Item 1. Business.
(a) Business Development
Blue Spa Incorporated (“Blue Spa”) is a Nevada corporation that was incorporated on September 4, 2009. Blue Spa is a startup company that intends to be engaged in the development, production, wholesale distribution, and retail sales of quality natural skin and body care products, fitness apparel, and related accessories. Blue Spa is also a “shell” company as defined by the SEC as a result of only having nominal operations and nominal assets. Blue Spa has adopted for its business operations a multi-channel concept, and intends to develop its business operations into a wholesale distribution network with a retail strategy, e-commerce, and a consumer catalogue. As of the date of this annual report Blue Spa has not conducted any business operations nor generated any revenues.
Blue Spa maintains its statutory resident agent’s office at 1859 Whitney Mesa Drive, Henderson, Nevada, 89014 and its business office is located at 26/F Building A, Times Plaza 2 Zongfu Road, Chengdu, 610016. Blue Spa’s office telephone number is 86-28-66847826.
Blue Spa has an authorized capital of 500,000,000 common shares with a par value of $0.0001 per share with 7 million common shares currently issued and outstanding.
Blue Spa maintains a website at HTTP://WWW.BLUESPAHOLDINGS.COM. Blue Spa’s website and its linked contents are not part of this annual report.
Blue Spa has not been involved in any bankruptcy, receivership or similar proceedings. There has been no material reclassification, merger consolidation or purchase or sale of a significant amount of assets not in the ordinary course of Blue Spa’s business.
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(b) Business of Blue Spa
Blue Spa is a Nevada company and was incorporated on September 4, 2009. Blue Spa is a startup company that intends to be engaged in the development, production, wholesale distribution, and retail sales of quality natural skin and body care products, fitness apparel, and related accessories. Blue Spa is also a “shell” company as defined by the SEC as a result of only having nominal operations and nominal assets. Blue Spa has adopted for its business operations a multi-channel concept, and intends to develop its business operations into a wholesale distribution network with a retail strategy, e-commerce, and a consumer catalogue.
Blue Spa has not generated any revenue or conducted any development operations since inception.
Competition
Blue Spa will occupy a unique market position. No other brand offers a specialty line that includes skin care, cosmetics, fitness apparel and accessories. However, within each category significant brands do exist with quality and price varying widely within each category. Blue Spa’s competitive advantage will be the positioning as a quality brand.
In the skin care and cosmetics category the competition can be divided into three groups:
(1)Commercial - i.e. MAC, Origins, Philosophy, Erno Laslo and Shesheido;
(2)Clinical - i.e. Kiehl’s, Clinique, Clarins and Dr. Hauscha; and
(3)Spa - private label brands associated with spas.
The commercial brands are primarily sold through department stores. They vary widely in quality from Origins to Shesheido. They also vary widely in price. The major advantage of these competitors is their financial strength and their department store relationships.
The clinical brands are perceived to be “authentic”. Their image is based upon the perception of treatment qualities verses purely cosmetic benefits. These brands are sold through their own retail outlets, specialty stores, department stores and/or health food stores. Kiehl’s is perceived as one of the most authentic of the clinical brand.
The spa brands are sold almost exclusively at the spas they are associated with. This close affiliation provides a validation for the products but limits their ability to achieve wide market distribution. Bliss and Aveda are notable exceptions. These two brands have achieved wide market distribution and brand recognition.
Competition in the fitness apparel industry is principally on the basis of brand image and recognition as well as product quality, innovation, style, distribution and price. Management believes that Blue Spa will successfully compete on the basis of its unique brand image, its focus on women, and its technical product innovation.
Nike recently formed a women’s division as a separate business unit. While this offers the possibility of a major competitor in the women’s fitness category, it also highlights the opportunity. Puma is the only brand that has developed a line of fitness apparel focused specifically at this consumer. They have positioned this line to sell through women’s specialty stores rather than traditional sport retailers.
The market for fitness apparel is highly competitive. It includes increasing competition from established companies who are expanding their production and marketing of performance products, as well as from frequent new entrants to the market. Blue Spa will be in direct competition with wholesalers and direct sellers of athletic apparel, such as Nike, Inc., adidas AG, which includes the adidas and Reebok brands, and Under Armour, Inc. We also compete with retailers specifically focused on women’s fitness apparel including lululemon athletica inc, Lucy Activewear Inc., The Gap, Inc. (including the Athleta collection), and bebe stores, inc. (including the BEBE SPORT collection).
Raw Materials
The principal raw materials to be used in the manufacture of Blue Spa’s skin care products are essential oils, herbal compounds, marine minerals, and algae. For its fitness apparel, Blue Spa will use technical and natural fabrics.
Dependence on Major Customers
Blue Spa has no customers.
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Patents/Trade Marks/Licences/Franchises/Concessions/Royalty Agreements or Labour Contracts
Blue Spa has no intellectual property such as patents or trademarks. Additionally, Blue Spa has no royalty agreements or labor contracts.
Government Controls and Regulations
Currently, Blue Spa is in compliance with all business and operations licenses that are typically applicable to most commercial ventures. However, there can be no assurance that existing or new laws or regulations that may be adopted in various jurisdictions in the future, will not impose additional fees and taxes on Blue Spa and its business operations. Management is not aware of any such revisions to existing laws and regulations nor new laws or regulations that could have a negative impact on Blue Spa’s business and add additional costs to Blue Spa’s business operations.
Also, Blue Spa and its products will be subject to regulation by the Food and Drug Administration and the Federal Trade Commission in the United States, as well as by various other Federal, state, local and international regulatory authorities and the regulatory authorities in the countries in which its products are manufactured or sold. Such regulations principally relate to the ingredients, labeling, packaging and marketing of the products. Management believes that Blue Spa will be able to comply with such regulations, as well as with applicable Federal, state, local and international and other countries’ rules and regulations governing the discharge of materials hazardous to the environment. There are no significant capital expenditures for environmental control matters either planned in the current year or expected in the near future.
Expenditures on Research and Development During the Last Two Fiscal Years
Since September 4, 2009, Blue Spa has not spent any funds on either company-sponsored research and development activities or customer-sponsored research activities relating to the development of new products, services or techniques or the improvement of existing products, services, or techniques.
Number of Total Employees and Number of Full Time Employees
Blue Spa currently does not have any employees. In each phase of its plan of operations, Blue Spa intends to retain the services of key management to assist in the various aspects of its business operations, such as product development, retail operations, finance, and administration. In the first years of development of Blue Spa’s business operations these people will all fill multiple rolls. Also, in Phase 5 of Blue Spa’s plan of operation management intends to identify and appoint industry advisors to provide management with a valuable sounding board for strategic and creative decisions and to assist in increasing the brand awareness of Blue Spa’s business model and its products.
Item 1A.
Item 1A. Risk Factors.
Blue Spa is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
Item 1B.
Item 1B. Unresolved Staff Comments.
Blue Spa is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
Item 2.
Item 2. Properties.
Blue Spa’s executive offices are located at 26/F Building A, Times Plaza 2 Zongfu Road, Chengdu 610016, China.
Blue Spa currently has no interest in any property.
Item 3.
Item 3. Legal Proceedings.
Blue Spa is not a party to any pending legal proceedings and, to the best of Blue Spa’s knowledge, none of Blue Spa’s property or assets are the subject of any pending legal proceedings.
Item 4.
Item 4. Mine Safety Disclosure.
Not applicable.
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PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information
Blue Spa’s common shares are not currently listed nor quoted on any exchange or market quote system.
(b) Holders of Record
Blue Spa had 31 holders of record of Blue Spa’s common shares as of July 31, 2013.
(c) Dividends
Blue Spa has declared no dividends on its common shares, and is not subject to any restrictions that limit its ability to pay dividends on its common shares. Dividends are declared at the sole discretion of Blue Spa’s Board of Directors.
(d) Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three years that would be required to be disclosed pursuant to Item 701 of Regulation S-K.
There are no outstanding options or warrants to purchase, or securities convertible into, shares of Blue Spa’s common shares.
(e) Penny Stock Rules
Trading in Blue Spa’s common shares is subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends Blue Spa’s common shares to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in Blue Spa’s securities, which could severely limit their market price and liquidity of Blue Spa’s securities. The application of the “penny stock” rules may affect your ability to resell Blue Spa’s securities.
Item 6.
Item 6. Selected Financial Data.
Blue Spa is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
THE FOLLOWING PRESENTATION OF THE PLAN OF OPERATION OF BLUE SPA INCORPORATED SHOULD BE READ IN CONJUNCTION WITH THE AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED HEREIN.
Overview
Blue Spa is a Nevada company and was incorporated on September 4, 2009. Blue Spa is a startup company that intends to be engaged in the development, production, wholesale distribution, and retail sales of quality natural skin and body care products, fitness apparel, and related accessories. Blue Spa is also a “shell” company as defined by the SEC as a result of only having nominal operations and nominal assets. Blue Spa has adopted for its business operations a multi-channel concept, and intends to develop its business operations into a wholesale distribution network with a retail strategy, e-commerce, and a consumer catalogue.
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Blue Spa’s plan of operations is to distribute and sell quality natural skin and body care products, fitness apparel, and related accessories for women. Blue Spa intends to (1) identify and brand quality natural skin and body care products for wholesale distribution and retail sales and (2) develop a Blue Spa line of yoga and fitness apparel, as a natural extension of the skin and body care brand. Blue Spa will begin as a wholesale company with a retail component and, over the course of 10 years, evolve to a retail company with a wholesale component. Blue Spa will also combine e-commerce and a consumer catalogue into its operations.
Plan of Operation
Blue Spa’s plan of operation for the next 12 months is to:
1.develop and populate its website;
2.identify, develop, and purchase products and inventory; and
3.develop and launch Blue Spa’s wholesale distribution network.
Phase 1 - Develop and populate Website (six months)
In Phase 1, Blue Spa plans to (1) upgrade and update its website so that it is more visually appealing and technologically sound, (2) update its product line and visuals on the Website, and (3) implement a downloadable high resolution picture format for viewing its products.
Unlike current e-commerce models, management does not intend to use the Internet to establish Blue Spa’s products or its brand, or bring them to market. The e-commerce consumer is typically brand and convenience conscience. The early ventures have shown that the costs associated with establishing a brand via this medium are prohibitive and significant. Instead, Blue Spa will develop its initial Internet capabilities as a combination business-to-business tool and e-catalogue. The Website will be simple and direct with minimal cost. Also, the e-commerce platform will provide Blue Spa with a valuable wholesale tool as it will provide distributors with an access code that will allow them to place orders and utilize Blue Spa’s product knowledge database as a training tool for their employees.
Blue Spa has budgeted $10,000 for this phase and expects it to take six months to complete, with completion expected within the next six months of Blue Spa’s plan of operation.
Phase 2 - Identify, develop, and purchase products and inventory (six months)
In Phase 2, Blue Spa plans to identify and develop its Water Range skin care products. Also, Blue Spa will identify and purchase fitness apparel and related accessories that fits in with its Blue Spa’s brand. Phase 2 will overlap with Phase 1 and will be worked on simultaneously with Phase 1.
Blue Spa has budgeted $25,000 for this phase and expects it to take six months to complete, with completion expected within the next six months of Blue Spa’s plan of operation.
Phase 3 - Launch Blue Spa wholesale (12 months)
In Phase 3, Blue Spa plans to (1) to identify and secure partnerships with well-respected distributors, (2) identify and contract with key wholesale showrooms in which to display Blue Spa’s products, (3) further enhance and develop the brand image of Blue Spa, and (4) identify and retain key biotechnology specialists and management to assist in the continued development of its products and the administration of its business operations.
By identifying and securing partnerships with distributors and showrooms to represent Blue Spa and its products, management intends to gain key show positions in Hong Kong, Tokyo, San Francisco, and New York gift shows. Terms and conditions of any contract will include a commission on all sales at a rate higher than the industry standard to provide motivation for the representatives to promote Blue Spa’s products.
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Blue Spa has budgeted $100,000 for this phase and expects it to take 12 months to complete, with completion expected within the next 12 months of Blue Spa’s plan of operation. Also in this phase, Blue Spa will continue to (a) maintain and populate the Website with new products and (b) continue to develop and purchase products and inventory to brand.
Accounting and Audit Plan
Blue Spa has retained a bookkeeper to assist in the keeping and organization of Blue Spa’s financial records. Blue Spa’s bookkeeper is expected to charge Blue Spa approximately $2,700 to maintain Blue Spa’s financial records for the next 12 months. Blue Spa’s independent auditor is expected to charge approximately $1,000 to review each of Blue Spa’s quarterly financial statements and approximately $7,500 to audit Blue Spa’s annual financial statements. In the next 12 months, Blue Spa anticipates spending approximately $12,000 to pay for its accounting and audit requirements.
SEC Filing Plan
Blue Spa intends to become a reporting company after its registration statement is declared effective. This means that Blue Spa will file documents with the US Securities and Exchange Commission on a quarterly basis. Blue Spa expects to incur filing costs of approximately $4,000 per quarter to support its quarterly and annual filings. In the next 12 months, Blue Spa anticipates spending approximately $16,000 for filing costs to pay for three quarterly filings and one annual filing.
As at May 31, 2013, Blue Spa had cash of $7,788 and a working capital deficit of $74,788. Accordingly, Blue Spa will require additional financing in the amount of $230,000 in order to fund its obligations as a reporting company under the Securities Act of 1934 and its general and administrative expenses for the next 12 months.
During the 12 month period following the date of this annual report, management anticipates that Blue Spa will not generate any revenue. Accordingly, Blue Spa will be required to obtain additional financing in order to continue its plan of operations. Management believes that debt financing will not be an alternative for funding Blue Spa’s plan of operations as it does not have tangible assets to secure any debt financing. Rather, management anticipates that additional funding will be in the form of equity financing from the sale of Blue Spa’s common shares. However, Blue Spa does not have any financing arranged and cannot provide investors with any assurance that it will be able to raise sufficient funding from the sale of its common shares to fund its plan of operations. In the absence of such financing, Blue Spa will not be able to execute its plan of operation and its business plan will fail. Even if Blue Spa is successful in obtaining equity financing and execute its plan of operation, if Blue Spa does not continue to obtain additional financing, it will be forced to abandon its business and plan of operations.
Risk Factors
An investment in Blue Spa’s common shares involves a number of very significant risks. Prospective investors should refer to all the risk factors disclosed in Blue Spa’s Form S-1 = Post-Effective Amendment #1 filed on June 3, 2013.
Financial Condition
As at May 31, 2013, Blue Spa had a cash balance of $7,788. Management does not anticipate generating any revenue for the foreseeable future. When additional funds become required, the additional funding will come from equity financing from the sale of Blue Spa’s common shares. If Blue Spa is successful in completing an equity financing, existing shareholders will experience dilution of their interest in Blue Spa. Blue Spa does not have any financing arranged and Blue Spa cannot provide investors with any assurance that Blue Spa will be able to raise sufficient funding from the sale of its common shares. In the absence of such financing, Blue Spa’s business will fail.
Based on the nature of Blue Spa’s business, management anticipates incurring operating losses in the foreseeable future. Management bases this expectation, in part, on the fact that Blue Spa will rely on third party suppliers. Blue Spa’s future financial results are also uncertain due to a number of factors, some of which are outside its control. These factors include, but are not limited to:
●Blue Spa’s ability to raise additional funding;
●the market price for raw materials;
●the results of Blue Spa’s expanded website and product lines.
Due to Blue Spa’s lack of operating history and present inability to generate revenues, Blue Spa’s auditors have stated their opinion that there currently exists a substantial doubt about Blue Spa’s ability to continue as a going concern.
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Functional Currency
Blue Spa’s functional currency is the United States dollar. Blue Spa has determined that its functional currency is the United States dollar for the following reasons:
●Blue Spa’s current and future financings are and will be in United States dollars;
●Blue Spa maintains a majority of its cash holdings in United States dollars;
●a majority of Blue Spa’s administrative expenses are undertaken in United States dollars; and
●all cash flows are generated in United States dollars.
Liquidity and Capital Resources
As of May 31, 2013, Blue Spa had total assets of $7,788, and a working capital deficit of $74,788, compared with a working capital deficit of $50,052 as of May 31, 2012. The increase in the working capital deficit was primarily due to an increase in notes payable. The assets consisted of $7,788 in cash and the liabilities consisted of $59,000 in notes payable ($32,000 in 2012), $18,670 in accrued liabilities ($18,482 in 2012), and $4,906 in interest payable ($1,855 in 2012).
There are no assurances that Blue Spa will be able to achieve further sales of its common shares or any other form of additional financing. If Blue Spa is unable to achieve the financing necessary to continue its plan of operations, then Blue Spa will not be able to continue its business and plan of operation and its business will fail.
Net Cash Used in Operating Activities
For the fiscal year ended May 31, 2013, net cash used in operating activities decreased to $21,497 compared with $23,145 for the same period in the previous fiscal year. The use of cash was primarily due to a net loss of $24,736, less interest payable of $3,051, and less an increase of $188 in accrued expenses.
Net Cash Provided by Investing Activities
Net cash provided by investing activities was $nil for the fiscal year ended May 31, 2013 as compared with cash flow from investing activities of $nil for the same period in the previous fiscal year.
Net Cash Provided by Financing Activities
Net cash flows provided by financing activities increased to $27,000 for the fiscal year ended May 31, 2013 as compared with financing activities of $20,000 for the same period in the previous fiscal year. The net cash provided by financing activities was due to the proceeds from notes payable.
Results of Operation for the Period Ended May 31, 2013
Blue Spa has had no operating revenues since its inception on September 4, 2009, through to May 31, 2013. Blue Spa’s activities have been financed from the proceeds of share subscriptions and proceeds from notes payable. From its inception, on September 4, 2009, to May 31, 2013 Blue Spa has raised a total of $17,000 from private offerings of its common shares.
References to the discussion below to fiscal 2013 are to Blue Spa’s fiscal year ended on May 31, 2013. References to fiscal 2012 are to Blue Spa’s fiscal year ended May 31, 2012.
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General and Administrative
General and administrative expenses are the general office and operational expenses of Blue Spa. They include bank charges, filing and transfer agent fees, website costs, and rent.
Off-Balance Sheet Arrangements
Blue Spa has no off-balance sheet arrangements including arrangements that would affect its liquidity, capital resources, market risk support and credit risk support or other benefits.
Material Commitments for Capital Expenditures
Blue Spa had no contingencies or long-term commitments at May 31, 2013.
Tabular Disclosure of Contractual Obligations
Blue Spa is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
Critical Accounting Policies
Blue Spa’s financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Management believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of Blue Spa’s financial statements is critical to an understanding of Blue Spa’s financial statements.
Website Development Costs
Blue Spa recognized the costs associated with developing a website in accordance with ASC 350-50 “Website Development Cost” that codified the American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) NO. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Relating to website development costs Blue Spa follows the guidance pursuant to the Emerging Issues Task Force (EITF) NO. 00-2, “Accounting for Website Development Costs”. The website development costs are divided into three stages, planning, development and production. The development stage can further be classified as application and infrastructure development, graphics development and content development. In short, website development cost for internal use should be capitalized except content input and data conversion costs in content development stage.
Costs associated with the website consist primarily of website development costs paid to third party. These capitalized costs will be amortized based on their estimated useful life over three years upon the website becoming operational. Internal costs related to the development of website content will be charged to operations as incurred. Web-site development costs related to the customers are charged to cost of sales.
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Fair Value of Financial Instruments
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values. The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and short term note - related party, approximate their carrying values since they are short term in nature and they are receivable or payable on demand. Management is of the opinion that Blue Spa is exposed to significant interest or credit risks arising from the bank-held assets. Blue Spa is operating outside the United States of America and may have significant exposure to foreign currency risk due to the fluctuation of the currency in which Blue Spa operates and the U.S. dollar. Blue Spa accounts for certain assets and liabilities at fair value.
Concentration of Credit Risk
Blue Spa places its cash and cash equivalents with a high credit quality financial institution. Blue Spa maintains United States Dollars at a bank in the Switzerland that are not insured. Blue Spa minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution.
Foreign Currency Translation
Blue Spa is located and operating outside of the United States of America. The functional currency of Blue Spa is the U.S. Dollar. At the transaction date, each asset, liability, revenue and expense is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities are re-measured by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations.
Research and Development Costs
Research and development costs will be expensed as incurred.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Blue Spa is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
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Item 8.
Item 8. Financial Statements and Supplementary Data.
BLUE SPA INCORPORATED
Financial Statements
For The Period September 4, 2009 (inception)
To The Year Ended May 31, 2013
(Stated in US Dollars)
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
BLUE SPA INCORPORATED
We have audited the accompanying balance sheet of Blue SPA incorporated (the “Company”) a development stage company as of May 31, 2013 and 2012, and the related statements of operations, stockholders’ deficit and other comprehensive loss, and cash flows for the year then ended May 31, 2013, 2012 and for the period from September 4, 2009 (inception) through May 31, 2013. 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 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. And audit 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 present fairly, in all material respects, he financial position of the Company as of May 31, 2013 and 2012, and the results of its operations and its cash flows for the year then ended May 31, 2013 and 2012, and for the period from September 4, 2009(inception) through May 31, 2013, in conformity with United States generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company in in the development stage and has limited operations. Its ability to continue as a going concern is dependent upon its ability to obtain additional financing and/or achieve a sustainable profitable level of operations. These conditions 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/ Dominic K.F. Chan & Co
Dominic K.F. Chan & Co
Certified Public Accountants
Hong Kong, July 29, 2013
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
BALANCE SHEETS
See accompanying notes to financial statements
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
AND COMPREHENSIVE INCOME
See accompanying notes to financial statements
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
See accompanying notes to financial statements
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31,
1.Organization and Nature of Operations
Blue Spa Incorporated (“the Company”) was incorporated in the State of Nevada, USA on September 4, 2009. The Company is in its early developmental stage since its formation and has not realized any revenues from its planned operations. The Company is engaged in the development of an internet based retailer of a multi-channel concept combining a wholesale distribution with a retail strategy. It plans to distribute quality personal care products, fitness apparel and related accessories.
The Company has chosen a fiscal year end May 31.
2. Going Concern
These financial statements have been prepared in conformity with generally accepted accounting principles in the United States, which contemplate continuation of the Company as a going concern. However, the Company has limited operations and has sustained operating losses resulting in a deficit. In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon the continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements, and the success of its future operations.
The Company has accumulated a deficit of $86,788 since inception September 4, 2009, has yet to achieve profitable operations and further losses are anticipated in the development of its business. The Company’s ability to continue as a going concern is in substantial doubt and is dependent upon obtaining additional financing and/or achieving a sustainable profitable level of operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company believes that the cash on hand will be able to meet its on-going costs in the next 12 months. The Company may seek additional equity as necessary and it expects to raise funds through private or public equity investment in order to support existing operations and expand the range of its business. There is no assurance that such additional funds will be available for the Company on acceptable terms, if at all.
3. Summary of principal accounting policies
A summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:
Basis of presentation
The Company has not earned any revenue from limited principal operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Entity” as set forth in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915. Among the disclosures required by FASB ASC 915 are that the Company’s financial statements be identified as those of a development stage company, and that the statements of earnings, retained earnings and stockholders’ equity and cash flows disclose activity since the date of the Company’s inception.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.
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BLUE SPA INCORPORATED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31,
3.Summary of principal accounting policies (Continued)
Use of 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 revenue and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
Foreign currency translations
The Company is located and operating outside of the United States of America. The functional currency of the Company is the U.S. Dollar. At the transaction date, each asset, liability, revenue and expense is translated into U.S. dollars by the use of the exchange rate in effect at that date. At the period end, monetary assets and liabilities are re-measured by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations.
Cash and cash equivalents
The Company considers all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less to be cash equivalents.
Development Stage Company
The Company is a developmental stage company, and follows the guideline of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codifications (“ASC”) Topic 915 Development State Entities. All losses accumulated since inception has been considered as part of the Company’s development stage activities.
Comprehensive income
The Company has adopted ASU 220 “Reporting Comprehensive Income”, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners.
For the year ended May 31, 2013 there are no reconciling items between the net loss presented in the statements of operations and comprehensive loss as defined by ASU 220.
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BLUE SPA INCORPORATED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31,
3.Summary of principal accounting policies (Continued)
Loss per share
The Company reports basic loss per share in accordance with ASC Topic 260 Earnings Per Share (“EPS”). Basic loss per share is based on the weighted average number of common shares outstanding and diluted EPS is based on the weighted average number of common shares outstanding and dilutive common stock equivalents. Basic EPS is computed by dividing net loss (numerator) applicable to common stockholders by the weighted average number of common shares outstanding (denominator) for the period. All EPS presented in the financial statements are basic EPS as defined by ASU 260, “Earnings Per Share”. There are no diluted net income/ (loss) per share on the potential exercise of the equity-based financial instruments, hence a state of anti-dilution has occurred. All per share and per share information are adjusted retroactively to reflect stock splits and changes in par value.
Income Taxes
The Company follows the guideline under ASC Topic 740 Income Taxes. “Accounting for Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Since the Company is in the developmental stage and has losses, no deferred tax asset or income taxes have been recorded in the financial statements.
Website Development Costs
The Company recognized the costs associated with developing a website in accordance with ASC 350-50 “Website Development Cost” that codified the American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) NO. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Relating to website development costs the Company follows the guidance pursuant to the Emerging Issues Task Force (EITF) NO. 00-2, “Accounting for Website Development Costs”. The website development costs are divided into three stages, planning, development and production. The development stage can further be classified as application and infrastructure development, graphics development and content development. In short, website development cost for internal use should be capitalized except content input and data conversion costs in content development stage.
Costs associated with the website consist primarily of website development costs paid to third party. These capitalized costs will be amortized based on their estimated useful life over three years upon the website becoming operational. Internal costs related to the development of website content will be charged to operations as incurred. Web-site development costs related to the customers are charged to cost of sales.
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31,
3.Summary of principal accounting policies (Continued)
Research and Development Costs
Research and development costs are expensed as incurred.
Fair value of financial instruments
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and short term note - related party, approximate their carrying values since they are short term in nature and they are receivable or payable on demand.
Management is of the opinion that the Company is exposed to significant interest or credit risks arising from the bank-held assets. The Company is operating outside the United States of America and may have significant exposure to foreign currency risk due to the fluctuation of the currency in which the Company operates and the U.S. dollar.
The Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on 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. As of May 31, 2013, the Company did not have any level 1 inputs.
-
Level 2-inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies and commodities. Our Level 2 instruments consists options issued for services. As of May 31, 2013, the Company did not have any level 2 inputs.
-
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, including option pricing models and discounted cash flow models. As of May 31, 2013, the company did not have any level 3 inputs.
The carrying values of cash, accounts payable and loan payable approximate fair value because of the short-term nature of these instruments. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31,
3.Summary of principal accounting policies (Continued)
Concentration of credit risk
The Company places its cash and cash equivalents with a high credit quality financial institution. The Company maintains United States Dollars at a bank in the Slovenia that are not insured. The Company minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution.
Recently issued accounting pronouncements
The Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any pronouncement not yet effective but recently issued would, if adopted, have a material effect on the accompanying financial statements.
4.Accrued expenses
Accrued expenses as of May 31, 2013 are summarized as follows:
5.Common stock
During the year ended May 31, 2013, no shares of common stock were sold. There were a total of 7,000,000 common stocks issued and outstanding as of May 31, 2013. There were no warrants or stock options outstanding as of May 31, 2013.
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31,
6.Notes payable
There are six unsecured promissory notes bearing interest at 8% per annum which are due on demand.
There is one unsecured promissory notes bearing interest at 8% per annum which is due on demand, and convertible at a conversion price of US$0.005 per share at the lender’s option.
Blue Spa IncorporatedForm 10-K - 2013Page
BLUE SPA INCORPORATED
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31,
7.Income tax
Potential benefits of income tax losses have not been recognized in these financial statements because the Company cannot be assured it is more likely-than-not it will utilize the net operating losses carried forward in future years.
Income tax recovery differs from that which would be expected by applying the effective rates to net loss as follows:
The Company has accumulated net operating losses totaling approximately $92,000 for income tax purposes which expire starting in 2029. The components of the net deferred tax asset at May 31, 2013 and the statutory tax rate, the effective tax rate and the amount of the valuation allowance are scheduled below:
Blue Spa IncorporatedForm 10-K - 2013Page
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Since inception on September 4, 2009, there were no disagreements with Blue Spa’s principal accountants on any matter of accounting principle or practices, financial statement disclosure or auditing scope or procedure. In addition, there were no reportable events as described in Item 304 of Regulation S-K that occurred within Blue Spa’s two most recent fiscal years and the subsequent interim periods. Blue Spa’s Independent Registered Public Accounting Firm since May 31, 2009 has been Dominic K.F. Chan & Co. of Hong Kong, China.
Item 9A.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
In connection with the preparation of this annual report on Form 10-K, an evaluation was carried out by Blue Spa’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of Blue Spa’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of May 31, 2013. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, Blue Spa’s management concluded, as of the end of the period covered by this report, that Blue Spa’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the SEC rules and forms and that such information was accumulated or communicated to management to allow timely decisions regarding required disclosure. In particular, Blue Spa has identified material weaknesses in internal control over financial reporting, as discussed below.
Management’s Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. Blue Spa’s internal control over financial reporting is a process designed under the supervision of Blue Spa’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Blue Spa’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of Blue Spa’s assets;
●provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
●provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Blue Spa’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of May 31, 2013, based on criteria established in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified material weaknesses in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of Blue Spa’s annual or interim financial statements will not be prevented or detected on a timely basis.
Blue Spa IncorporatedForm 10-K - 2013Page 12
The matters involving internal controls and procedures that management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on Blue Spa’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by Blue Spa’s Chief Financial Officer in connection with the audit of its financial statements as of May 31, 2013 and communicated the matters to management.
As a result of the material weakness in internal control over financial reporting described above, management has concluded that, as of May 31, 2013, Blue Spa’s internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by COSO.
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on Blue Spa’s financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on Blue Spa’s board of directors caused and continues to cause an ineffective oversight in the establishment and monitoring of the required internal controls over financial reporting.
Blue Spa is committed to improving its financial organization. As part of this commitment and when funds are available, Blue Spa will create a position to Blue Spa to segregate duties consistent with control objectives and will increase its personnel resources and technical accounting expertise within the accounting function by: (i) appointing one or more outside directors to its board of directors who will also be appointed to the audit committee of Blue Spa resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls over financial reporting; and (ii) preparing and implementing sufficient written policies and checklists that will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more outside directors, who will also be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on Blue Spa’s Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses: (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support Blue Spa if personnel turn-over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues Blue Spa may encounter in the future.
Management will continue to monitor and evaluate the effectiveness of Blue Spa’s internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Blue Spa’s independent auditors have not issued an attestation report on management’s assessment of Blue Spa’s internal control over financial reporting. As a result, this annual report does not include an attestation report of Blue Spa’s independent registered public accounting firm regarding internal control over financial reporting. Blue Spa was not required to have, nor has Blue Spa, engaged its independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit Blue Spa to provide only management’s report in this annual report.
Changes in Internal Controls
There were no changes in Blue Spa’s internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended May 31, 2013, that materially affected, or are reasonably likely to materially affect, Blue Spa’s internal control over financial reporting.
Blue Spa IncorporatedForm 10-K - 2013Page 13
Item 9B.
Item 9B. Other Information
None
PART III
Item 10.
Item 10. Directors, Executive Officers, and Corporate Governance.
(a) Identify Directors and Executive Officers
Each director of Blue Spa holds office until (i) the next annual meeting of the stockholders, (ii) his successor has been elected and qualified, or (iii) the director resigns.
Blue Spa’s management team is listed below.
Officer’s Name
Blue Spa Incorporated
Law Yau Yau
Director and President, CEO, CFO,
Treasurer, Corporate Secretary
Law Yau Yau ● Mr. Yau Yau (30 years old) has acted as Blue Spa’s sole Director and Officer since its inception on September 4, 2009. Since January 2005 Mr. Yau Yau has also been a Quality Control Manager for Shenzhen Linfeng Electronics Co Ltd, in the Shenzhen, Province of China.
(b) Identify Significant Employees
Blue Spa has no significant employees other than Mr. Yau Yau who is Blue Spa’s sole director and officer. Mr. Yau Yau has devoted and will continue to devote approximately 10 hours per week or 20% of his working time to Blue Spa’s business.
(c) Family Relationships
There are no family relationships among the directors, executive officers or persons nominated or chosen by Blue Spa to become directors or executive officers.
(d) Involvement in Certain Legal Proceedings
During the past 10 years, no of the director, officer, or promoter of Blue Spa has been:
●a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time;
●convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
●subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
●subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity, or to be associated with persons engaged in any such activity;
Blue Spa IncorporatedForm 10-K - 2013Page 14
●found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;
●found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
●the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
●any Federal or State securities or commodities law or regulation; or
●any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
●any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
●the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
(e) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Security Exchange Act of 1934 requires directors, executive officers and 10% or greater shareholders of Blue Spa to file with the Securities and Exchange Commission initial reports of ownership (Form 3) and reports of changes in ownership of equity securities of the Company (Form 4 and Form 5) and to provide copies of all such Forms as filed to Blue Spa. Based solely on Blue Spa’s review of the copies of these forms received by it or representations from certain reporting persons, management believes that SEC beneficial ownership reporting requirements for fiscal 2013 were met, with the exception that Law Yau Yau failed to file a Form 3 - Initial Statement of Beneficial Ownership of Securities and a Form 5 - Annual Statement of Changes in Beneficial Ownership of Securities..
(f) Nomination Procedure for Directors
Blue Spa does not have a standing nominating committee; recommendations for candidates to stand for election as directors are made by the board of directors. Blue Spa has not adopted a policy that permits shareholders to recommend candidates for election as directors or a process for shareholders to send communications to the board of directors.
(g) Audit Committee Financial Expert
Blue Spa has no financial expert. Management believes the cost related to retaining a financial expert at this time is prohibitive. Blue Spa’s Board of Directors has determined that it does not presently need an audit committee financial expert on the Board of Directors to carry out the duties of the Audit Committee. Blue Spa’s Board of Directors has determined that the cost of hiring a financial expert to act as a director of Blue Spa and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on the Audit Committee.
(h) Identification of Audit Committee
Blue Spa does not have a separately-designated standing audit committee. Rather, Blue Spa’s entire board of directors perform the required functions of an audit committee. Currently, Law Yau Yau is the only member of Blue Spa’s audit committee, but he does not meet Blue Spa’s independent requirements for an audit committee member. See “Item 12. (c) Director independence” below for more information on independence.
Blue Spa’s audit committee is responsible for: (1) selection and oversight of Blue Spa’s independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by Blue Spa’s employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditor and any outside advisors engaged by the audit committee.
Blue Spa IncorporatedForm 10-K - 2013Page 15
As of May 31, 2013, Blue Spa did not have a written audit committee charter or similar document.
(i) Code of Ethics
Blue Spa has adopted a financial code of ethics that applies to all its executive officers and employees, including its CEO and CFO. See Exhibit 14 - Code of Ethics for more information. Blue Spa undertakes to provide any person with a copy of its financial code of ethics free of charge. Please contact Blue Spa at 86-28-66847826 to request a copy of Blue Spa’s financial code of ethics. Management believes Blue Spa’s financial code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Blue Spa IncorporatedForm 10-K - 2013Page 16
Item 11.
Item 11. Executive Compensation.
Blue Spa has paid no compensation to its named executive officers during its fiscal year ended May 31, 2013.
summary compensation table
Since Blue Spa’s inception, no stock options, stock appreciation rights, or long-term incentive plans have been granted, exercised or re-priced.
Currently, Blue Spa does not have an employment agreement with Law Yau Yau. However, Blue Spa reimburses Mr. Yau Yau for all reasonable expenses incurred by Mr. Yau Yau while acting as the sole director and officer of Blue Spa.
There are no employment agreements between Blue Spa and any named executive officer, and there are no employment agreements or other compensating plans or arrangements with regard to any named executive officer which provide for specific compensation in the event of resignation, retirement, other termination of employment or from a change of control of Blue Spa or from a change in a named executive officer’s responsibilities following a change in control.
Item 12.
Item 12. Security Ownership of Certain Beneficial Holders and Management and Related Stockholder Matters.
(a) Security Ownership of Certain Beneficial Owners (more than 5%)
[1] The listed beneficial owner has no right to acquire any shares within 60 days of the date of this Form 10-K from options, warrants, rights, conversion privileges or similar obligations excepted as otherwise noted.
[2] Based on 7,000,000 common shares issued and outstanding as of July 31, 2013.
Blue Spa IncorporatedForm 10-K - 2013Page 17
(b) Security Ownership of Management
[1] Based on 7,000,000 common shares issued and outstanding as of July 31, 2013.
Each person listed above has full voting and investment power with respect to the common shares indicated. Under the rules of the SEC, a person (or a group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares power to vote or to direct the voting of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase Blue Spa’s common shares.
(c) Changes in Control
Management is not aware of any arrangement that may result in a change in control of Blue Spa.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
(a) Transactions with Related Persons
Since the beginning of Blue Spa’s last fiscal year, no director, executive officer, security holder, or any immediate family of such director, executive officer, or security holder has had any direct or indirect material interest in any transaction or currently proposed transaction, which Blue Spa was or is to be a participant, that exceeded the lesser of (1) $120,000 or (2) one percent of the average of Blue Spa’s total assets at year-end for the last three completed fiscal years.
(b) Promoters and control persons
Since inception of Blue Spa on September 4, 2009, Law Yau Yau has been the only promoter of Blue Spa’s business, but Mr. Yau Yau has not received anything of value from Blue Spa nor is any person entitled to receive anything of value from Blue Spa for services provided as a promoter of the business of Blue Spa.
(c) Director independence
Blue Spa’s board of directors currently solely consists of Law Yau Yau. Pursuant to Item 407(a)(1)(ii) of Regulation S-K of the Securities Act, Blue Spa’s board of directors has adopted the definition of “independent director” as set forth in Rule 4200(a)(15) of the NASDAQ Manual. In summary, an “independent director” means a person other than an executive officer or employee of Blue Spa or any other individual having a relationship which, in the opinion of Blue Spa’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director, and includes any director who accepted any compensation from Blue Spa in excess of $200,000 during any period of 12 consecutive months with the three past fiscal years. Also, the ownership of Blue Spa’s stock will not preclude a director from being independent.
In applying this definition, Blue Spa’s board of directors has determined that Mr. Yau Yau does not qualify as an “independent director” pursuant to the same rule.
As of the date of the report, Blue Spa did not maintain a separately designated compensation or nominating committee.
Blue Spa has also adopted this definition for the independence of the members of its audit committee. Law Yau Yau is the sole member of Blue Spa’s audit committee as a result of being the sole director. Blue Spa’s board of directors has determined that Mr. Yau Yau is not “independent” for purposes of Rule 4200(a)(15) of the NASDAQ Manual, applicable to audit, compensation and nominating committee members, and is “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act.
Blue Spa IncorporatedForm 10-K - 2013Page 18
Item 14.
Item 14. Principal Accounting Fees and Services
(1) Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for Blue Spa’s audit of annual financial statements and for review of financial statements included in Blue Spa’s Form 10-Q’s or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
2013 - $10,000 - Dominic K.F. Chan & Co - Chartered Accountants
2012 - $10,000 - Dominic K.F. Chan & Co - Chartered Accountants
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of Blue Spa’s financial statements and are not reported in the preceding paragraph:
2013 - $3000 - Dominic K.F. Chan & Co - Chartered Accountants
2012 - $3000- Dominic K.F. Chan & Co - Chartered Accountants
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
2013 - $nil - Dominic K.F. Chan & Co - Chartered Accountants
2012 - $nil - Dominic K.F. Chan & Co - Chartered Accountants
(4) All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:
2013 - $nil - Dominic K.F. Chan & Co - Chartered Accountants
2012 - $nil - Dominic K.F. Chan & Co - Chartered Accountants
(6) The percentage of hours expended on the principal accountant’s engagement to audit Blue Spa’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was nil %.
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
1. Financial Statements
Financial statements of Blue Spa Incorporated have been included in Item 8 above.
2. Financial Statement Schedules
All schedules for which provision is made in Regulation S-X are either not required to be included herein under the related instructions or are inapplicable or the related information is included in the footnotes to the applicable financial statement and, therefore, have been omitted from this Item 15.
3. Exhibits
All Exhibits required to be filed with the Form 10-K are included in this annual report or incorporated by reference to Blue Spa’s previous filings with the SEC, which can be found in their entirety at the SEC website at www.sec.gov under SEC File Number 000-51302 and SEC File Number 333-169331.
Blue Spa IncorporatedForm 10-K - 2013Page 19
Exhibit
Description
Status
3.1
Articles of Incorporation and Certificate of Amendment, filed as an exhibit to Blue Spa’s registration statement on Form S-1 filed on September 13, 2010, and incorporated herein by reference.
Filed
3.2
By-Laws, filed as an exhibit to Blue Spa’s registration statement on Form S-1 filed on September 13, 2010, and incorporated herein by reference.
Filed
Code of Ethics, filed as an exhibit to Blue Spa’s 2010 registration statement on Form S-1 filed on September 13, 2009, and incorporated herein by reference.
Filed
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Included
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Included
101 *
Financial statements from the annual report on Form 10-K of Blue Spa Incorporated for the fiscal year ended May 31, 2013, formatted in XBRL: (i) the Audited Balance Sheet, (ii) the Audited Statement of Operations; (iii) the Audited Statement of Stockholders’ Deficit and Comprehensive Income, and (iv) the Audited Statement of Cash Flows
* In accordance with Rule 402 of Regulation S-T, the XBRL (“Extensible Business Reporting Language”) related information is furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
Blue Spa IncorporatedForm 10-K - 2013Page 20
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, Blue Spa Incorporated has caused this report to be signed on its behalf by the undersigned duly authorized person.
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of Blue Spa Incorporated and in the capacities and on the dates indicated have signed this report below.
Signature
Title
Date
/s/ Law Yau Yau
President, Chief Executive Officer,
Principal Executive Officer, Treasurer,
Corporate Secretary,
Chief Financial Officer,
Principal Financial Officer, and
Principal Accounting Officer
Member of the Board of Directors
August 2, 2013
Law Yau Yau
Blue Spa IncorporatedForm 10-K - 2013Page 21