ITEM 1. BUSINESS
This report contains forward-looking statements. In some cases, these statements may be identified by terminology such as “anticipates,” “believes,” “continue,” “estimates,” “expects,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” and other comparable terminology. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to develop our operations, our ability to satisfy our obligations, our ability to raise capital as necessary, our ability to generate revenues and pay our operating expenses, our ability to consummate the acquisition of additional assets, economic, political and market conditions and fluctuations, government and industry regulation, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in Item 1A
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2. PROPERTIES
At this time, the Company maintains its designated office at 2421 Fenton St. Chula Vista, CA 91914. The Company’s telephone number is 619-752-6766. The Company’s fax number is 650-378-1399. The Company’s website is www.incablock.com.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
While we are not currently a party to any material pending legal proceedings, from time to time we may be named as a party to lawsuits in the normal course of our business.
ITEM 4.
ITEM 4. (REMOVED AND RESERVED)
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There is no established trading market for our common stock or any other class of our equity securities.
As of June 30, 2011, there were two (3) holders of record of our common stock and a total of 25,362,500 shares of common stock outstanding. All common stock currently outstanding was issued by the Company under applicable exemptions from registration under the Securities Act. None of our stock is registered under the Exchange Act, and no stock may be sold or offered unless registered with the SEC or sold under an applicable exemption from registration. There were no holders in “street name.”
To date, Inca Global has not paid any dividends. The Company does not intend to pay dividends in the foreseeable future, as the Company plans to retain its funds for operating purposes.
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
OVERVIEW
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our discussion includes forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements made which are not purely historical are forward-looking, and are based upon current expectations that involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated or implied in these forward-looking statements as a result of a number of factors, including those set forth In Item 1A -“Risk Factors” of this Annual Report on Form 10-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Plan of Operation
The Company licensed a unique intellectual property (the Patent) for the production of Concrete Interlocking Modular Blocks System, which can be safely and efficiently assembled without mortar. The Company initially intends to generate revenue by designing, selling and contract manufacture customized concrete block products, interlocking concrete blocks, roofing structures, light concrete aggregate panels and a "kit system" of a pre-fabricated houses or structures on a standard format or custom made basis according to customer blue prints. The Company may also evaluate licensing opportunities worldwide whereby the Company may assist a licensee in developing a plant for the production of the block to market prefabricated buildings using the technology covered under the Company’s licensed patent. Furthermore, to provide a strong, innovative construction system with which to construct housing developments and commercial buildings, e.g. warehouses, hangars, etc..
On March 11, 2011, the Company entered into a Licensing Agreement (“Licensing Agreement”) with Eco Global Corp. a Nevada Corporation (“Licensor”) pursuant to discussion between the Company’s Chief Executive Officer (CEO) Daniel D. Correa and Eco Global Corps board of directors that lead to the Company being granted an, exclusive license for certain territories for intellectual property INCABLOCK™ developed by Licensor, principally comprising of a unique intellectual property for the production of Concrete Interlocking Modular Blocks System, which can be safely and efficiently assembled without any mortar (the “Technology”). The license includes the use of US patent No. 7,305,803 with an expiration date of May 16, 2025 and Trademarks under serial No.77/439,024. The Company, with the IncaBlock technology, intends to design, manufacture and market customized concrete block products, interlocking concrete blocks, roofing structures, light concrete aggregate panels and a "kit system" of a pre-fabricated houses or structures on a standard format or custom made basis according to customer blue prints.
The term of the Licensing Agreement and of the rights, authorities and licenses granted to the Licensee pursuant to the Licensing Agreement for (i) the Technology, (ii) any improvements of or to the Technology, or (iii) any product which embodies the Technology or such improvements shall commence upon execution of this Agreement and continue for thirty (30) years, provided that the Licensee is not in breach or default of any of the terms or conditions contained in this Agreement.
Pursuant to the Licensing Agreement, Eco Global granted the Company the following rights for $100,000 dollars that was owed to Mr. Correa for services rendered to Eco Global:
Licensor granted to Licensee an exclusive, non-transferable, license for use in the Territory (worldwide rights), with a limited right of sublicense to allow the Licensee to use the Intellectual Property to make, use, and apply the Technology in the course of Licensee’s business, which, in the absence of the License, would infringe Licensor’s intellectual property. Except for the rights granted pursuant to the License, Licensor shall retain all rights, title and interest to the Technology and any improvements thereto-although the License includes the Company’s right to utilize such improvements. The Licensee shall be responsible for all of the testing and improvements to the Technology and Licensor shall retain all rights to the Improvements, but such Improvements shall also be a part of the License. Licensee shall have the right to offer limited royalty-bearing sublicenses to third parties where such third parties are in a position to commercialize the Technology in ways that Licensee cannot accomplish in a competitive manner. Licensee shall pay Licensor two percent (2.0%) of all royalties and fees received from such third parties and Licensee shall pay Licensor a royalty of three percent (3%) of all gross revenues resulting from the use of the Technology by Licensee, except as otherwise modified in writing.
The license is terminated upon the occurrence of events of default specified in the License Agreement and outlined as followed:
If any of the Parties are in breach or default of the terms or conditions contained in this Agreement and do not rectify or remedy that breach or default within 90 days from the date of receipt of notice by the other party requiring that default or breach to be remedied, then the other party may give to the party in default a notice in writing terminating this Agreement.
Licensee may, at its option, terminate this Agreement at anytime by doing the following:
By ceasing to use the Technology and offer the services facilitated by any Licensed Products. Giving sixty (60) days prior written notice to Licensor of such cessation and of Licensee’s intent to terminate, and upon receipt of such notice, Licensor may immediately begin negotiations with other potential licensees and all other obligations of Licensee under this Agreement will continue to be in effect until the date of termination. By tendering payment of all accrued royalties and other payments due to Licensor as of the date of the notice of termination and evidencing to the Licensor that provision has been made for any prospective royalties and other payments to which Licensor may be entitled after the date of termination.
Licensor may terminate the License Agreement if Licensee is in breach or default of the terms or conditions contained in this Agreement and does not rectify or remedy that breach or default within 90 days from the date of receipt of notice by Licensor requiring that default or breach to be remedied, then Licensor, may alter License granted by this Agreement with regards to its exclusivity, its territorial application and restrictions on its application.
Licensee and Licensor shall immediately notify each other of all unauthorized uses, infringements, imitations and any other claims against the interests of Licensor and Licensee and assist each other in the enforcement of trade-mark, copyright, patent and industrial design protection relating to the Intellectual Property. Each of Licensor and Licensee shall have the right, but not the obligation, to decide whether to take action against infringements and imitations or defend against any action with respect to the Intellectual Property, and Licensee shall cooperate in any such action or defense. Licensee and Licensor shall be required to use industry standard non-disclosure agreements or mutually acceptable non-disclosure agreements when dealing with third parties in order to safeguard and protect Intellectual Property.
The Company’s funding plans include selling additional capital stock and/or borrowing to fund the aforementioned expenses. The Company intends to approach Hedge Funds, Venture Capital Groups, Private Investment Groups and other Institutional Investment Groups in its efforts to achieve future funding.
The Company will require significant additional financing in order to market its INCABLOCK solutions to suppliers and buyers, achieve the milestones and generate revenue to avoid the discontinuation of the License, including the following estimated amounts for research, development and commercialization expenses related to the Technology. The Company therefore intends to raise an aggregate of $10 million in 2011 and 2012, the proceeds of which would be utilized as follows:
(1) Includes base compensation, benefits and expenses for director-level, and above, domestic and international employees over a two year time frame with the number of management team members (4) ramping up commensurate with the staff build-up. Of the total, 65% is for base compensation, 13% for benefits and taxes, and 22% for expenses.
(2) Compensation for an estimated domestic and international marketing staff ramping up to 16 full-time-equivalent (FTE) business development (marketing) employees over a two-year time frame. Of the total, 80% is for base compensation (average salary, $60,000); with 20% for benefits and taxes.
There is no guarantee that the Company will be able to raise this or any amount of additional capital and a failure to do so would have a significant adverse effect on the Company’s ability, or would cause significant delays in its ability to address the market for purchases of building materials and homes by commercial enterprises and achieve its Business Plan, it estimated the minimum amount of capital the company needs to raise over the ne twelve months is $1 million to continue operations . Neither the Company nor any of its advisors or consultants has significant experience in raising funds similar to the $10,000,000 estimated to be required
Going Concern
Because we only had $14,000 in cash at March 31, 2011, which is insufficient to fund any operations, the report of our independent registered public accounting firm on our financial statements for the period ended March 31, 2011 contains an explanatory paragraph regarding their substantial doubt about our ability to continue as a going concern. Our auditors’ opinion is based upon our operating losses and our need to obtain additional financing to sustain operations. Our ability to continue as a going concern will be dependent upon our ability to obtain the necessary financing to meet our obligations and repay our liabilities when they become due, and to generate sufficient revenues from our operations to pay our operating expenses. We will need to raise substantial funds in order to develop the INCABLOCK products which we have recently licensed from Eco Global Corporation, and if we cannot raise additional funds we may need to abandon development of these products and cease operations.
Results of Operations
We were incorporated on May 4, 2010, and have incurred expenses of approximately $79,300 through March 31, 2011. These expenses largely consist of formation expenses and administrative expenses related to the start-up and organization of our business that have been incurred by and funded by AVP. Expenses include legal fees, accounting fees, costs associated with SEC filings and preparation of documents. We have not had any revenue.
We expect that, if we are successful in securing additional capital, future general and administrative expenses will increase as compared to the period ended March 31, 2011. In addition, we expect to incur research and development expenses as we seek to advance our product candidates.
Liquidity and Capital Resources
As of March 31, 2011, we had a cash balance of only $14,000. There were no other assets, and accrued expenses were approximately $58,915, all due to Accelerated Venture Partners, LLC, or AVP, a related party. We had a stockholders’ deficit of approximately $44,915 and no means to pay the liabilities in excess of our assets. AVP has agreed to fund certain administrative operating expenses of Inca Global until the Company succeeds in raising additional funds, at which point the administrative operating expenses will be due. However, AVP may seek to force earlier payment of the amounts which we owe, or AVP may decide in the future not to continue funding costs on behalf of Inca Global, although we are not aware of any plans for them to do so. If we are not successful in raising additional capital, we may not be able to pay our liabilities and may have to cease operations.
The Company intends to seek an aggregate of $10,000,000 in 2011 and 2012 through the sale of equity or convertible debt securities, the issuance of these securities could dilute existing shareholders. The Company’s funding plans include selling additional capital stock and/or borrowing to fund the aforementioned expenses. The Company intends to approach Hedge Funds, Venture Capital Groups, Private Investment Groups and other Institutional Investment Groups in its efforts to achieve future funding. It is estimated that $3,369,000 will be used for management, sales and marketing, $5,557,100 will be used for the building of a manufacturing plant including the employee salaries and an estimated $821,000 will be spent on legal, accounting, rent and other payables leaving $1,095,000 in reserve for increased working capital. It estimated the minimum amount of capital the company needs to raise over the next twelve months is $1 million to continue operations. There is no guarantee that the Company will be able to raise this or any amount of additional capital and a failure to do so would have a significant adverse effect on the Company’s ability, or would cause significant delays in its ability to address the market for purchases of building materials and homes by commercial enterprises and achieve its Business Plan. Neither the Company nor any of its advisors or consultants has significant experience in raising funds similar to the $10,000,000 estimated to be required.
We have a consulting agreement with AVP under which AVP has agreed to provide us with certain advisory services that include reviewing our business plan, identifying and introducing prospective financial and business partners, and providing general business advice regarding our operations and business strategy. Under the consulting agreement, cash compensation of $400,000 is due to AVP upon our securing $5 million in available cash from funding, and an additional $400,000 is due upon our securing $10 million in available cash from funding (inclusive of the first $5 million). The cash compensation is to be paid to AVP at the rate of $66,667 per month. The total cash compensation to be received by AVP under the consulting agreement is not to exceed $800,000 unless we receive an amount of funding in excess of $10 million. If we receive equity or debt financing that is an amount less than $5 million, in between $5 million and $10 million, or greater than $10 million, the cash compensation earned by the AVP under its consulting services agreement will be prorated. We have the option to make a lump sum payment to AVP in lieu of the monthly cash payments.
We plan to measure our future liquidity primarily by the cash and working capital available to fund our operations, if we are ever able to raise capital. To date we have raised $30,000 in capital and, accordingly, do not have enough capital available to fund our operations, as stated above. We will not be able to commercialize the INCABLOCK product without additional capital. We are evaluating various means of raising our initial capital, including through the sale of equity securities, licensing agreements or other means. We expect to incur losses for at least several years into the future as we develop our INCABLOCK product and we are unable to estimate when, if ever, we will receive revenue or have a positive cash flow.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Seasonality
Our operating results are not affected by seasonality.
Inflation
Our business and operating results are not affected in any material way by inflation.
Critical Accounting Policies
The Securities and Exchange Commission issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The nature of our business generally does not call for the preparation or use of estimates. Due to the fact that the Company does not have any operating business, we do not believe that we do not have any such critical accounting policies.
Stock-Based Compensation
We plan to account for stock awards granted to recipients using an estimate of the fair value of the stock award on the date that the award is granted. This estimated fair value will be recognized as an expense in the statement of operations on a straight-line basis over the vesting period of the underlying stock option, generally four years for employees. There is a high degree of subjectivity involved in estimating the input values needed to estimate the fair value of stock options and other awards. For Inca Global in particular, our stock has never traded and therefore it will be difficult to determine the underlying fair value of our common stock on each date a stock award is made. Changes in any of the assumptions required to estimate the fair value, particularly the estimated value of the underlying stock and the estimated volatility, as well as the estimated term of the options, can materially affect the resulting estimates of the fair values of the awards that are granted. Also, the expenses recorded for stock-based compensation in our financial statements may differ significantly from the actual value realized by the recipients of the stock options, and these expenses are not adjusted to the actual amounts, if any, realized by the stock option recipients. Users of the financial statements should also understand that the expenses we recognize for stock-based compensation do not result in payments of cash by us.
Research and development expenses
We plan to expense our research and development costs as incurred. If we succeed in securing additional funding, research and development expenses are expected to include clinical trial costs, development and manufacturing costs for investigational drugs, payments to clinical and contract research organizations, compensation expenses for drug development personnel, consulting and advisor costs, preclinical studies and other costs related to development of our product candidates. Research and development expenses are expected to include expenses that are incurred over multiple reporting periods, such as fees for contractors and consultants, patient treatment costs related to clinical trials and investigational drug manufacturing costs. It may be difficult to determine the accounting period in which certain research and development costs are incurred, particularly when outside contractors are involved and there are differences between clinical trial assumptions and actual experience (such as rate of patient enrollment, levels and timing of services provided, review and correction of data inconsistencies, etc.). We plan to assess the level and related costs of the services provided during each reporting period, including the percentage of work completed through each reporting period, to determine the portion to expense in each period. The assessment of the percentage of work completed that determines the amount of research and development expense that should be recognized in a given period sometimes requires significant judgment. We plan to apply our judgment and base our estimates on our historical experience at other companies and on the best information available at the time of reporting.
Revenue recognition
While we do not expect to have any products ready for commercial sale for several years, if at all, we may enter into contractual arrangements with other entities that provides us with revenue before our product candidates are approved. Under such contractual arrangements, if we succeed in entering into any, we plan to recognize revenues when our performance requirements have been fulfilled, the amount of revenue is fixed and determinable, and collection is reasonably assured.
Revenue from license fees with non-cancelable, non-refundable terms and no future performance obligations would be recognized when collection is assured. Milestone payments would be recognized when we fulfill the development milestone requirements and collection is assured. We expect that future royalty revenue, if any, would be recorded when payments are received, since we do not expect that we will be able to reasonably estimate the sales upon which the royalties are based.
If we enter into revenue arrangements with multiple components, we expect to divide the components into separate units of accounting. Consideration received would be allocated among the separate units of accounting based on their relative fair values, and the applicable revenue recognition criteria identified and applied to each of the units.
Recent Accounting Pronouncements
We recently commenced our operations and do not believe that there are any recently issued accounting pronouncements that we have not adopted which are likely to have a material impact on our financial position, results of operations or other disclosures.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-
INCA GLOBAL, INC.
- INDEX TO FINANCIAL STATEMENTS -
F- 1
Peter Messineo
Certified Public Accountant
1982 Otter Way Palm Harbor FL 34685
peter@pm-cpa.com
T 727.421.6268 F 727.674.0511
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Inca Global, Inc.
I have audited the accompanying balance sheet of Inca Global, Inc. as of March 31, 2011 and the related statements of operations, stockholders’ deficit and cash flows for the period from inception (May 4, 2010) through March 31, 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 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. I was not engaged to perform an audit of the Company’s internal control over financial reporting. My audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly I express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 Inca Global, Inc. at March 31, 2011, and the results of its operations and its cash flows for the period from inception (May 4, 2010) through March 31, 2011, in conformity with U.S. 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 1 to the financial statements, the Company has incurred losses since its inception, has limited cash and has not commenced business operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Further information and management’s plans in regard to this uncertainty were also described in Note 1. These financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.
/s/ Peter Messineo, CPA
Palm Harbor, Florida
July 14, 2011
F- 2
INCA GLOBAL, INC.
(A Development Stage Company)
BALANCE SHEET
See notes to financial statements.
F- 3
INCA GLOBAL, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
See notes to financial statements.
F- 4
INCA GLOBAL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS’ DEFICIT
See notes to financial statements.
F- 5
INCA GLOBAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
See notes to financial statements.
F- 6
INCA GLOBAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Inca Global, Inc. (“the Company”) was incorporated in the state of Delaware on May 4, 2010 under the name Accelerated Acquisitions XI, Inc. The Company was formed as a “shell company” with no operations while it sought new business opportunities. On March 8, 2011, the Company entered into a licensing agreement pursuant to which the Company received an exclusive, non-transferrable worldwide license to specified technology, patents, intellectual property, know-how, trade secret information, clinical trial protocols and data, as well as commercial rights to:
·
design, manufacture, market and license customized concrete block products, interlocking concrete blocks, roofing structures, light concrete aggregate panels and a “kit system” of a pre-fabricated houses or structures on a standard format or custom made basis according to customer blue prints.
As a result of entering into the licensing agreement and undertaking efforts into the research and developmentof its products, the Company ceased to be a shell company. The Company changed its name to Inca Global, Inc. on April 6, 2011. The Company operates in one reportable business segment, the development and commercialization of products to improve building material cost.
The Company is currently in the development stage. All activities of the Company to date relate to its organization and acquiring rights to its products.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. As reflected in the accompanying financial statements, the Company has a deficit accumulated during the development stage of $79,300, accrued expenses to its founder of $58,915 and cash of only $14,000 as of March 31, 2011. The Company’s ability to continue as a going concern is dependent upon its ability to obtain financing necessary for it to meet its obligations, develop the products that it has licensed, and ultimately generate revenues from the sale of these products. The Company’s founder has agreed to fund certain administrative operating expenses of the Company until the Company succeeds in raising additional funds. Management’s plans include raising additional funds through an equity financing or licensing transaction in order to meet the Company’s obligations and develop its product candidates, but funding may not be available and the Company may be unsuccessful in raising additional capital of any type. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might arise as a result of this uncertainty.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts may differ from these estimates.
Cash Equivalents and Investments
The Company considers all securities which are highly liquid and purchased with original maturities of 90 days or less to be cash equivalents.
Fair Value of Financial Instruments
The fair value of financial instruments, including cash, cash equivalents and accrued liabilities, is representative of their respective fair values due to their short maturities.
Property and Equipment
Property and equipment will be stated at cost, less accumulated depreciation and amortization. Depreciation and amortization will be calculated on a straight-line basis over the estimated useful lives of the respective assets.
F- 7
Impairment of Long-Lived Assets
The Company will review long-lived assets for impairment whenever events or changes in business circumstances would indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when future estimated cash flows expected to result from the use of the asset, and its eventual disposition, are less than the carrying amount of the asset. The impairment loss would be based on the excess of the carrying value over its respective fair value. Through March 31, 2011, the Company had not acquired any long-lived assets and had not recorded any impairment losses.
Research and Development Expenses
If the Company is successful in raising additional capital, the Company expects to incur research and development costs which will be expensed as incurred. Research and development costs may include clinical trial costs, development and manufacturing costs for investigational vaccines and diagnostic tests, payments to clinical and contract research organizations, compensation expenses for drug development personnel, consulting and advisor costs, preclinical studies and other costs related to development of its product candidates. Research and development expenses may also include certain expenses that are incurred over multiple reporting periods, such as fees for contractors and consultants, patient treatment costs related to clinical trials and investigational drug manufacturing costs. Management plans to assess the level and related costs of the services provided during each reporting period, including the percentage of work completed through each reporting period, to determine the portion to expense in each period. Management expects the assessment of the percentage of work completed in any given period to often require significant judgment and plans to base its estimates on the information available at the time of reporting.
Stock-Based Compensation
Stock options and other stock-based awards granted to employees, directors and/or consultants will be accounted for using an estimate of the fair value of the stock award on the date it is granted. The estimated fair value of the award on the grant date will be recognized into the consolidated statement of operations on a straight-line basis over the vesting period of the underlying stock award.
Comprehensive loss
Components of other comprehensive loss (which are not included in net loss) are included as part of total comprehensive loss. For the period presented, comprehensive loss is the same as net loss and has been included in the statement of stockholders’ deficit.
Operating Leases
The Company plans to recognize rental expense on a straight-line basis over the term of each operating lease.
Revenue Recognition
The Company plans to recognize revenues, if any are earned, when the Company’s performance requirements have been fulfilled, the amount is fixed and determinable, and collection is reasonably assured. Revenue from license fees with non-cancelable, non-refundable terms and no future performance obligations would be recognized when collection is assured. Milestone payments would be recognized when the Company or a third-party fulfills the development milestone requirements and collection is assured. The Company expects that future royalty revenue, if any, would be recorded when payments are received, since the Company does not expect that it will be able to reasonably estimate the sales upon which the royalties are based.
If the Company enters into revenue arrangements with multiple components, the Company expects to divide the components into separate units of accounting if specified criteria are met, including whether the delivered component has stand-alone value to the customer, and whether there is objective reliable evidence of the fair value of the undelivered items. Consideration received would be allocated among the separate units of accounting based on their relative fair values, and the applicable revenue recognition criteria identified and applied to each of the units.
Net Loss per Share
Net loss per share is calculated using the weighted-average number of shares of common stock outstanding during the period. Because the Company has not reported net income, the net loss position of the Company results in basic and diluted net loss per share being the same; conversely, if the company had reported net income, the impact of potentially dilutive securities would have reduced the net income per share.
F- 8
Income Taxes
The Company uses the liability method of accounting for income taxes, and determines deferred tax assets and liabilities based on differences between the financial and tax reporting basis of assets and liabilities. The Company measures these assets and liabilities using enacted tax rates and laws that are scheduled to be in effect when the differences are expected to reverse. Because the realization of any deferred tax assets will be dependent upon future earnings, and the Company’s future earnings are uncertain, the Company expects that its net deferred tax assets will be fully offset by a valuation allowance. The Company plans to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements which have not yet been adopted that the Company believes are likely to have a material impact on its financial position or results of operations.
Note 2. Stock and Stock Transactions
Preferred Stock
The Company has authorized 10,000,000 shares of preferred stock, with a par value of $0.0001 per share. The Company’s Board of Directors has the ability to determine the rights and preferences of any series of preferred stock issued. There are no shares of preferred stock currently issued or outstanding.
Common Stock
The Company has authorized 100,000,000 shares of common stock, with a par value of $0.0001 per share.
At inception (May 4, 2010), the Company issued 5,000,000 shares of common stock to Accelerated Venture Partners, LLC (“AVP”) for $2,000.
On March 7, 2011, AVP tendered 3,500,000 shares to the Company for cancellation. Also on March 7, the Company granted AVP an option to purchase 1,500,000 shares of common stock at par value in exchange for certain consulting services, and AVP immediately exercised this option. The Company has the option to repurchase the shares exercised under the option at par value if the below milestones are not met within a specified time:
·
Milestone 1 - Company’s right of repurchase will lapse with respect to 60% of the shares upon securing $5 million in available cash from funding;
·
Milestone 2 - Company’s right of repurchase will lapse with respect to 40% of the Shares upon securing $10 million in available cash (inclusive of any amounts attributable to Milestone 1).
On March 7, 2011, the Company issued 22,350,000 shares of common stock to Daniel Correa at par value.
On March 28, 2011, the Company sold a total of 12,500 common shares at a price of $2.40 per share to one investor and raised $30,000 in this offering.
As of March 31, 2011, there were 25,362,500 shares issued and outstanding and 5,962,500 shares of common stock were reserved for issuance under the Company’s Stock Option Plan. There were 68,672,500 shares of common stock available for future issuance.
Note 3. Stock-Based Compensation
The Company has adopted a stock-based compensation plan for its employees, directors and consultants, which provide for the grant of stock awards to defined service providers of the Company. As of March 31, 2011, the Company had not issued any equity awards under the plan and, accordingly, no compensation expense has been recognized.
Note 4. Income Taxes
There is no provision for income taxes for the period ended March 31, 2011 because the Company has incurred net operating losses since inception. The ultimate realization of any deferred tax assets is dependent upon the generation of future taxable income. In assessing its deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on the Company’s limited operations, management currently believes that it is more likely than not that the Company will not realize the benefits of these deductible differences. Accordingly, the Company has provided a valuation allowance against its deferred tax assets. Deferred tax assets, before consideration of the valuation allowance, consist solely of $25,000 in net operating loss carryforwards ($20,000 federal and $5,000 state).
F- 9
The Company’s federal net operating loss carryfowards of $72,000 and state net operating loss carryforwards of $79,300 will expire in the Company’s fiscal year ending March 31, 2031. Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by the Internal Revenue Code Section 382. The Company believes such an ownership change occurred with the sale of common stock to Daniel Correa on March 7, 2011, although the effect on the Company’s income taxes is expected to be immaterial due to the minimal net loss incurred through that date. Future ownership changes may result in additional annual limitations of NOL carryforwards and R&D credit carryforwards, if any are generated before the ownership change.
As of March 31, 2011, there were no unrecognized tax benefits. The Company will classify any future interest and penalties as a component of income tax expense if incurred. To date, there have been no interest or penalties charged or accrued in relation to unrecognized tax benefits. The Company is subject to federal and state examinations for the one period presented, and there is no tax examination currently in progress.
Note 5. License Agreement
On March 11, 2011, the Company entered into a Licensing Agreement (“Licensing Agreement”) with Eco Global Corp. a Nevada Corporation (“Licensor”) pursuant to discussion between the Company’s Chief Executive Officer (CEO) Daniel D. Correa and Eco Global Corps board of directors that lead to the Company being granted an, exclusive license for certain territories for intellectual property INCABLOCK™ developed by Licensor, principally comprising of a unique intellectual property for the production of Concrete Interlocking Modular Blocks System, which can be safely and efficiently assembled without any mortar (the “Technology”). The license includes the use of US patent No. 7,305,803 with an expiration date of May 16, 2025 and Trademarks under serial No.77/439,024. The Company, with the IncaBlock technology, intends to design, manufacture and market customized concrete block products, interlocking concrete blocks, roofing structures, light concrete aggregate panels and a "kit system" of a pre-fabricated houses or structures on a standard format or custom made basis according to customer blue prints.
The term of the Licensing Agreement and of the rights, authorities and licenses granted to the Licensee pursuant to the Licensing Agreement for (i) the Technology, (ii) any improvements of or to the Technology, or (iii) any product which embodies the Technology or such improvements shall commence upon execution of this Agreement and continue for thirty (30) years, provided that the Licensee is not in breach or default of any of the terms or conditions contained in this Agreement.
Note 6. Related Party Transactions
The Managing Partner of AVP is Timothy Neher, a former director of the Company and the only officer of the Company prior to March 7, 2011. From inception through March 31, 2011, the Company paid $20,385 cash to AVP and accrued $58,915 for expenses due to AVP. See Note 2 for a description of the stock transactions involving AVP. See Note 7 for a description of commitments to AVP.
Note 7. Commitments and Contingencies
Under the License Agreement the Company was granted an exclusive, non-transferable, license for use in the Territory (worldwide rights), with a limited right of sublicense to allow the Licensee to use the Intellectual Property to make, use, and apply the Technology in the course of Licensee’s business, which, in the absence of the License, would infringe Licensor’s intellectual property. Except for the rights granted pursuant to the License, Licensor shall retain all rights, title and interest to the Technology and any improvements thereto-although the License includes the Company’s right to utilize such improvements. The Licensee shall be responsible for all of the testing and improvements to the Technology and Licensor shall retain all rights to the Improvements, but such Improvements shall also be a part of the License. Licensee shall have the right to offer limited royalty-bearing sublicenses to third parties where such third parties are in a position to commercialize the Technology in ways that Licensee cannot accomplish in a competitive manner. Licensee shall pay Licensor two percent (2.0%) of all royalties and fees received from such third parties and Licensee shall pay Licensor a royalty of three percent (3%) of all gross revenues resulting from the use of the Technology by Licensee, except as otherwise modified in writing.
On March 7, 2011, the Company entered into a Consulting Services Agreement with AVP. The agreement requires AVP to provide the Company with certain advisory services that include reviewing the Company’s business plan, identifying and introducing prospective financial and business partners, and providing general business advice regarding the Company’s operations and business strategy. Cash compensation of $400,000 is due upon the Company securing $5 million in available cash from funding, and an additional $400,000 is due upon the Company securing $10 million in available cash from funding (inclusive of the first $5 million). The cash compensation is to be paid to AVP at the rate of $66,667 per month. The total cash compensation to be received by AVP is not to exceed $800,000 unless the Company receives an amount of funding in excess of $10 million. If the Company receives equity or debt financing that is an amount less than $5 million, in between $5 million and $10 million, or greater than $10 million, the cash compensation earned by the AVP under its consulting services agreement will be prorated. The Company has the option to make a lump sum payment to AVP in lieu of the monthly cash payments.
F- 10
As permitted under Delaware law and in accordance with its Bylaws, Inca Global indemnifies its officers and directors for certain expenses incurred from legal or other proceedings that arise as a result of the director or officer’s service to the Company. There is no limitation on the term of the indemnification and the maximum amount of potential future indemnification is unlimited. The Company currently does not have a directors and officers insurance policy that could limit its exposure and enable it to recover a portion of any future amounts paid. The Company believes the fair value of these officer and director indemnification agreements is minimal, and, accordingly, has not recorded any liabilities for these agreements as of March 31, 2011.
From time to time, Inca Global may be involved in claims and other legal matters arising in the ordinary course of business. Management is not currently aware of any matters that it believes are likely to have a material adverse effect on its financial position or results of operations.
Note 8. Subsequent Events
On June 25, 2011 the Company (“Seller”) entered into a three year (3) contract with Cofimich Sociedad Anonima De Capital Variable, Sociedad Financiera De Objeto Multiple Entidad No Regulada (“Cofimich SA DE CV, SOFOM E.N.R.”) a Mexican Corporation, with the address of Calle 20 de Noviembre, number 36, Centro de Morelia, Michoacán, CP 58000, (“Buyer”). The Company will sell to Buyer, a minimum of 3,400 kits (sets) of materials for the construction of social housing including, floors, walls, slabs, electrical, plumbing, urbanization of development where the houses will be built over the next three years. The detail of the material to be sold is described in purchase order number one of dated June 25, 2011 Exhibit 10.4 attached. The Company agreed to deliver the Buyer, the products covered by this contract in the locations listed in the order mentioned, precisely at the time and in the same way as shown, which may not exceed three months from the date specified in the purchase order. The price of each kit will vary according to the dates of purchase, the sizes of the kits and the market prices of raw materials, but the parties set an estimated price based on current market conditions, the timing of purchases have been set out in the order cited below:
a)
For purchases made during the current year 2011, the selling price of each kit (348 kits), the amount obtained by multiplying $117.09 Dollars U.S. Currency, (ONE HUNDRED SEVENTEEN DOLLARS AND NINE CENTS, DOLLAR U.S. CURRENCY) per square meter construction of the house is intended to build the kit, which for this case would be an approximate average of 50 (FIFTY) square meters.
b)
For purchases made during 2012, the selling price of each kit (1,526 kits), the amount obtained by multiplying $122.94 Dollars U.S. Currency, (ONE HUNDRED TWENTY TWO DOLLARS AND NINETY FOUR CENTS, DOLLAR U.S. CURRENCY) per square meter construction of the house is intended to build the kit, which for this case would be an approximate average of 50 (FIFTY) square meters.
c)
For purchases made during 2013, the selling price of each kit (1,526 kits), the amount obtained by multiplying $129.09 Dollars U.S. Currency, (ONE HUNDRED TWENTY NINE DOLLARS AND NINE CENTS, DOLLAR U.S. CURRENCY) per square meter of construction of the house is intended to build with this kit, which in this case would be an approximate average of 50 (FIFTY) square meters.
The above prices may be adjusted if a significant increase in raw materials or materials during the term of this contract, subject to proof of the increases, just as it may change the order in larger amounts than requested, but not, in smaller quantities and that prices are established based on a minimum of 3,400 kits. Either party may terminate the agreement upon a violation of the terms and conditions without the need of judicial declaration.
F- 11
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosure. On July 6, 2011 the Board of Directors terminated the services of Paritz & Co, PA as our registered public accountants. The Board elected Peter Messineo, CPA, Palm Harbor FL as our auditor. Prior to Board approval, we had not consulted with Peter Messineo, CPA on any accounting or audit matters.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal accounting officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal accounting officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the material information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to us, and was made known to them by others within those entities, particularly during the period when this report was being prepared.
There were no changes in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date.
Management’s Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our principal executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Controls - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and the related guidance provided in Internal Control Over Financial Reporting - Guidance for Smaller Public Companies also issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, 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.
Based on our evaluation under the framework in Internal Controls - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of March 31, 2011.
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 due to our reporting status as a smaller public company.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
In our fiscal fourth quarter which ended March 31, 2011, we had no events that were required to be reported on Form 8-K that were not filed to date.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following individuals currently serve as our executive officers and directors:
Dr. Correa servers as Chief Executive Officer , President, Secretary, Treasurer and sole director of the Company. He served as Chief Executive Officer of Eco Global Corporation, from 2008 to January 2011 a publicly traded company and owner of a patented construction system utilized in the manufacturing of housing and commercial buildings, the company offers licenses for manufacturing and or marketing in the USA. . From 2000 through 2007, Dr. Correa served as the Managing Member of INCABLOCK, LLC., a Delaware LLC, which performed research and development for the Incablock Construction System. INCABLOCK, LLC was dissolved in 2007 and the patent was transferred to Incablock International, LLC in 2008. In 2008, Dr. Correa has served as the Managing Member where he has been actively marketing the “Block Construction System”. During 2007 and 2008, Dr. Correa also served as the Managing Member of INCA GROUP, LLC, A Nevada LLC and resigned in August 2008. From 2004 to 2007, Dr. Correa, served as the President of CARD MART PLUS USA, INC., a Nevada Corporation focused on the development and resale of pre-paid debit cards. From 2007 through March 2008, Dr. Correa served on the board of directors of HOMETREND, INC., a Nevada Corporation.
Board Committees
Due to the small size of our current Board of Directors, the Board has not established any committees and the full Board fulfills the responsibilities traditionally delegated to an audit committee, compensation committee, nominating committee and/or corporate governance committee. As the Board size grows and the Company increases its level of operations, the Board will consider delegating various responsibilities to committees.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all reports filed under Section 16(a). To the Company’s knowledge, based on information provided to the Company, all executive officers, directors and greater than 10% stockholders were in compliance with all applicable Section 16(a) filing requirements in fiscal 2011.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all compensation recorded by us in 2011 for our principal executive officers, each other executive officer serving as such whose annual compensation exceeded $100,000, and up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our Company at March 31, 2011.
None
Outstanding Equity Awards at Fiscal Year-End
The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding from inception May 4, 2010 through March 31, 2011:
None
Compensation of Directors
We have not established standard compensation arrangements for our directors and the compensation, if any, payable to each individual for their service on our Board will be determined from time to time by our Board of Directors based upon the amount of time expended by each of the directors on our behalf. None of our directors received any compensation for their services.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding beneficial ownership of the Company's Common Stock as of March 10, 2010, by: (I) each current director; each nominee for director, and executive officer of the Company; (ii) all directors and executive officers as a group; and (iii) each shareholder who owns more than five percent of the outstanding shares of the Company's Common Stock. Except as otherwise indicated, the Company believes each of the persons listed below possesses sole voting and investment power with respect to the shares indicated.
___________
(1) This table is based upon 25,362,500 shares issued and outstanding as March 31, 2011.
(2) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to the shares. Shares of Common Stock subject to options or warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage of the person holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person.
(3) Timothy Neher is founder and Managing Partner of Accelerated Venture Partners, LLC and holds voting and dispositive power for these shares.
(4) Shares are owned directly by Accelerated Venture Partners, LLC. Timothy Neher, is Managing Partner of Accelerated Venture Partners and holds voting and dispositive power for these shares.
(5) Timothy Neher is founder and Managing Partner of Accelerated Venture Partners, LLC and holds voting and dispositive power for these shares.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Director Independence
As of March 31, 2011, the Board consisted of Daniel Correa. The Board has determined that Mr. Correa is not an independent director as defined by the rules of The Nasdaq Stock Market.
Related Party Transaction Review and Approval
We have entered into indemnification agreement with our director for the indemnification of them to the fullest extent permitted by law. The indemnification agreements also allow advancement of expenses to the directors.
Our Board of Directors has not adopted formal policies and procedures for the review and approval of related party transactions. Our Board of Directors has reviewed and approved the material terms of our related party transactions.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
On July 6, 2011 we selected Peter Messineo, CPA as our independent registered public accounting firm for the fiscal year ended March 31, 2011. Fees billed or to be billed to the Company by Peter Messineo, CPA for professional services include $1,500 for an audit of the Company’s financial statements for the period ended March 31, 2011.
On July 6, 2011 we terminated Paritz and Company P.A. as independent registered public accounting firm. Fees billed by Paritz for professional services during fiscal 2011 aggregated $1,600, and included an audit of our financial statements as of June 30, 2010 and quarterly reviews for the periods ending September 30, 2010 and December 31, 2010.
There were no other audit fees, audit-related fees, tax fees or other fees billed by either of our independent registered public accounting firms during the fiscal year ended March 31, 2011. All audit fees have been pre-approved by the Board of Directors.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Financial Statements and Schedules:
Financial statements as of March 31, 2011 and for the period then ended are included in Item 8. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(b)
Exhibits:
The following exhibits are incorporated by reference or filed as part of this report.
*
This exhibit is a management contract or compensatory plan or arrangement.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
POWER OF ATTORNEY AND SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Daniel Correa as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.