for intangible assets. During the years ended April 30, 2011, we recorded impairment charges of $0 related to intangible assets.
Recent Accounting Pronouncements
In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Our adoption of SFAS No. 157 is not expected to materially impact our financial position and results of operations.
In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159") which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Our adoption of SFAS No. 159 is not expected to materially impact our financial position and results of operations.
LOGAN SOUND INC. (A Development Stage Company) Notes To The Financial Statements April 30, 2011 --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In December 2007, the FASB issued Statement No. 141(R), "Business Combinations" ("SFAS 141(R)") which expands the definition of transactions and events that qualify as business combinations; requires that the acquired assets and liabilities, including contingencies, be recorded at the fair value determined on the acquisition date and changes thereafter reflected in earnings, not goodwill; changes the recognition timing for restructuring costs; and requires acquisition costs to be expensed as incurred. In addition, acquired in-process research and development (IPR&D) is capitalized as an intangible asset and amortized over its estimated useful life. Adoption of SFAS 141(R) is required for combinations after December 15, 2008. Early adoption and retroactive application of SFAS 141(R) to fiscal years preceding the effective date are not permitted. We believe that there is no impact of SFAS 141(R) on our financial position and results of operations.
In December 2007, the FASB issued Statement No. 160, "Noncontrolling Interest in Consolidated Financial Statements" ("SFAS 160") which re-characterizes minority interests in consolidated subsidiaries as non-controlling interests and requires the classification of minority interests as a component of equity. Under SFAS 160, a change in control will be measured at fair value, with any gain or loss recognized in earnings. The effective date for SFAS 160 is for annual periods beginning on or after December 15, 2008. Early adoption and retroactive application of SFAS 160 to fiscal years preceding the effective date are not permitted. We believe that there is no impact of SFAS 160 on our financial position and results of operations.
3. COMMON STOCK
The total number of common shares authorized that may be issued by the Company is 75,000,000 shares with a par value of one tenth of one cent ($0.001) per share and no other class of shares is authorized.
During the year ended April 30, 2009, the Company issued 1,600,000 shares of common stock for total cash proceeds of $8,000.
As of April 29, 2009, the Company entered into an Asset Purchase Agreement with Ken Logan. Ken Logan agreed to sell his 100% interest in all the property, assets and intellectual property necessary for the development, manufacture and marketing of the wah-anti-wah guitar effects pedal for 4,000,000 common shares.
At April 30, 2011, there were no outstanding stock options or warrants.
4. INCOME TAXES
As of April 30, 2011, the Company had net operating loss carry forwards of approximately $82,834 that may be available this Agreement to reduce future years' taxable income through 2029. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
5. MANAGEMENT AGREEMENT
As of April 29, 2009, the Company entered into a management agreement with Ken Logan and agrees to pay $2,300 per month for his services.
ITEM 9:
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A:
ITEM 9A: CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, the Company's principal executive officer and principal financial officer evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) for the period covered by this annual report as of our fiscal year end, April 30, 2011. Based on this evaluation, this officer concluded that as of the end of the period, these disclosure controls and procedures were adequate to ensure that the information required to be disclosed by us in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and include controls and procedures designed to ensure that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2012. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
B. Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in the Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial reporting were not effective as of April 30, 2011 and were subject to material weaknesses.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses in our internal control over financial reporting using the criteria established in the COSO:
1. Failing to have an audit committee or other independent committee that is independent of management to assess internal control over financial reporting; and 2. Failing to have a director that qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.
C. Changes in Internal Control over Financial Reporting.
During the fiscal year ended April 30, 2011, our internal control over financial reporting was not subject to changes.
ITEM 9B:
ITEM 9B: OTHER INFORMATION
None.
PART III
ITEM 10:
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The name, address and position of our present officers and directors are set forth below:
Name Position(s) ---- -----------
Ken Logan President, Principal Executive Officer, Secretary, Age: 48 Treasurer, Principal Financial Officer, Principal Accounting Officer and member of the Board of Directors.
BIOGRAPHICAL INFORMATION AND BACKGROUND OF OFFICER AND DIRECTOR
KEN LOGAN has acted as our sole director and officer since our inception on January 30, 2007. Prior to this position, from 2005 to the beginning of 2007, Mr. Logan provided studio technician and recording consulting services to various companies as an independent contractor. From 1996 to 2004, he was employed as a studio technician with Sharpe Sound Studios, an audio post-production company where he was responsible for the repair, maintenance, design and installation of professional studio equipment. Mr. Logan has not acted as an director or officer of any other reporting issuer.
CODE OF ETHICS
We have not adopted a Code of Ethics that governs the conduct of our officer.
AUDIT COMMITTEE
We do not have a formal audit committee or 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 have limited operations, at the present time, we believe the services of a financial expert are not warranted.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us for the last three completed fiscal years ending for our officer. 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 named executive officers.
EXECUTIVE OFFICER COMPENSATION TABLE
We are a party to a consulting agreement with our president, Ken Logan, whereby we pay him $2,300 per month for his services. We do not have any other employment or consulting agreements with third parties of our officers. We do not contemplate entering into any agreements until such time as we begin profitable operations.
The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officers.
There are no stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors.
COMPENSATION OF DIRECTORS
Our sole director is not compensated for his services as a director. The board has not implemented a plan to award options to any directors. There are no contractual arrangements with any member of the board of directors. We have no director's service contracts.
CHANGE OF CONTROL
We do not have any pension plans or compensatory plans or other arrangements which provide compensation in the event of a termination of employment or a change in our control.
ITEM 12:
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of April 30, 2011 regarding the ownership of our common stock by each shareholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, each director and all executive officers and directors as a group. Except as otherwise indicated, each of the shareholders has sole voting and investment power with respect to the shares of common stock beneficially owned.
Amount of Beneficial Percent of Title of Class Name of Beneficial Owner Ownership class -------------- ------------------------ --------- -----
Common Stock Ken Logan 5,600,000 65.12%
Common Stock Directors and officers as a group consisting of one person 5,600,000 65.12%
The percent of class is based on 8,600,000 shares of common stock issued and outstanding as of the date of this annual report.
ITEM 13:
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
By an asset purchase agreement dated April 29, 2009 with our president, Ken Logan, we acquired all the property, assets and intellectual property necessary for the development, manufacture and marketing of the wah anti wah guitar effects pedal. In consideration of the purchase of these assets, we issued 4,000,000 shares of our common stock to Mr. Logan.
By a management agreement dated April 29, 2009 with our president, Ken Logan, we agreed to pay him $2,300 in consideration of him providing management services to us.
Our president, Ken Logan, has provided loans to us totalling $50,200 to April 30, 2011. These loans are unsecured, non-interest bearing and have no fixed terms of repayment.
Otherwise, none of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
* Any of our directors or officers; * Any person proposed as a nominee for election as a director; * Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; * Our sole promoter, Ken Logan; * Any relative or spouse of any of the foregoing persons who has the same house as such person; * Immediate family members of directors, director nominees, executive officers and owners of 5% or more of our common stock
ITEM 14:
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
For the years ended April 30, 2011 and 2010, the aggregate fees billed by George Stewart, CPA for professional services rendered for the audit of our annual consolidated financial statements were:
2011 $3,800 2010 $3,600
AUDIT RELATED FEES
For the years ended April 30, 2011 and 2010, the aggregate fees billed for assurance and related services by George Stewart, CPA relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above, was:
2011 Nil 2010 Nil
TAX FEES
For the years ended April 30, 2011 and 2010, the aggregate fees billed by George Stewart, CPA for other non-audit professional services, other than those services listed above, totalled:
2011 Nil 2010 Nil
ALL OTHER FEES
For the years ended April 30, 2011 and 2010, the aggregate fees billed by George Stewart, CPA for other non-audit professional services, other than those services listed above, totalled:
2011 $5,700 2010 $5,700
The other fees consist of George Stewart, CPA's review of our reviews of our interim unaudited financial statements.
We do not use George Stewart, CPA for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage George Stewart CPA to provide compliance outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before George Stewart CPA is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
* approved by our board of directors who are capable of analyzing and evaluating financial information; or * entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors' responsibilities to management.
The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
ITEM 15:
ITEM 15: EXHIBITS
The following exhibits are filed as part of this annual report.
EXHIBITS:
31.1 Certification Statement of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer under Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LOGAN SOUND INC.
Dated: February 18, 2014 By: /s/ Ken Logan ----------------------------------- Ken Logan, President and Chief Executive Officer and Chief Financial Officer