ITEM 1. Description of Business.
General
As used in this Form 10-KSB, references to the "Company," "we," “our” or "us" refer to Modena 1, Inc., unless the context otherwise indicates.
Forward-Looking Statements
Matters discussed in this document may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their businesses. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
Modena 1, Inc. desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intends,” “estimates,” “forecast,” “project” and similar expressions identify forward-looking statements.
The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s discussion and analysis or plan of operations. Although we believe that these assumptions were reasonable when made, these statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date of this report.
Historical
Modena 1, Inc. was incorporated on November 18, 2003 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. We have been in the developmental stage since inception and have no operations to date other than issuing shares to our only shareholder.
We will attempt to locate and negotiate with a business entity for the combination of that target company with us. The combination will may take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. The target company may structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No assurances can be given that we will be successful in locating or negotiating with any target company. Currently, the company has no operations or prospects with which to complete a business combination.
We have been formed to provide a method for a foreign or domestic non-public company to become an SEC reporting (publicly-traded) company whose securities are qualified for trading in the United States securities markets.
Perceived Benefits.
There are certain perceived benefits to being a reporting company with a class of publicly-traded securities. These are commonly thought to include the following:
·
the ability to use registered securities to make acquisitions of assets or businesses;
·
increased visibility in the financial community;
·
the facilitation of borrowing from financial institutions;
·
improved trading efficiency;
·
shareholder liquidity;
·
greater ease in subsequently raising capital;
·
compensation of key employees through stock options for which there may be a market;
·
valuation;
·
enhanced corporate image; and
·
a presence in the United States capital market.
Potential Target Companies.
A business entity, if any, which may be interested in a business combination with us may include the following:
·
a company for which a primary purpose of becoming public is the use of its securities for the acquisition of assets or businesses;
·
a company which is unable to find an underwriter of its securities or is unable to find an underwriter of securities on terms acceptable to it;
·
a company which wishes to become public with less dilution of its common stock than would occur upon an underwriting;
·
a company which believes that it will be able to obtain investment capital on more favorable terms after it has become public;
·
a foreign company which may wish an initial entry into the United States securities market;
·
a special situation company, such as a company seeking a public market to satisfy redemption
·
requirements under a qualified Employee Stock Option Plan; or
·
a company seeking one or more of the other perceived benefits of becoming a public company.
A business combination with a target company will normally involve the transfer to the target company of the majority of the issued and outstanding common stock of the Company, and the substitution by the target company of its own management and board of directors.
No assurances can be given that we will be able to enter into a business combination, as to the terms of a business combination, or as to the nature of the target company.
Risk Factors
An investment in our common stock involves a high degree of risk. You should carefully consider the following factors and other information before deciding to invest in our Company. If any of the following risks actually occur, our business, financial condition, results of operations and prospects for growth would likely suffer. As a result, you could lose all or part of your investment.
Our business is subject to numerous risk factors, including the following:
Risks Relating to Our Business
We are a development stage company and may never be able to effectuate our business plan.
Modena 1, Inc. was incorporated on November 18, 2003 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. We have been in the developmental stage since inception and have no operations to date other than issuing
shares to our only shareholder. As a development stage company, the Company is a highly speculative venture involving significant financial risk. There can be no assurance that we will ever achieve successfully a merger with another entity, generate any revenues or achieve profitability. The revenue and income potential of our proposed business and operations is unproven.
We expect losses to continue in the future because we have no revenue to offset losses.
As we have no current revenue , we are expecting loses over the next 12 months, because we do not yet have any revenues to offset the expenses associated with the development of our business or being a public company. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.
We have a going concern opinion from our auditors, indicating that we may not be able to continue to operate.
As discussed in the Notes to Financial Statements, the Company has a working capital deficit of $3,273 and has no current revenue stream. These factors raise substantial doubt that we will be able to continue operations as a going concern, and our independent auditors included an explanatory paragraph regarding this uncertainty in their report on our financial statements for the period ended October 31, 2007. Our ability to continue as a going concern is dependent upon our generating cash flow sufficient to fund operations and reducing operating expenses. Our business strategy may not be successful in addressing these issues. If we cannot continue as a going concern, our stockholders may lose their entire investment in us.
The Company has no existing agreement for a business combination or other transaction.
We have no arrangement, agreement or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. No assurances can be given that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. Management has not identified any particular industry or specific business within an industry for evaluation. We cannot guarantee that we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that future funds allocated to the purchase of our shares will not be invested in a company with active business operations.
Future success is highly dependent on the ability of management to locate and attract a suitable acquisition.
The success of the Company's proposed plan of operation will depend to a great extent on the operations, financial condition and management of the identified target company. While business combinations with entities having established operating histories are preferred, there can be no assurance that the Company will be successful in locating candidates meeting such criteria. The decision to enter into a business combination will likely be made without detailed feasibility studies, independent analysis, market surveys or similar information which, if the Company had more funds available to it, would be desirable. In the event the Company completes a business combination the success of the Company's operations will be dependent upon management of the target company and numerous other factors beyond the Company's control. There is no assurance that the Company can identify a target company and consummate a business combination.
There is competition for those private companies suitable for a merger transaction of the type contemplated by management.
The Company is in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all of these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
The Company has conducted no market research or identification of business opportunities, which may affect our ability to identify a business to merge with or acquire.
The Company has neither conducted nor have others made available to us results of market research concerning prospective business opportunities. Therefore, we have no assurances that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination or other transactions for formal evaluation by us, such that it may be expected that any such target business or transaction will present such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available. There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our stockholders.
Our executive officer and director has significant voting power and may take actions that may be different than actions sought by other shareholders.
Sang Ho Kim, the President, Chief Executive Officer, Chief Financial Officer and sole director of the Company, is the controlling shareholder of the Company. Accordingly, this shareholder will be able to exercise complete control over all matters requiring shareholder approval. This control over our affairs might be adverse to the interest of other stockholders. In addition, this concentration of ownership could delay or prevent a change in control and might have an adverse effect on the market price of our common stock.
We are heavily dependent upon our officer, Sang Ho Kim. The loss of our officer would harm our ability to execute our business plan.
We are dependent on the continued contributions of Sang Ho Kim, whose knowledge and leadership would be difficult to replace. Our success is also heavily dependent on Mr. Kim’s ability to contract with consultants to assist in locating a target company as potential candidates for a business combination. We do not currently have any consulting agreements in place with consultants. We do not maintain any key person insurance on Sang Ho Kim. If we were to lose his services, our ability to execute our business plan would be harmed, and we may be forced to cease operations until such time as we could hire a suitable replacement.
Since our officer can work or consult for other companies, his activities could slow down our operations.
Our officer and director is not required to work exclusively for us and does not devote all of his time to our operations. Therefore, it is possible that a conflict of interest with regard to his time may arise based upon his employment for other companies. His other activities may prevent him from devoting full-time to our operations which could slow down our operations and may reduce our financial results because of the slow down in operations. It is expected that our director will devote between 5 and 30 hours per week to our operations on an ongoing basis, and will devote whole days and even multiple days at a stretch when required.
Because we do not have an audit or compensation committee, shareholders will have to rely on our director, who is not independent, to perform these functions.
We do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee. These functions are performed by our directors. Thus, there is a potential conflict of interest in that our director and officer has the authority to determine issues concerning management compensation and audit issues that may affect management decisions.
If we are unable to obtain additional funding, our business operations will be harmed. Even if we do obtain additional financing our then existing shareholders may suffer substantial dilution.
Cash on hand is insufficient to fund our anticipated administrative, legal and accounting expenses for the next twelve months. Accordingly, we may need to raise additional funds to pay for such expenses. Such funds may come from the sale of equity and/or debt securities and/or loans. It is possible that additional capital will be required to effectively support the operations and to otherwise implement our overall business strategy. The inability to raise the required capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain necessary financing, we will likely be required to curtail our development plans which could cause the company to become dormant. We currently do not have any arrangements or agreements to raise additional capital. Any additional equity financing may involve substantial dilution to our then existing shareholders.
We may not be able to raise sufficient capital or generate adequate revenue to meet our obligations and fund our operating expenses.
We have not had any revenues since our inception. Failure to raise adequate capital and generate adequate revenues to meet our obligations and develop and sustain our operations could result in our having to curtail or cease operations. Additionally, even if we do raise sufficient capital and generate revenues to support our operating expenses, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about our ability to continue as a going concern. Our independent auditors currently included an explanatory paragraph in their report on our financial statements regarding concerns about our ability to continue as a going concern. Accordingly, our failure to generate sufficient revenues or to generate adequate capital could result in the failure of our business and the loss of your entire investment.
Risks Relating To Our Common Shares
We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.
Our Certificate of Incorporation authorizes the issuance of 100,000,000 shares of common stock, par value $0.001 per share, of which 100,500 shares are issued and outstanding. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
Our common shares are subject to the “Penny Stock” Rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
·
that a broker or dealer approve a person's account for transactions in penny stocks; and
·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
·
obtain financial information and investment experience objectives of the person; and
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
·
sets forth the basis on which the broker or dealer made the suitability determination; and
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our Common shares and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
There is no current trading market for our securities and if a trading market does not develop, purchasers of our securities may have difficulty selling their shares.
There is currently no established public trading market for our securities and an active trading market in our securities may not develop or, if developed, may not be sustained. If for any reason our common stock is not quoted on the Over The Counter Bulletin Board or a public trading market does not otherwise develop, purchasers of the shares may have difficulty selling their common stock should they desire to do so. No market makers have committed to becoming market makers for our common stock and none may do so.
State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.
Secondary trading of the Company’s common stock will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment.
Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay
dividends, our stockholders will not be able to receive a return on their shares unless the value of such shares appreciates and they sell them. There is no assurance that stockholders will be able to sell shares when desired.
Item 2.
Item 2. Description of Property.
The Company does not currently hold interests in any property.
The Company presently operates from office space provided on a rent-free basis by the president of the Company. In the event that this space becomes unavailable in the future, the Company will seek to lease office space from an unaffiliated party at prevailing competitive rates.
Item 3.
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
During the period ending October 31, 2007, there has not been any matter which was submitted to a vote of the Company’s shareholders through the solicitation of proxies or otherwise.
PART II
Item 5.
Item 5.
Market for Common Equity and Related Stockholder Matters
Market Information
The common stock of the Company has never been traded. It has not yet obtained a trading symbol.
Holders
As of September 9, 2008 there were 106,100 shares of common stock issued and outstanding, 100,000 of which are controlled by Sang-Ho Kim, the Company's sole officer and director.
As of September 9, 2008 there were 41 holders of record of shares of our common stock.
Dividends
The Company has not declared or paid cash dividends or made distributions in the past, and the Company does not anticipate that it will pay cash dividends or make distributions in the foreseeable future.
Item 6.
Item 6. Management’s Discussion and Analysis or Plan of Operation
The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operation contains “forward looking statements”. Actual results may materially differ from those projected in the forward looking statements as a result of certain risks and uncertainties set forth in this report. Although our management believes that the assumptions made and expectations reflected in the forward looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be materially different from the expectations expressed in this Annual Report. The following discussion should be read in conjunction with the audited Financial Statements and related Notes included thereto.
Plan of Operation
Over the next twelve months, the Company will continue its efforts to locate a candidate for the purpose of a merger. We anticipate seeking out a target company through solicitation. Such solicitation may include newspaper or magazine advertisements, mailings and other distributions to law firms, accounting firms, investments bankers, financial advisors and similar persons, the use of one or more World Wide Web sites and similar methods. No estimate can be made as to the number of persons who will be contacted or solicited. The Company may engage in such solicitation directly or may employ one or more other entities to conduct or assist in such solicitation. The Company and its affiliates will pay referral fees to consultants and others who refer target business for mergers into public companies in which management and its affiliates have an interest. Payments are made if a business combination occurs, and may consist of cash or a portion of the stock in the Company retained by management and its affiliates, or both.
Sang Ho-Kim, the President, Chief Executive Officer, Chief Financial Officer and sole director of the Company will supervise the search for target companies as potential candidates for a business combination. Mr. Kim will pay his own expenses and any costs he incurs in supervising the search for a target company. Mr. Kim may enter into agreements with other consultants to assist in locating a target company and may share stock received by it or cash resulting from the sale of its securities with such other consultants. Mr. Kim as our sole officer and director has the authority to enter into any agreement binding us.
It is possible that we will be successful in locating such a merger candidate and closing such merger. However, if the we cannot effect a non-cash acquisition, the Company may have to raise funds from a private offering of its securities under Rule 506 of Regulation D. There is no assurance we will obtain any such equity funding.
Results of Operation
The Company did not have any operating income from inception (November 18, 2003) through October 31, 2007. During the fiscal year ended October 31, 2007, the Company incurred $4,300 (2006 - $7,496) in general and administrative charges associated with legal, accounting and office expenses. Our major expenses since inception have been legal, accounting and filing fees relating to filing our quarterly and audited financial statements.
Liquidity and Capital Resources
As of October 31, 2007 the Company had limited capital resources and will rely upon the issuance of common stock and additional capital contributions from shareholders to fund administrative expenses pending acquisition of an operating company.
Cash flows used in operations was mainly for general and administration charges associated with legal, accounting and office expenses.
Cash flows provided by financing included issuance of 500 shares of common stock for proceeds of $500 and proceeds of $6,000 from a convertible note as discussed below.
In July 2007, the Company received proceeds of $6,000 and issued a convertible note to an unrelated party. The loan bears a stated interest rate of 5% per annum, is unsecured and the principal amount of $6,000 plus all accrued interest is due on July 2, 2010. In addition, the holder has the option at any time to convert all or part of the outstanding principal and interest amount into common shares of the Company. The number of common shares that shall be issued upon conversion of the note shall be determined by the holder and the Company, where the price cannot be greater than the price per common share issued by the Company in the next round of financing. The loan was used to settle outstanding accounts payable for professional fees.
Going Concern Consideration
Our independent auditors included an explanatory paragraph in their report on the financial statements included herein regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements
ITEM 7.
ITEM 7. Financial Statements
MODENA 1, INC.
FINANCIAL STATEMENTS
OCTOBER 31, 2007 AND 2006
CONTENTS
Report of Independent Registered Accounting Firm
Balance Sheets
Statements of Operations
Statements of Cash Flows
Statement of Changes in Stockholders' Deficit
Notes to Financial Statements
18 - 24
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Modena 1, Inc (A Development Stage Company)
We have audited the accompanying balance sheets of Modena 1, Inc (A Development Stage Company) as of October 31, 2007 and 2006 and the related statements of operations, changes in stockholders’ deficit, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 financial position of Modena 1, Inc (A Development Stage Company) as of October 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s operating losses, negative working capital, and total capital deficiency raise substantial doubt about its ability to continue as a going concern. Note 2 also describes management’s plans to address these financial matters. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DNTW Chartered Accountants, LLP
Markham, Canada
February 22, 2008
MODENA 1, INC.
(A Development Stage Company)
BALANCE SHEETS
AS AT 31 OCTOBER 2007
ASSETS
Current Assets:
Cash and cash equivalents
$
2,027
-
Total Current Assets
2,027
-
Total Assets
$
2,027
-
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued liabilities
$
5,300
5,864
Total Current Liabilities
5,300
5,864
Long Term Liabilities
Convertible note
3,567
-
Total Long Term Liabilities
3,567
Total Liabilities
8,867
5,864
STOCKHOLDERS' DEFICIT
Capital stock - $.001 par value, 100,000,000 common shares authorized, 100,500
common shares outstanding (2006 - 100,000)
Additional paid in capital
16,960
13,636
Deficit accumulated during the development stage
(23,899)
(19,600)
Total Stockholders' Deficit
(6,840)
(5,864)
Total Liabilities and Total Stockholders' Deficit
$
2,027
-
MODENA 1, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
October 31, 2007 and 2006
1.
History and Organization
Modena 1, Inc. ("the Company"), a development stage company incorporated in the state of Delaware as of November 18, 2003, plans to locate and negotiate with a business entity for the combination of that target company with the Company. The business combination may take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. The target company may structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No assurances can be given that The Company will be successful in locating or negotiating with any target company. Currently, the company has no operations or prospects with which to complete a business combination.
The Company has been formed to provide a method for a foreign or domestic non-public company to become an SEC reporting (publicly traded) company whose securities are qualified for trading in the United States securities market.
2.
Going Concern Assumption
These accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has a working capital deficit of $3,273 and has no current revenue stream. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company's ability to continue as a going concern is also contingent upon its ability to complete certain capital formation activities and generate working capital operations in the future. Management's plan in this regard is to secure additional funds through equity financing activities, and from loans made by the Company's stockholder.
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern.
MODENA 1, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
October 31, 2007 and 2006
3.
Basis of Presentation
The Company has not earned any revenues from limited principal operations and accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in Statement of Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by Development Stage Enterprises (“SFAS No. 7 “). Among the disclosures required by SFAS No. 7 are that the Company's financial statements be identified as those of a development stage company, and that the statements of operation, stockholders' deficit and cash flows disclose activity since the date of the Company's inception.
4.
Summary of Significant Accounting Policies
The accounting policies of the Company are in accordance with US GAAP, and their basis of application is consistent with that of the previous year. Outlined below are those policies considered particularly significant:
a)
Fair Value of Financial Instruments
As of October 31, 2007 and 2006, the carrying value of accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments.
b)
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period. As of October 31, 2007, a deferred tax asset (which arises solely as a result of net operating losses), has been entirely offset by a valuation reserve due the uncertainty that this asset will be realized in the future.
c)
Earnings or Loss Per Share
The Company adopted SFAS No.128, Earnings per Share which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year.
There were no dilutive financial instruments for the years ended October 31, 2007 and 2006.
MODENA 1, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
October 31, 2007 and 2006
d)
Concentration of Credit Risk
SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration.
e)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
f)
Cash and Cash Equivalents
Cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three (3) months or less.
g)
Beneficial Conversion Feature of Convertible Note
In accordance with Emerging Issues Task Force (“EITF”) No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, the Company recognized the advantageous value of conversion rights attached to convertible note. Such rights gives the holder the ability to convert debt into shares of common stock at a price per share that is less than the fair market value of the common stock on the day the loan is made to the Company. The beneficial value was calculated as the intrinsic value of the beneficial conversion feature of the convertible note and the related accrued interest and was recorded as a discount to the related debt and an addition to additional paid in capital. The discount was calculated as $2,715 and, using the effective interest rate, is being amortized over the life of the convertible note.
MODENA 1, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
October 31, 2007 and 2006
h)
Recent Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the effect that the adoption of FIN 48 may have on its financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently in the process of assessing the impact the adoption of SFAS 157 will have on its financial statements.
In September 2006, the SEC issued SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 requires that public companies utilize a "dual-approach" to assessing the quantitative effects of financial misstatements. This dual approach includes both an income statement focused assessment and a balance sheet focused assessment. The guidance in SAB 108 must be applied to annual financial statements for fiscal years ending after November 15, 2006. Management believes the adoption of this pronouncement will not have a material impact on the Company's financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 permits entities to choose to measure many financial instruments, and certain other items, at fair value. SFAS 159 applies to reporting periods beginning after November 15, 2007. The adoption of SFAS 159 is not expected to have a material impact on the Company’s financial condition or results of operations.
MODENA 1, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
October 31, 2006 and 2005
h)
Recent Accounting Pronouncements (Continued)
In December 2007, the FASB issued SFAS No. 141 (R) Business Combinations. SFAS 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective as of the beginning of the Company’s fiscal year beginning after December 15, 2008. Management believes the adoption of this pronouncement will not have a material impact on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of the Company’s fiscal year beginning after December 15, 2008. Management believes the adoption of this pronouncement will not have a material impact on the Company's financial statements.
5.
Promissory Note
In July 2007, the Company received proceeds of $6,000 and issued a convertible note to an unrelated party. The loan bears a stated interest rate of 5% per annum, is unsecured and the principal amount of $6,000 plus all accrued interest is due on July 2, 2010. In addition, the holder has the option at any time to convert all or part of the outstanding principal and interest amount into common shares of the Company. The number of common shares that shall be issued upon conversion of the note shall be determined by the holder and the Company, where the price cannot be greater than the price per common share issued by the Company in the next round of financing.
In accordance with EITF 98-5, the Company evaluated the conversion feature embedded in the debt instrument and concluded that a beneficial conversion feature exists since the stated interest rate is below the interest rate on that of similar loans. An estimated discount rate of 25% was determined based on the Company’s current capital structure and the discount on the loan was determined to be the beneficial conversion feature embedded in the convertible note and was recorded as an addition to additional paid-in capital and as a reduction in the loan payable balance. The discount, calculated as $2,715, will be amortized over the life of the loan using the effective interest method with the amortized portion recorded as interest expense. For the year ended October 31, 2007, interest expense of $282 was recorded on the loan.
6.
Capital Stock
Authorized
100,000,000 common shares, par value $0.001 per share
Issued
100,500 (2006 - 100,000) common shares
$ 100 $ 100
Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation.
MODENA 1, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
October 31, 2007 and 2006
7.
Income Taxes
The Company has paid no federal or state income taxes. As of October 31, 2007, the Company has net operating loss carryforwards of $23,899 which, if unused, will begin to expire in 2023. The tax effect, at the statutory state and federal rates of 23.7%, of the operating loss carryforwards and temporary differences at October 31, 2007 and 2006 are as follows:
The following is the reconciliation of the income tax benefit computed using the federal statutory rate to the provision for income taxes:
8.
Related Party Transactions
All related party transactions are recorded at their exchange amounts. During the year ended October 31, 2007, a shareholder paid $2,428 relating to accounting and filing fees on behalf of the Company. Since inception, the shareholder has advanced funds for professional fees and other office and general expenses in the amount of $13,746. During the current quarter, the shareholder has waived reimbursement of these expenses and considered these advances as a contribution to capital. Accordingly, the contributions have been recorded as additional paid-in capital.
Item 8A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this annual report, an evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures are effective in ensuring that material information relating to the Company required to be disclosed in the Company’s periodic SEC filings is made known to them in a timely manner.
.
Changes in Internal Controls
There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 8B.
Other Information.
None.
PART III
ITEM 9.
ITEM 9.
Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act
Directors and Officers
We have one Director and Officer as follows:
Name Age Position
Sang-Ho Kim 43 President/CEO/Director
There are no agreements or understandings for the officer or director to resign at the request of another person and the above-named officer and director is not acting on behalf of nor will act at the direction of any other person.
Set forth below is the name of our director and officer, all positions and offices with the Company held, the period during which he has served as such, and the business experience during at least the last five years:
Sang-Ho Kim, B.SC, P. Eng., President and Chairman:
Sang-Ho Kim acquired all of the outstanding common shares of the Company on May 12, 2005. Mr. Kim was the former President and Chairman of Edgetech Services Inc. for 7 years and co-founder of Edgetech Services Inc. He was primarily responsible for building Edgetech Services from a 3-person startup to a successful consulting practice.
From 1993 through 1998, Mr. Kim was Electronic Commerce Manager and Project Manager for Groupe Schneider Canada and Schneider Electric Canada. As such he supervised engineering and programming staff, coordinated the IT needs of varying departments, implemented electronic data interfaces and more.
Significant Employees
No disclosure necessary.
Family Relationships.
No disclosure necessary.
Involvement in Legal Proceedings
No disclosure necessary.
Compliance with Section 16a of the Exchange Act
Based on a review of Forms 3, 4 and 5 furnished to the Registrant in its most recent fiscal year, the Company is not aware of any delinquent filings outstanding.
ITEM 12.
ITEM 12. Certain Relationships and Related Transactions.
No disclosure necessary.
ITEM 13.
ITEM 13. Exhibits and Reports on Form 8K.
a)
Exhibits
(3)
(i) Articles of Incorporation
(1)
(ii) Bylaws.
(1)
(14)
Code of Ethics
(16)
Letter re: change in certifying accountant.
(2)
(31)
Rule 13a-14(a)/15d-14(a) Certifications
(i) Certification of Sang-Ho Kim
(32)
Certification Pursuant To The Sarbanes-Oxley Act 18 U.S.C. Section 1350 As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
(i) Certification of Sang-Ho Kim
(1)
Incorporated by reference to previous filing
(2)
These items have been previously filed
b)
Reports on Form 8-K
Form 8-K Filed on June 1, 2004 reporting change of control of Registrant.
Form 8-K Filed on May 7, 2004 reporting change of control of Registrant.
Form 8-K Filed on April 13, 2005 reporting change of Certifying Accountant.
Form 8-K Filed on July 19, 2007 reporting change of Certifying Accountant.
Exhibits
Exhibit 14
MODENA 1, INC.
CODE OF ETHICS
FOR PRESIDENT, CEO AND SENIOR FINANCIAL OFFICERS
1.
The President, CEO and all senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the SEC. Accordingly, it is the responsibility of the President, CEO and each senior financial officer promptly to bring to the attention of the Disclosure Committee (or in the event that the Company has not established a Disclosure Committee, to the Board of Directors) any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Disclosure Committee in fulfilling its responsibilities.
2.
The President, CEO and each senior financial officer shall promptly bring to the attention of the Disclosure Committee and the Audit Committee (or in the event that the Company has not established an audit committee, to the Board of Directors) any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.
3.
The President, CEO and each senior financial officer shall promptly bring to the attention of the General Counsel, President, or the CEO and to the Audit Committee any information he or she may have concerning any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.
4.
The President, CEO and each senior financial officer shall promptly bring to the attention of the General Counsel, President, or the CEO and to the Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of these procedures.
5.
The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of these procedures by the President, CEO and the Company’s senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to these procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of the individual’s employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in questions had committed other violations in the past.
Exhibit 31
CERTIFICATION PURSUANT TO 18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Sang-Ho Kim certify that:
1.
I have reviewed this Form 10KSB of Modena 1, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.
The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
5.
The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
Date: September 9, 2008
/s/ Sang-Ho Kim
_______________________
Sang-Ho Kim
President and CEO
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Sang-Ho Kim, President and Chief Executive Officer of Modena 1, Inc. (the “Company”) do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. This Annual Report on 10KSB of the Company for the period ended October 31, 2007 as filed with the Securities and Exchange Commission (the “report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 9, 2008
/s/ Sang-Ho Kim
_______________________
Sang-Ho Kim
President and Chief Executive Officer
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed for professional services rendered by the Company’s principal accountant for the audit of the Company’s annual financial statements for the fiscal years ended October 31, 2007 and 2006 were $2,000 and Nil respectively.
Audit Related Fees
The Company incurred no fees during the last two fiscal years for assurance and related services by the Company’s principal accountant that were reasonably related to the performance of the audit of the Company’s financial statements.
Tax Fees
The Company incurred no fees during the last two fiscal years for professional services rendered by the Company’s principal accountant for tax compliance, tax advice and tax planning.
All Other Fees
The Company incurred fees during the last two fiscal years ended October 31, 2007 and 2006 were $3,583 and $8,340 for services rendered by the Company’s principal accountants relating to the preparation of quarterly financial statements for inclusion in the Company's quarterly reports on Form 10QSB.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS
No disclosure necessary.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
MODENA 1, INC.
Registrant
Date:
September 9, 2008
By:
/s/ Sang Ho Kim
_______________________
Sang Ho Kim
President, Chief Executive Officer,
Chief Financial Officer and Principal Accounting Officer