ITEM 1. DESCRIPTION OF BUSINESS
History
We were incorporated in the State of Nevada on September 27, 2004 as “Asia Projects Corporation”, for the purpose of distributing health supplements worldwide. On May 9, 2006 we changed our name to Smokers Lozenge Inc.
Effective April 3, 2008, we completed a merger with our subsidiary, Cybermesh International Corp, a Nevada company with no prior operating history and with no assets, liabilities or equity. As a result, we changed our name from “Smokers Lozenge Inc.” to ”Cybermesh International Corp.” to better reflect the proposed future direction and business of our company.
On February 28, 2008, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Cyber Mesh Systems Inc. (“CMS BC”), a company incorporated in the Province of British Columbia, wherein we have agreed to purchase all the assets of CMS BC. Consideration for the purchase of the assets is the forgiving of a loan from our company to CMS BC in the amount of $100,000. In addition to the forgiving of the loan, we agreed to issue 42,500 shares of our company (post share consolidation) to CMS BC. Please refer to Exhibit 10.1 for further particulars.
The Agreement was subsequently terminated on July 23, 2008. Please refer to Exhibit 10.2 for further particulars.
Prior to signing the Asset Purchase Agreement we were a distributor of the health supplement “Smokers Lozenge” (the “Lozenge”) for smokers, ex-smokers and people who have been exposed to second hand smoke. Its purpose is to relieve coughing, eradicate phlegm and other associated discomforts experienced with exposure to cigarette smoke. Operations commenced September 30, 2005.
We had a distribution agreement entitling us to market and sell the Lozenge on an exclusive basis worldwide, with the exception of China, which was on a non-exclusive basis. This agreement and sub distribution agreements were cancelled effective February 28, 2008. Accordingly, we have no intention of continuing or expanding the business of distribution of the Lozenge.
Acquisition of Subsidiaries
Effective August 23, 2008, we completed the acquisition of our subsidiary, Omni Research Corporation (“Omni”). Omni is a company incorporated under the laws of Belize and prior to our acquisition, had no prior operating history and no assets, liabilities or equity. Omni has an authorized capital of 50,000 common shares of which all 50,000 shares were issued to us for consideration of $5,000. Omni subsequently changed its name to Cybermesh Systems Inc.
Debt Settlement Agreement
On August 27, 2008, we entered into a debt settlement agreement with CMS BC. CMS BC owed us $100,000 pursuant to a promissory note. The $100,000 was settled in exchange for products and proprietary technologies currently being marketed and also products and proprietary technologies under development by CMS BC. Pursuant to the agreement, these assets shall be transferred to Omni, our wholly owned subsidiary. Please refer to Exhibit 10.3 for further particulars.
Service Agreement
On September 15, 2008, we entered into a service agreement (the “Service Agreement”) with Block Arcade I.T. Services Inc. (“Block Arcade”), an independent Nevada based high tech product research and development company. We engaged Block Arcade to launch the Acquired Technologies consisting of Blast IPTV - high definition streaming video TV, Free Internet Hot Spots - local advertising supported wireless networks, Mobile 2 Global Cellular - VOIP Communication Products, Wireless Network Routers and other telecommunication equipment into market by delivering high definition videos, movies, television programming, and audio visual
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products - internet to end user devices. Block Arcade was to use various proprietary technologies acquired under the debt settlement agreement in developing the Acquired Technologies, such as compression, encryption, video streaming and telecommunication technologies. The acquired technologies were licensed to Block Arcade for the sole purpose of research and development. The contract for services was for one year term, with a monthly fee payable in advance in the amount of $50,000. Please refer to Exhibit 10.4 for further particulars.
On December 15, 2008, we terminated our agreement with Block Arcade by way of a Termination Agreement. We are currently sourcing bids for furthering our research and development from various high-tech companies and hope to obtain a more cost effective method to launch the Acquired Technologies into market. At this time we cannot estimate when a new service agreement will be finalized. Please refer to Exhibit 10.5 for further particulars.
We have put our Acquired Technologies in abeyance as the technical consulting team in charge of developing the technologies has abandoned the development of the technologies without notice, effectively terminating their relationship with our company. All attempts by us to settle this matter with the consulting team have been futile. We perform a review for potential impairment of long-lived assets at least annually in order to ensure that recorded amounts are recoverable. As of May 31, 2009 those assets were deemed impaired and written off.
We currently do not have any business activity.
The market in which we operate
We have not marketed any products as of the date of this Form 10-K.
Employees (See also “Description of Property” below)
Our principal business and administrative branch office for North American investor relations and U.S. regulatory reporting is located at Suite 200, 245 East Liberty Street, Reno, Nevada, 89501.
Any of the following risks could materially adversely affect our business, financial condition, or operating results.
All parties and individuals reviewing this Form 10K and considering us as an investment should be aware of the financial risk involved. When deciding whether to invest or not, careful review of the risk factors set forth herein and consideration of forward-looking statements contained in this registration statement should be adhered to. Prospective investors should be aware of the difficulties encountered as we face all the risks including competition, and the need for additional working capital. The likelihood of our success must be considered in light of the problems and expenses that are frequently encountered in connection with operations in the competitive environment in which we will be operating.
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***You should read the following risk factors
carefully before purchasing our common stock. ***
RISKS RELATING TO OUR BUSINESS
We have a limited operating history upon which an evaluation of our prospects can be made. For that reason, it would be difficult for a potential investor to judge our prospects for success.
We were organized in September 2004 and we commenced operations on September 30, 2005. We have had limited operations since our inception from which to evaluate our business and prospects. There can be no assurance that our future proposed operations will be implemented successfully or that we will be able to generate profits. If we are unable to sustain our operations, you may lose your entire investment. We face all the risks inherent in a new business, including the expenses, difficulties, complications and delays frequently encountered in connection with conducting operations, including capital requirements and management's potential underestimation of initial and ongoing costs. As a new business, we may encounter delays and other problems in connection with the methods of product distribution that we implement. We also face the risk that we will not be able to effectively implement our business plan. In evaluating our business and prospects, these difficulties should be considered. If we are not effective in addressing these risks, we will not operate profitably and we may not have adequate working capital to meet our obligations as they become due.
We are dependent on the services of our sole officer and director and the loss of his services could have a material adverse effect on our ability to carry on business.
We are substantially dependent upon the efforts and skills of our sole officer and director, Locksley Samuels. We do not an employment contract with Mr. Samuels and thus he has no obligation to fulfill such capacities as officer and director for any specified period of time. The loss of the services Mr. Samuels will have a material effect on our business.
If we do not receive shareholder loans we may be unable to continue meeting our minimum funding requirements.
As of May 31, 2010 we have a negative working capital of $ 2,71,453. We will require shareholder loans to meet our working capital needs; however, we have no formalized agreements with shareholders guaranteeing that any funds will be available to us. We may exhaust this source of funding at any time, which would cause us to cease operations.
RISKS RELATING TO OUR COMMON STOCK
There has been no active trading activity for our common stock and therefore the stock you purchase may be illiquid for an indefinite period of time.
There is assurance that an active trading market for our common stock will develop or be sustained.
Broker-dealers may be discouraged from effecting transactions in our shares because they are considered penny stocks and are subject to the penny stock rules.
The Securities and Exchange Commission (the "Commission") has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share, subject to certain exceptions. Our Common Stock is presently subject to these regulations which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a “penny stock”, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the “penny stock” market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if
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the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the “penny stock” held in the account and information on the limited market in “penny stocks”. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell our securities and may negatively affect the ability of purchasers of our shares of Common Stock to sell such securities.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2.
ITEM 2. PROPERTIES
Principal Business Office
Our administrative office for North American investor relations and U.S. regulatory reporting is located at Suite 200, 245 East Liberty Street, Reno, Nevada, 89501.
There are currently no proposed programs for the renovation, improvement or development of the facilities that we currently use. We believe that this arrangement is suitable given the nature of our current operations, and believe that we will not need to lease additional administrative offices in the immediate future.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following individuals were elected unanimously to the Board of Directors to serve until the next Annual Meeting of Stockholders:
(1) Directors hold office until the next annual stockholders’ meeting or until a successor or successors are elected and appointed.
We approved the appointment of Robert G. Jeffrey as our independent accountants for the fiscal year ended May 31, 2010.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR COMMON EQUITY
No Trading Activity for Common Stock
We are listed on the OTC Bulletin Board; however, there has been no trades of our common stock as of the date of this Form 10-K.
Stockholders of Our Common Shares
As of September 13, 2010, we had 11,985,400 commons shares outstanding.
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Under Rule 144 as currently in effect, a person who has beneficially owned shares of a company’s common stock for at least one year is entitled to sell within any three month period a number of shares that does not exceed the greater of:
1. 1% of the number of shares of the company’s common stock then outstanding which, in our case, will equal 1,183 shares as of the date of this prospectus; or
2. the average weekly trading volume of the company’s common stock during the four calendar weeks preceding the filing of a notice on form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the company.
Under Rule 144(k), a person who is not one of the company’s affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
Stock Option Grants
On September 24, 2008, the Board of Directors approved the granting of options to purchase a total of up to 15,000 shares of common stock (adjusted for 200 for 1 share consolidation) as described in the 2008 Stock Option Plan (the “2008 Plan”) to our directors, officers, employees and consultants. The following is intended as a brief description of the 2008 Plan and is qualified in its entirety by the full text of the 2008 Plan which is attached as Exhibit 10.6.
Administration
The 2008 Plan will be administered by the Board of Directors. The Board of Directors may appoint a committee of the Board of Directors (the “Committee”) comprised of two or more of directors, each of whom will be a “Non-Employee Director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an “Outside Director” within the meaning of Section 162(m) of the Code, to administer the 2008 Plan. Subject to the terms of the 2008 Plan, the Board of Directors or the Committee may determine and designate those employees, directors and consultants to whom options should be granted and the nature and terms of the options to be granted.
Eligibility
All of our employees, including our executive officers and directors who are also employees, are eligible to participate in the 2008 Plan. Directors who are not employees, as well as our consultants and advisers, are eligible to receive options under the 2008 Plan, except that such persons may only receive non-qualified options. Additionally, options granted to non U.S. residents may also only receive non-qualified options.
Exercise of Stock Option
The exercise price per share for each option granted under the 2008 Plan shall be determined by the Board of Directors or the Committee.
Subject to earlier termination upon termination of employment and the incentive stock option limitations as provided in the 2008 Plan, each option shall expire on the date specified by the Board of Directors or the Committee.
The options will either be fully exercisable on the date of grant or shall be exercisable thereafter in such installments as the Board of Directors or Committee may specify. Upon termination of employment or other
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service of an option holder, an option may only be exercised for a period of three months or, in the case of termination due to disability or death, a period of 12 months.
Transferability
Options granted under the 2008 Plan may not be transferred except by will or the laws of the descent and distribution and, during his or her lifetime, options may be exercised only by the optionee.
Certain Adjustments
In the event of any change in the number or kind of our outstanding common shares by reason of a stock dividend, stock split, recapitalization, combination, subdivision, rights issuance or other similar corporate change, the Board shall make such adjustment in the number of common shares that may be issued under the 2008 Plan, and the number of common shares subject to, and the exercise price of, each then outstanding option, as it, in its sole discretion, deems appropriate.
Amendment or Discontinuance
The Board may amend or discontinue the 2008 Plan, provided that no amendment may, without an optionee’s consent, materially and adversely affect any rights under any option previously granted to the optionee under the 2008 Plan.
Our current issued and outstanding shares could be sold at the appropriate time pursuant to Rule 144 of the Securities Act.
As of May 31, 2010, there were no options yet granted under this Plan.
Securities Authorized For Issuance Under Equity Compensation Plans
The Company did not have an equity compensation plan in place as of May 31, 2010.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock or other securities and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant.
Recent Sales of Unregistered Securities
Except as reported in previous filings, we did not sell any securities in transactions which were not registered under the Securities Act in the fiscal year ended May 31, 2010.
Subsequent to May 31, 2010, the Company settled $ 118,671 of debt incurred as of May 31, 2010 on shareholder and consultant loans and related accrued interest by issuance of 11,867,100 restricted common shares on June 28, 2010, of which 5,755,800 was issued to Multi Media Capital Corp. (“Multi Media”) and 6,111,300 was issued to Zhunger Capital Partners Inc. (“Zhunger Capital”), at a price of $0.01 per share.
As a result, there has been a change in control of the Company. As of **DATE*, there are 11,985,400 shares of common stock issued and outstanding. Thus, the acquisition by Multi Media and Zhunger Capital of the 5,755,800 and 6,111,300 shares of common stock represents an equity interest of approximately 48% and 51% in the Company, respectively. There are no arrangements or understandings between the Company and Multi Media and Zhunger Capital and their respective agents and associates with respect to election of directors or other matters.
The offer and sale of the shares were exempt from registration pursuant to section 4(2) of the Securities Act, Rule 701 and Rule 506 of Regulation D promulgated there under. The Company’s limited the manner of the offering and provided disclosure regarding the offering and the Company to the shareholders. The Company
believes that these sales were also exempt under Regulation S under the Securities Act, as such sales were made in offshore transactions to non-U.S. persons.
DESCRIPTION OF SECURITIES
As of September 13, 2010, our total authorized capital is 200,000,000 common shares with a par value of $0.001 per share.
Effective June 28, 2010, we filed a notice with the Secretary of State for Nevada, pursuant to NRS 78.385 and 78.390 of the Nevada Statutes, increasing the Company’s authorized share capital from 15,000,000 to 200,000,000 shares..
The increase in authorized share capital was approved by majority vote of the Company’s shareholders..
All of our authorized shares are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of shares are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders. Holders of shares are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available. However, our present intention is not to pay any cash dividends to holders of shares but to reinvest earnings, if any. In the event of our liquidation, dissolution or winding up the holders of shares are entitled to share pro-rata in all assets remaining after payment of liabilities.
Our shares have no pre-emptive, conversion or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares.
Our articles and by-laws do not contain any provisions that would delay, defer or prevent our change in control.
Dividend Policy:
We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Should we declare a dividend in the future, such dividend will be paid to shareholders on a pro rata basis in accordance with their shareholdings at such time.
Share Purchase Warrants:
On September 1, 2008, we carried out a private placement offering of units, with each unit consisting of one share of common stock and one share purchase warrant. Subscriptions totaling $290,000 were received from four investors for a total of 5,800 stock units at $50.00 per unit, as adjusted for the 200 for 1 share consolidation.
Each warrant entitles the subscriber to purchase one additional common share for a period of 24 months from the date of issuance, at an exercise price of U.S. $100.00 per warrant, as adjusted for the 200 for 1 share consolidation.
Options:
As of May 31, 2010, there were no options yet granted under the 2008 Stock Option Plan.
Changes in Control:
Our common and preferred shares have no pre-emptive, conversion or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares.
Our articles and by-laws do not contain any provisions that would delay, defer or prevent our change in control.
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Item 6.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Notice Regarding Forward Looking Statements
We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our next Annual Report on form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
OVERVIEW.
Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The application of GAAP involves the exercise of varying degrees of judgment. The resulting accounting estimates will not always precisely equal the related actual results. Management considers an accounting estimate to be critical if:
assumptions are required to be made; and
changes in estimates could have a material effect on our financial statements.
We have determined that the measurement of impairment expense and the calculation of the fair value of equity securities issued for services meet those criteria of a significant estimate.
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Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following is an analysis of our revenues and gross profit, details and analysis of components of expenses, and variances from May 31, 2010 to May 31, 2009.
Sales
We did not generate any revenues during the year ended May 31, 2010 and 2009.
Expenses
For the year ended May 31, 2010 and 2009, our administrative expenses totaled $ 43,888 and $362,333 respectively, as follows:
In 2009, we incurred $259,032 in research and development costs relating to the Service Agreement, which agreement was terminated during the year due to additional costs incurred and complexities encountered, resulting in impairment charge of $100,000. We have put our Acquired Technologies in abeyance as the technical consulting team in charge of developing the technologies has abandoned the development of the technologies without notice, effectively terminating their relationship with our company. All attempts by us to settle this matter with the consulting team have been futile. We perform a review for potential impairment of long-lived assets at least annually in order to ensure that recorded amounts are recoverable. As of May 31, 2009, those assets were deemed impaired and written off. We currently do not have any business activity.
Legal and accounting fees amounted to $ 40,102, of which $ 24,235 in legal fees were incurred in conjunction with the acquisition of subsidiary and the remaining $ 15,367 in accounting fees related to audit fees and accounting fees incurred for the preparation of records each quarter.
Bad debt expense consists of the reversal of $3,500 of interest income which had accrued on the $100,000 advance, which was cancelled as per the Debt Settlement Agreement.
Legal and accounting fees amounted to $ 16,967 of which legal fees of $ 4,267 were incurred relating to preparation of various agreements, and the remaining $ 12,600 accounting fees related to audit fees for the fiscal year end and accounting fees incurred for preparation of records of each quarter.
Consulting fees in the amount of $ 25,000 were incurred for EDGAR filing fees and preparation of various SEC required filings, and a further $ 1,345 were incurred for transfer agent fees. The remaining balance of $ 576 consists of bank charges and office expenses such as rent and office supplies.
Other Expenses
Interest expense relates largely to financing required for the purchase of Acquired Technologies, prior to the Settlement Agreement” referred to in Item 1 - Description of Business and is virtually unchanged between the
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years ended May 31, 2010 and May 31, 2009. The amount for the year ended May 31, 2010 was $ 11,388 compared to $10,209 for the year ended May 31, 2009.
Current trends in the industry
We are not aware of current trends in the industry which will affect our operations.
Liquidity and Capital Resources
Working Capital Needs:
As of May 31, 2010, we had a negative working capital of $ 271,453. Over the next 12 months, we will require approximately $ 186,000 to sustain our working capital needs as follows:
Please note that as mentioned above in “Recent Sales of Unregistered Securities”, $ 118,671 of our current liabilities consisting of shareholder and consultant loans and related interest were settled by issuance of 11,867,100 common shares at $ 0.01.
Sources of Capital:
Our only source of funding is shareholder loans. Shareholder loans will be without stated terms of repayment, with interest at the rate of 6% per annum. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time. We are not considering taking on any long-term or short-term debt from financial institutions in the immediate future.
Cash Flows
Operating Activities:
Net cash consumed by operating activities were $ 4,686 and $ 336,845 in fiscal year end 2010 and 2009, respectively.
In 2009, the $100,000 value of the Acquired Technologies obtained as part of Debt Settlement Agreement on August 28, 2008 was deemed impaired as of May 31, 2009 and written off. Interest of $3,500 was forgiven, which had previously accrued on the $100,000 advance. Deposits of $1,500 consist of legal retainer of which was expensed in 2010. Our accrued liabilities increased as a result of professional fees accrued for legal and accounting fees. Accrued interest relates to the $100,000 note payable and loans from a consultant and shareholders.
Financing Activities:
During the year ended May 31, 2010, the Company received loans in the amount of $ 4,638.
During the year ended May 31, 2009, net cash provided by financing activities was $340,475. We obtained advances from a consultant in the amount of $86,697, of which $30,222 was repaid. The loan was advanced in order to fund our research and development efforts. The loan bears interest of 6% and there are no stated terms of repayment. We carried out a private placement to raise $290,000 for issuance of 1,160,000 units, with each unit consist of one common share and one share purchase warrant (5,800 units after share split) in order to fund our working capital needs, the majority of which were allocated to research and development. A 6% finders fee
was paid in the amount of $17,500, resulting in net proceeds of $272,500. We received $36,500 in new shareholder loans and repaid $25,000 of shareholder loans.
On December 31, 2007, we signed a promissory note with an investor, granting us $100,000 for the purpose of facilitating the Asset Purchase Agreement with CMS BC. The loan was payable on the earlier of 365 calendar days from the advancement of the loan, 60 days from the consummation of the Agreement, or 30 days from the termination for any reason of the Asset Purchase Agreement. The $100,000 was subsequently loaned to CMS BC and upon finalizing the Agreement; this advance was forgiven by us as part of a debt settlement arrangement in consideration of the assets of CMS BC consisting of intellectual properties.
The promissory note with the investor was convertible to common stock at our option. The conversion rate is $200 per share (post 200 for 1 share consolidation). On September 11, 2008, the promissory note was assigned to a shareholder. Coincident with the assignment of the note, the conversion privilege was terminated.
As the Asset Purchase Agreement was terminated July 23, 2008, payment of the promissory note was due from CMS BC on August 22, 2008. On August 28, 2008, we signed a debt settlement agreement with CMS BC wherein the $100,000 debt would be cancelled upon the exchange for products and proprietary technologies developed.
We received an additional $ 4,638 in loans from a consultant during the 2010 year.
Material Commitments
We do not have any material commitments for capital expenditures.
Seasonal Aspects
Management is not currently aware of any seasonal aspects which would affect the results of our operations during any particular time of year.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in market prices, including interest rate risk, foreign currency exchange rate risk, security market risk, commodity price risk, and other relevant market rate or price risks. We do not have any significant risks related to equity investments, security markets or derivative financial instruments as we do not have equity investments in privately held companies, security markets or derivative financial instruments. Nor do we have any significant interest rate risk. We are not exposed to foreign currency exchange rate risk, commodity price risk and credit risk.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Cybermesh International Corp.
We have audited the accompanying consolidated balance sheets of Cybermesh International Corp. (a development stage company) as of May 31, 2010 and 2009, and the related consolidated statements of Income, changes in stockholders’ equity, and cash flows for years ended May 31, 2010 and 2009 and for the period from August 28, 2008 ( the date of inception of development stage) to May 31, 2010.. These consolidated financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial positions of Cybermesh International Corp. (a development stage company) as of May 31, 2010 and 2009, and the results of its operations and cash flows for the years end May 31, 2010 and 2009 and for the period from August 28, 2008 to May 31, 2010 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 shown in the accompanying financial statements, at May 31, 2010, the Company had an accumulated deficit of $ 557,097, a deficit in working capital of $ 271,453 and a history of continuing losses. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should the Company be unable to continue in operation.
/s/ Jeffrey & Company, Certified Public Accountants
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These accompanying notes are an integral part of these financial statements.
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CYBERMESH INTERNATIONAL CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2010
1. ORGANIZATION AND BUSINESS
Organization of Company
The Company was incorporated in the State of Nevada on September 27, 2004 as “Asia Projects Corporation”, for the purpose of distributing health supplements worldwide. On May 9, 2006 the Company changed its name to “Smokers Lozenge Inc.”. It commenced operations on September 30, 2005.
On February 28, 2008, the Company executed an asset purchase agreement (the “Agreement”), with Cyber Mesh Systems, Inc. (“CMS BC”), under which the Company would acquire all the assets of CMS BC in return for 22,500,000 pre split shares (112,500 post split share) of Company common stock and the forgiveness of $100,000 of debt owed to the Company by CMS BC. CMS BC is incorporated in the Canadian province of British Columbia. It is an internet-based research and development company. Shares to be used to close this acquisition were issued on February 29, 2008 and deposited with an escrow agent pending the closing. The closing was to take place on May 31, 2008.
Pursuant to the terms of the Agreement, 22,500,000 pre split shares (112,500 post split share) were issued and held in escrow on February 28, 2008, pending the closing date when these shares were to be issued to respective shareholders. The Agreement was subsequently terminated on July 23, 2008.
On April 3, 2008, the Company merged with a subsidiary, Cybermesh International Corp, a Nevada company with no prior operating history and with no assets, liabilities or equity. As a result, the Company changed its name to Cybermesh International Corp. (“CMI Nevada”) to better reflect the proposed future direction and business of the company.
The terms of the Agreement were subsequently renegotiated and, on August 27, 2008, an agreement was executed with CMS BC under which the Company would acquire all of the assets of CMS BC consisting of various technologies in return for $100,000 of advances which the Company had made to CMS BC. Title to these assets, which consist principally of computer based intellectual property, was assigned to CMS Belize, the Company’s wholly owned subsidiary.
The Company has put its acquired technologies in abeyance as the technical consulting team in charge of developing the aforesaid technologies abandoned the development of the technologies without notice, terminating their relationship with the Company. All attempts to settle the respective differences between the consulting team and the Company have been futile. As of May 31, 2009 those assets were deemed impaired and written off. The Company currently does not have any business activity.
Effective August 23, 2008, the Company completed an acquisition of Omni Research Corporation. The name of the company was subsequently changed to Cybermesh Systems Inc. (“CMS Belize”). CMS Belize is a company incorporated under the laws of Belize in August 2008 and prior to being acquired; it had no prior operating history and no assets, liabilities or equity. CMS Belize has an authorized capital of 50,000 common shares of which all 50,000 shares were issued to the Company for consideration of $ 5,000.
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CYBERMESH INTERNATIONAL CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2010
These financial statements include the accounts of the Company and its wholly owned subsidiary, CMS Belize. All intercompany transactions have been eliminated in consolidation.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
For purposes of the statements of cash flows, the Company considers all short term debt securities purchased with a maturity of three months or less to be cash equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and, advances receivable.
Recognition of Revenue
Revenue is recognized when product is delivered to customers. In determining recognition, the following criteria are considered: persuasive evidence exists that there is an arrangement between buyer and seller; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments consisting only of cash approximate their fair value at May 31, 2010.
Income Taxes
The Company accounts for income taxes in accordance with current pronouncements of the Financial Accounting Standards Board (FASB) which requires the use of the “liability method”. Accordingly, deferred tax liabilities and assets are determined based on differences between the financial statement and tax bases of assets and liabilities, and of net operating loss carry forwards, using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the income that is currently taxable.
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CYBERMESH INTERNATIONAL CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2010
3. SUMMARY OF SIGNIFICANT 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 certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimated.
Advertising Costs
The Company will expense advertising costs when the advertisement occurs. The Company did not incur any advertising costs in the years ended May 31, 2010 or 2009.
Net Income per Share
The Company computes net income (loss) per common share in accordance with prouncements of the FASB and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under these pronouncements,, basic and diluted net income per common share are computed by dividing the net income available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period. Accordingly, the number of weighted average shares outstanding as well as the amount of net income per share are presented for basic and diluted per share calculations for all periods reflected in the accompanying financial statements.
Shares potentially issuable under the terms of option or warrant agreements or pursuant to conversion provisions of the convertible note re not included in the calculation of average shares outstanding, as their inclusion would have an anti-dilutive effect.
Segment Reporting
Management treats the operations of the Company as one segment.
Research and Development
Research costs are expenses as incurred. Development costs are also expensed unless, in the Company’s view, they meet specific criteria related to technical, market and financial feasibility, in which case they are deferred and amortized. Amortization is calculated on a straight-line basis over the expected life of the related products. Through May 31, 2010,, the Company had not incurred any research costs which would be required to be amortized.
Impairment
The Company performs a review for potential impairment of long-lived assets at least annually in order to ensure that recorded amounts are recoverable.
Stock Based Compensation
The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued.
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CYBERMESH INTERNATIONAL CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2010
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
Except for a pronouncement of the FASB described in Note 16, the Company does not expect adoption of recently issued accounting pronouncements to have a significant effect on the Company’s results of operations, financial position or cash flows.
4. SHAREHOLDER NOTE PAYABLE
The Company is obligated under a note agreement which bears interest at 6% Maturity of the note originally depended on the outcome of the Asset Purchase Agreement (Note 1). As a result of the termination of that Agreement, the note is now due on demand. On September 11, 2008, the promissory note was assigned to a shareholder and the conversion privilege was cancelled.
5. AMOUNTS DUE TO SHAREHOLDERS
Shareholder loans do not bear interest but interest has been imputed at 6%; they are due on demand.
6. RELATED PARTY TRANSACTIONS
The Company conducts its business in the office of its agent. There has been no rent charged for this use. If there were such a charge, it would be nominal. The Company’s agent lent funds to the Company in both the years ended May 31, 2009 and May 31, 2010.
The advances from shareholders are $ 26,500. These obligations do not bear interest but interest has been imputed at 6%. The advances are due on demand. These obligations were settled on July 28, 2010 by issuance of common stock. See Note 16.
7. SHARE AUTHORIZATION AND STOCK SPLIT
On June 8, 2009 the Company requested a roll back of its authorized and outstanding stock by 200 times. The authorized common shares were decreased to 15,000,000 and the outstanding number of shares was decreased to 118,300. That stock split was approved by the Financial Industry Regulatory Authority (“FINRA”) on August 14, 2009. The split is reflected on the financial statements as if it occurred on earliest date presented.
On September 1, 2008, the Company began a private placement offering for the issuance of equity securities. Common stock and warrants to purchase common stock were offered as units, with each unit consisting of one share of stock and one warrant to purchase an additional share of stock at $.50 per share ($ 100 post split) for a period of twenty four months. A total of 1,160,000 units (5,800 units after the stock split) were acquired by 4 investors, yielding net proceeds of $272,500. The warrants were originally valued at $ 0.05 based upon a Black Scholes valuation model.
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CYBERMESH INTERNATIONAL CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2010
8. PRIVATE PLACEMENTS, CONTINUED
The 1,160,000 warrants (or 5,800 warrants as adjusted for stock split) that were issued as part of stock units are the only warrants issued by the Company. None have been exercised through May 31, 2010, leaving 5,800 warrants outstanding as of May 31, 2010. As of May 31, 2010, those warrants have three months remaining with an adjusted exercise price of $ 100 per warrant.
The following assumptions were used in the initial valuation of warrants:
9. ADVANCES FROM CONSULTANT
The Company received advances from a consultant totaling $ 61,113. These advances provided for working capital needs. The advances bear interest at 6% per annum.
10. EXPENSES
Major items included in Administrative Expenses were the following:
11. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
There was no cash paid for income taxes during any of the periods presented. Cash paid for interest during the 2009 year was $ 1,813 and no payments were made during the 2010 year. Except as described in the next paragraph, there were no non-cash investing or financing activities during any of the periods presented.
On August 27, 2008, an agreement was concluded with CMS BC under which the Company acquired all of the assets of CMS BC in return for forgiveness of $100,000 of advances which the Company had made to CMS BC. Title to these assets, which consist principally of computer based intellectual property, was assigned to CMS Belize, the Company’s wholly owned subsidiary. As of May 31, 2009 those assets were deemed impaired and they were written off.
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CYBERMESH INTERNATIONAL CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2010
During the fiscal year ended May 31, 2010, the Company’s Board of Directors adopted a stock option plan (“The 2008 Stock Option Plan.”). The Plan provides for the issuance of up to 15,000 shares to assist the Company in retaining those officers, employees, consultants or directors whose services would contribute to success of the Company. As of May 31, 2010, there were no options yet granted under this Plan.
13. TERMINATION OF MATERIAL AGREEMENT
On September 15, 2008, the Company entered into a servicing agreement with Block Arcade IT Services Inc. (Block Arcade). The agreement called for Block Arcade to further develop the computer-based intellectual property which the Company had acquired from CMS BC. The agreement committed the Company to pay servicing fees of $ 50,000 per month for a minimum of one year.
On December 15, 2008, the Company executed a Termination Agreement with Block Arcade and the obligation for monthly fees was terminated. Through the date of termination, the Company had paid fees totalling $150,000. That amount has been included in research and development expense of $ 259,032 (see Note #10).
The Company experienced losses during the years ended May 31, 2010 and 2009. The Internal Revenue Code allows net operating losses (NOL’s) to be carried back and then forward and applied against future profits for a period of twenty years. Losses which total $ 557,097, are available for future years; if not used, these carryforwards will expire as follows:
Under current accounting guidance, recognition of deferred tax assets is permitted unless it is more likely than not that the assets will not be realized. The potential benefit of the loss carryforwards has been offset by a valuation allowance. The Company has recorded deferred tax assets as follows:
The valuation allowance increased by $ 8,292 during the year ended May 31, 2010.
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CYBERMESH INTERNATIONAL CORP.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2010
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company had a working capital deficiency as of May 31, 2010 of $ 271,453 and an accumulated deficit as of that date in the amount of $ 557,097 and has experienced continuing losses. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation. The Company’s present plans, the realization of which cannot be assured, to overcome these difficulties include, but are not limited to, the continuing effort to raise capital in the public and private markets.
In May, 2009, the FASB established general standards of accounting for and disclosure of subsequent events that occur after the balance sheet date but before the financial statements are issued. The Company incorporated the requirements of this guidance in the preparation of the accompanying financial statements and concluded its review on the date of issuance of these financial statements.
On June 28, 2010, the Company settled $ 118,671 of debt obligations by the issuance of 11,867,100 restricted common shares of which 5,755,800 was issued to Multi Media Capital Corp. (“Multi Media”) and 6,111,300 was issued to Zhunger Capital Partners Inc. (“Zhunger Capital”), at a price of $0.01 per share. The acquisition by Multi Media and Zhunger Capital of the 5,755,800 and 6,111,300 shares of common stock represents equity interests of approximately 48% and 51% in the Company, respectively.
Effective June 28, 2010, the Company filed a notice with the Secretary of State of Nevada, pursuant to NRS 78.385 and 78.390 of the Nevada Statutes, whereby the Company increased its authorized share capital from 15,000,000 to 200,000,000.
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ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL STATEMENTS
None.
ITEM 9A(T).
ITEM 9A(T). CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Our chief executive officer and chief financial officer have concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management, with the participation of our chief executive officer and chief financial officer, as of the end of the period covered by this report, that our disclosure controls and procedures were not effective for this purpose, except as noted below under “Changes in Internal Controls.”
Changes in Internal Controls. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this Annual Report on Form 10-K our disclosure controls and procedures were not effective to enable us to accurately record, process, summarize and report certain information required to be included in our periodic SEC filings within the required time periods, and to accumulate and communicate to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Prior to the issuance of our financial statements, we completed the account reconciliations, analyses and our management review such that we can certify that the information contained in our financial statements for the year ended May 31, 2010, fairly presents, in all material respects, the financial condition and results of operations of the Company.
Limitations on Effectiveness of Controls and Procedures. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15 under the Exchange Act, as amended. As of May 31, 2010, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, an evaluation was conducted of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management of our
company, including the chief executive officer and the chief financial officer, concluded that our internal control over financial reporting was not effective as of May 31, 2010.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and 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.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s Report was not subject to attestation by our public accounting firm pursuant to temporary rules of the SEC that permit us to provide only Management’s Report in this Annual Report.
Changes in Internal Controls Over Financial Reporting.
There were no changes in our internal control over financial reporting that could materially affect these controls during our most recent quarter.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following information sets forth the name of our sole officer and director, his present position, age and biographical information within the last 5 years. Also provided is a brief description of the business experience of our sole director and executive officer and significant employee during the past five years and an indication of directorships held by such director in other companies subject to the reporting requirements of the Exchange Act.
(1) Directors hold office until the next annual stockholders’ meeting or until a successor or successors are elected and appointed.
Locksley Samuels was appointed the above noted positions on September 11, 2008. Mr. Samuels is responsible for operations, financial budgets and forecasts, implementing our investment projects, overseeing research and development and human resources and marketing. Mr. Samuels is also responsible for our overall direction and various initiatives as needed from time to time in maintaining our company, and overseeing our public relations efforts with investors. Mr. Samuels does not hold any shares in our company.
Mr. Samuels is currently the President of Eurotrend Manufacturing Co., Ltd., (“Eurotrend”), a company based in Jamaica, providing services for design, manufacturing and installation of custom kitchen cabinetry. Mr. Samuels has been the President of Eurotrend since its inception in 1984.
Mr. Samuels obtained his Bachelors of Applied Sciences degree in Chemical Engineering from the University of Waterloo in Ontario, Canada in 1975.
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Significant Employees:
Our only significant employee is our sole officer and director, Mr. Samuels.
Family Relationships:
As we have only one director and executive officer, there are no arrangements or understandings pursuant to which a director or executive officer was selected to be a director or executive officer.
Involvement in Certain Legal Proceedings:
Our sole director, executive officer and control person has not been involved in any of the following events during the past five years and which is material to an evaluation of the ability or the integrity of our director or executive officer:
1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
3. being 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; and
4. being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Investor Relations
We have not engaged investor relations professionals.
Audit Committee
We do not currently have a standing audit committee. The Company’s Chief Executive Officer is actively researching candidates for membership on the Board of Directors who would be “independent” and who, accordingly, could serve on an audit committee. The board member who is currently performing the equivalent functions of an audit committee is our President, Locksley Samuels, who has not been determined to be an “audit committee financial expert.”
Audit Committee Financial Expert
We do not have an audit committee financial expert serving on the audit committee. Under the applicable Securities and Exchange Commission standard under Item 407(d) of Regulation S-K, an audit committee financial expert means a person who has the following attributes:
An understanding of generally accepted accounting principles and financial statements;
The ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;
Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
An understanding of internal controls and procedures for financial reporting; and
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An understanding of audit committee functions. Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a)of the Exchange Act requires our officers and directors, and persons who own more than 10% of the its common stock, to file reports of ownership and changes of ownership of such securities with the United States Securities and Exchange Commission. As of the year ended May 31, 2010, our sole officer and director did not hold any shares of our common stock.
Code of Ethics
We do not have a code of ethics.
Material Changes to Nominations by Security Holders of Director Candidates
In the past fiscal year, there has been no material change to the procedures by which security holders may recommend nominees to the issuer’s board of directors.
DIRECTORS’ COMPENSATION
Our sole directors do not receive compensation for serving on the Board of Directors. Our sole director is reimbursed for any expenses incurred on our behalf.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Our sole officer and director was not compensated during the fiscal years ended May 31, 2010 and May 31, 2009.
We presently do not have any compensation agreement with our sole officer and director.
Stock Option Grants
We have not granted any stock options to our sole executive officer since incorporation.
Consulting Agreements
We do not have any employment or consulting agreement with our sole officer and director and we will not pay such director any amount for acting on the Board of Directors.
The table below summarizes all compensation awarded to, earned by, or paid to our sole executive officer for all services rendered in all capacities to us for the fiscal year ended May 31, 2010 and May 31, 2008.
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ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 13, 2010 certain information regarding the beneficial ownership of our common stock by:
1. each person who is known by us to be the beneficial owner of more than 5% of the common stock, and
2. our sole director and executive officer, and
The persons or entities listed below have sole voting and investment power with respect to all shares of common stock beneficially owned by them, except to the extent such power may be shared with a spouse. No change in control is currently being contemplated.
As of September 13, 2010, 11,985,400 shares with a par value of $0.001 per share were issued and outstanding. We are authorized to issue 200,000,000 shares with a par value of $0.001 per share.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 1, 2008, we carried out a private placement offering of units, with each unit consisting of one share of common stock and one share purchase warrant to purchase an additional share of common stock at a price of $0.50 per share, exercisable for a period of twenty four months. A total of 1,160,000 common shares (unadjusted for 200 for 1 share consolidation) were purchased by four investors, for a total of $290,000.
On June 8, 2009 we completed a consolidation of our authorized and outstanding stock on the basis of 200 old shares for one new share. Consequently, our authorized common shares were decreased to 15,000,000 and the issued share capital was decreased to 118,300 shares of common stock.
On June 28, 2010, the Company settled $ 118,671 of debt incurred as of May 31, 2010 on shareholder and consultant loans and related accrued interest by issuance of 11,867,100 restricted common shares from treasury of which 5,755,800 was issued to Multi Media Capital Corp. (“Multi Media”) and 6,111,300 was issued to Zhunger Capital Partners Inc. (“Zhunger Capital”), at a price of $0.01 per share.
The acquisition by Multi Media and Zhunger Capital of the 5,755,800 and 6,111,300 shares of common stock represents an equity interest of approximately 48% and 51% in the Company, respectively.
Effective June 28, 2010, the Company filed a notice with the Secretary of State for Nevada, pursuant to NRS 78.385 and 78.390 of the Nevada Statutes, whereby the Company increased its authorized share capital from 15,000,000 to 200,000,000.
Corporate Governance - Director Independence
Our stock is quoted on the Over The Counter Bulletin Board, which does not have director independence requirements. Under Item 407(a) of Regulation S-K, we have elected to measure the independence of our sole director under the definition of independence used by the American Stock Exchange, which can be found in the AMEX Company Guide, §121(A)(2) (2007). Under such definition, our sole director is not independent, because we cannot affirmatively determine that our sole director does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Pre-Approval Policies and Procedures
Prior to engaging our accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.
Below is the aggregate amount of fees billed for professional services rendered by our principal accountants with respect to the Company’s last two fiscal years:
All of the professional services rendered by principal accountants for the audit of our annual financial statements that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for last two fiscal years were approved by our board of directors.
Maintaining Principal Accountant’s Independence
The board of directors has considered whether the provision of the services described below are compatible with maintaining the principal accountant’s independence and believes that such services do not compromise that independence.
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SIGNATURES
In accordance with section 13 and 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.
In accordance with the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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