U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Amendment No. 2)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-50956
LAWRENCE CONSULTING GROUP, INC.
(Exact Name of Company as Specified in Its Charter)
Delaware 20-0653570
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2 Lakeside Drive West, Lawrence, New York 11559
(Address of Principal Executive Offices) (Zip Code)
Company's telephone number: (516) 633-0924
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12B-2 of the Exchange Act [X]
The Company had total revenues of $13,315 for the fiscal year ended June
30, 2005. As of September 20, 2005, the Company had 275,900 shares of common
stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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Explanatory Note
This Annual Report on Form 10-KSB/A of Lawrence Consulting Group, Inc. (the
"Company") for the fiscal year ended June 30, 2005, contains an amendment to
Exhibit 31.1 to the original Annual Report on Form 10-KSB filed on September 28,
2005 (the "Original Form 10-KSB") to reflect a restatement of the certification
contained therein. This Form 10-KSB/A is effective for all purposes as of the
date of the filing of the original Form 10-KSB.
ITEM 1. DESCRIPTION OF BUSINESS
OUR COMPANY
Lawrence Consulting Group, ("we" or "LCG"), is a professional services firm
which delivers consulting services to companies to help them provide business
solutions for interacting with their customers. We provide sales, marketing,
customer, manufacturing, finance, and information technology across a number of
industry sectors. We work with companies to develop business and information
technology strategies, technology solutions and integrated marketing programs,
to maximize the relationship between supply and customer demand, and ultimately,
to help our customers improve business performance. As of August 31, 2005, LCG
had consulting agreements with three customers.
We may seek acquisitions or mergers with other entities in our current area
of business which are intended to enhance our value. In the event we are unable
to identify suitable acquisition or merger candidates, we may elect to acquire
or merge with an entity in a related or unrelated field.
INDUSTRY BACKGROUND
The adoption of recent technologies, including the Internet, has changed
the way organizations do business. The Internet has grown from an information
delivery system to an interactive platform through which companies are
restructuring the way they market and sell products and services and manage
their operations. In addition, the Internet economy has exponentially increased
the number and variety of delivery channels through which companies can
interface with customers. By integrating the Internet and other related emerging
technologies, organizations have a greater opportunity to reduce operating
costs, reduce product and marketing cycle times, create and strengthen customer
relationships and business alliances, and improve and accelerate communication
and the flow of information, both internally and externally.
Companies have adopted these new technologies as integral vehicles for
creating new business models, conducting both business-to-consumer and
business-to-business transactions, and extending their customer reach and global
presence. However, many organizations that made significant investments in
building their Web presence, call centers, supply and distribution systems, and
data management systems have failed to see significant return on investment.
Today, companies are continuing to focus on selective initiatives that offer
compelling business value. They are seeking to leverage technology investments,
refine organizational support mechanisms and optimize return on investment
within tight technology budgets. As a result, we believe they are seeking
professional service providers who understand their strategic business needs,
and can help them strategically position their technological investments to
solve their business problems and improve return on investment.
We believe technology fundamentally affects the ways a company interacts
with its customers, employees, business partners, investors and competitors.
Therefore, we believe that companies will continue to seek outside consultants
that possess the knowledge and expertise necessary to create pragmatic business
and information technology strategies, and the resources required to implement
those strategies.
LCG focuses on helping clients achieve growth by reorganizing and realizing
value from their customer base.
Business Strategy - We help clients develop business and marketing
strategies that enable them to maximize business performance. Through a careful
evaluation of material forces that impact an organization, we help clients
strategically change their products and services, customers and material and
organizational change.
Product Strategy - We help our clients improve the performance of their
products. Through a careful review and understanding of customers, competitors
and evolving market dynamics we help clients maximize value from their products
and customer relationships.
Information Technology Strategy - We work with clients to determine the
right information technology investments necessary to support their current and
anticipated business objectives. We assist our clients to maximize return from
their information technology investments.
2
HISTORICAL OPERATIONS
2 LCG was organized in the State of Delaware in January 2004. Since its
formation we raised an aggregate of $76,900 from the sale of our Common Stock to
our founders and in connection with a private placement which closed in August
2004 (the "Private Placement"). As of August 31, 2005, LCG had entered into
consulting agreements with three clients.
We believe that our business can grow in two ways. The first would be to
expand internally by hiring more employees and entering into additional
consulting agreements. The second would be through acquisitions or mergers with
other entities in its or related businesses.
SELECTION OF BUSINESS OPPORTUNITIES
We anticipate that in the event that we elect to seek a business
opportunity, such as a merger or acquisition, the selection of a business
opportunity in which to participate will be complex and extremely risky.
Management believes (but has not conducted any research to confirm) that being a
public corporation will help us find an acquisition candidate for the following
reasons; facilitate and improve the terms on which additional equity financing
may be sought, provide incentive stock options or similar benefits to key
employees, increase the opportunity to use securities for acquisitions, provide
liquidity for shareholders and other factors. Management anticipates that
business opportunities may be available in many different industries, both
within and without the consulting industry and at various stages of development,
all of which make the task of comparative investigation and analysis of such
business opportunities difficult and complex.
We will have limited capital with which to provide the owners of business
entities with any cash or other assets which may be attractive. Management has
not conducted market research and is not aware of statistical data to support
the perceived benefits of a business combination for the owners of a target
company.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, our officers and directors, who are not professional
business analysts. In analyzing prospective business opportunities, management
may consider such matters as the available technical, financial and managerial
resources; working capital and other financial requirements; history of
operations; if any; prospects for the future; nature of present and expected
competition; the quality and experience of management services which may be
available and the depth of that management; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the company after the business combination; the potential for growth or
expansion; the potential for profit; the perceived public recognition or
acceptance of products, services, or trades; name identification; and other
relevant factors.
We may acquire a venture which is in its preliminary or development stage,
which is already in operation, or in any stage of its business life. It is
impossible to predict at this time the status of any business in which we may
become engaged, in that such business may need to seek additional capital, may
desire to have its shares publicly traded, or may seek other perceived
advantages which we may offer.
With respect to negotiations with a target company, management expects to
focus on the percentage of the company which target company shareholders would
acquire in exchange for their shareholdings in the target company. Any merger or
acquisition effected by us can be expected to have a significant dilutive effect
on the percentage of shares held by our shareholders at such time.
We intend to develop a marketing team which we believe will be crucial to
our future growth and success. The marketing team would be engaged full-time to
develop our brand and image recognition. We have a web site and intend to
participate in executive seminars, trade shows and market research. In addition,
we intend to make presentations at seminars to improve our visibility.
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CONSULTING AGREEMENTS
As of the date hereof, we have entered into consulting agreements with
three clients. One consulting agreement provides that we will assist our client
in developing business and marketing strategies to maximize value from its
products and improve performance of its products. This consulting agreement,
which has a term of one year with options to renew, provides for a monthly
retainer of $1,000 plus $150 for each hour of services provided (in excess of
five per month). The second consulting agreement provides that we will assist
our client in determining its technology investments, in order to maximize its
return on these investments. This consulting agreement, which has a one-year
term with options to renew, provides for a fee of $200 per each hour of
consulting services provided by LCG to the client. Each of these two consulting
agreements have been renewed on the same terms as before for an additional year.
In May 2005 we entered into a consulting agreement with The Gorlin
Companies. Under this agreement we assist our client and its portfolio companies
in the evaluation of the use of technology by biotechnology companies. This
agreement, which has a term of one year with options to renew, provides that LCG
will be paid a monthly retainer of $800 plus $200 per hour for each hour of
consulting services in excess of five (5) hours per month provided to this
client.
EMPLOYEES
We currently employ one person, our President, Secretary and Treasurer who
devotes only a portion of his business time to the affairs of LCG.
We intend to recruit qualified professionals from other consulting
organizations, industry and from universities. We intend to use internal and
external recruiting resources, employee referrals and the Internet to attract
new professionals. We may also seek to acquire other businesses and to retain
qualified professionals from such businesses.
COMPETITION
The professional services consulting marketplace is highly competitive.
Many of our competitors are much larger than us and have far greater resources
than us and have been in business for a longer period than we have.
The market for our services is subject to rapid change and increased
competition from large existing companies, new entrants, and internal management
and information technology groups. However, we believe the market will continue
to offer significant opportunity for multiple companies due to the
ever-increasing use of the Internet and other new technologies.
RISK FACTORS
The following factors should be considered carefully in evaluating LCG and
its business. Additional risks and uncertainties not presently known to us may
also effect our business operations. If any of the following risks actually
occur, our business, financial condition or operating results could be
materially adversely affected.
We Are Recently Formed.
LCG was incorporated on January 14, 2004. In August 2004, we completed the
Private Placement and to date we have entered into consulting agreements with
three clients.
We have Limited Operating History and Revenue and Only Minimal Assets.
We have a limited operating history and revenues and no earnings from
operations to date. We have no significant assets or financial resources, except
for the funds raised in the Private Placement and funds contributed by our
founders. No assurance can be given that we will be able to develop our business
or find a suitable merger or acquisition candidates.
Our failure to meet client expectations could result in losses and negative
publicity.
We will create, implement and maintain business solutions and other
applications that are often critical to our clients' businesses. Errors in the
development, deployment and execution of our solutions or failure to meet
clients' expectations could result in:
Delayed or lost revenue to adverse client reaction;
Requirements to provide additional services to a client at no charge;
Negative publicity, which could damage our reputation and adversely
affect our ability to attract or retain clients; and
Claims for substantial damages against us, regardless of our
responsibility for such failure.
We depend on our senior management team, and the loss of any member
may adversely affect our business.
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We believe that our success will depend on the continued employment of Mr.
Perlysky, our sole officer and director. We will also need to hire additional
members of senior management. This dependence is particularly important to our
business since personal relationships are a critical element of obtaining and
maintain client engagements. If one or more members of our senior management
team were unable or unwilling to continue in their present positions, such
persons may be difficult to replace and our business could be seriously harmed.
Accordingly our inability to hire any members of senior management, or the loss
of one or more members of our senior management team, could impact our future
revenue. In addition, if any of these key employees were to join a competitor or
form a competing company, some of our clients might choose to use the services
of that competitor or new company instead of our own. Furthermore, clients or
other companies seeking to develop in-house capabilities may hire away some of
our key employees. Employee defections to clients could not only result in the
loss of key employees but could also result in the loss of a client relationship
or a new business opportunity. Any losses of client relationships could
seriously harm our business.
We must recruit and retain qualified professionals to succeed in our
labor-intensive business.
Our future success will depend in large part on our ability to recruit and
retain qualified managers, business strategists, and other technical personnel,
and sales and marketing professionals. Qualified professionals are in demand and
are likely to remain a limited resource in the foreseeable future. Any inability
to recruit and retain a sufficient number of qualified employees could hinder
the growth of our business.
Potential future acquisitions could be difficult to integrate and could
therefore, adversely affect our operating results.
One of our strategies for growth is the acquisition of businesses.
Currently, we do not have any acquisitions pending. We may not be able to find
and consummate acquisitions on terms and conditions reasonably acceptable to us.
The acquisitions we do undertake may involve a number of special risks,
including:
o Diversion of management's attention;
o Potential failure to retain key acquired personnel
o Assumptions of unanticipated legal liabilities and other problems
o Difficulties integrating systems, operations and cultures; and
o Amortization of acquired intangible assets.
Our failure to successfully manage future acquisitions could seriously harm
our operating results. It is anticipated that acquisitions will be funded
through a combination of cash from operations or from debt or equity financings
and/or by the issuance of our Common Stock directly to the acquired entity or
its shareholders.
We may not be able to protect our confidential information and proprietary
rights.
While we currently intend to require our employees to execute
confidentiality agreements, we cannot assure that this will be adequate to deter
misappropriation of our confidential information and internet commerce model. In
addition, we may not be able to detect unauthorized use of our intellectual
property and take appropriate steps to enforce our rights. If third parties
infringe or misappropriate our trademarks or other proprietary information, our
business could be seriously harmed. In addition, other parties may assert
infringement claims against us or claim that we have violated their intellectual
property rights. Such claims, even if not true, could result in significant
legal and other costs and may be a distraction to management.
Our business will be harmed if the growth of commerce on the Internet is
slower than expected.
5
If commerce on the Internet does not continue to grow, or grows more slowly
than expected, our growth would decline and our business would be harmed. The
widespread acceptance and adoption of the Internet for conducting business is
likely only in the event that the Internet provides businesses with greater
efficiencies and operating improvements. Factors which may affect Internet usage
or electronic commerce adoption include:
o Actual or perceived lack of security of information;
o Lack of access and ease of use;
o Congestion of Internet traffic or other usage delays;
o Inconsistent quality of service;
o Increases in access costs to the Internet;
o Excessive government regulation;
o Uncertainty regarding intellectual property ownership;
o Reluctance to adopt new business methods;
o Costs associated with the obsolescence of existing infrastructure; and
o Economic viability of the Internet commerce model.
Competition could result in price reductions, reduced profitability
and loss of market share.
Competition in the professional marketplace is strong.
The market for our services is subject to rapid technological change and
increased competition from large existing players, new entrants, and internal
management and information technology groups.
Our business will be negatively affected if we do not keep pace with the
latest technological changes and client preferences.
Our market and the leading technologies used by our clients are
characterized by rapid technological change. If we are unable to respond
successfully to these technological developments or do not respond in a timely
or cost-effective way, our business and operating results will be seriously
harmed. In addition, we must recruit and retain professionals who are familiar
with technological advances and developments so that they can fulfill the needs
of our clients.
Current Management Devotes Limited Time to Company.
Management anticipates devoting only part of its time to the business of
the Company. The Company's only officer is Dov Perlysky, President, Secretary
and Treasurer. Mr. Perlysky has a written employment agreement with the Company
but will not receive any compensation thereunder until annualized revenue of LCG
exceeds $500,000, on a quarterly basis. The Company has not obtained key man
life insurance on Mr. Perlysky. Notwithstanding the limited time commitment of
management, loss of the services of Mr. Perlysky would adversely affect
development of the Company's business.
Our Sole Officer and Director will continue to have substantial control
over the Company after the Offering.
Our sole officer and director indirectly owns 120,000 shares of Common
Stock, which represents 43.5% of the outstanding LCG Common Stock. Consequently,
he may be able to control the direction of LCG. Mr. Perlysky also indirectly
owns 480,000 warrants to purchase LCG Common Stock at an exercise price of $0.12
per share. Mr. Perlysky as well as certain of our other shareholders of the
Company have agreed to escrow their shares until the earlier of (i) September 1,
2007 or (ii) the date on which the closing price of the shares of LCG Common
Stock has equaled or exceeded $1.00 per share on the NASDAQ Bulletin Board,
NASDAQ National Market System or on the American or New York Stock Exchange for
at least ten (10) consecutive trading days. While in escrow the holders of the
shares will be able to vote such shares but may not sell them.
6
Reporting requirements may delay or preclude acquisition.
Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires companies subject thereto to provide certain information about
significant acquisitions including audited financial statements for the company
acquired covering one or two years, depending on the relative size of the
acquisition. The time and additional costs that may be incurred by some target
companies to prepare such financial statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition by us.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.
Our officers and directors have limited liability and have indemnity rights
which may discourage stockholders from bringing an action against them.
Our Certificate of Incorporation provides that we will indemnify our
officers and directors against losses sustained or liabilities incurred which
arise from any transaction in that officer's or director's respective managerial
capacity unless that officer or director violates a duty of loyalty, did not act
in good faith, engaged in intentional misconduct or knowingly violated the law,
approved an improper dividend, or derived an improper benefit from the
transaction. LCG's Certificate of Incorporation also provides for the
indemnification by it of its officers and directors against any losses or
liabilities incurred as a result of the manner in which the officers and
directors operate LCG's business or conduct its internal affairs, provided that
in connection with these activities they act in good faith and in a manner which
they reasonably believe to be in, or not opposed to, the best interests of LCG
and their conduct does not constitute gross negligence, misconduct or breach of
fiduciary obligations. The existence of these provisions may discourage holders
of LCG Common Stock from bringing an action against management because LCG may
be responsible for paying all costs associated therewith, which could negatively
impact the value of the LCG Common Stock.
We have no intention of paying dividends on our Common Stock in the near
future and holders of LCG Common Stock will have to rely on the appreciation
thereof to realize any monies from holding these securities. We have not paid
any dividends on our Common Stock and do not anticipate paying cash dividends in
the foreseeable future. We intend to retain any earnings to finance the growth
of our business. Management of LCG cannot assure you that we will ever pay cash
dividends. Accordingly, holders of our Common Stock will have to rely on the
appreciation thereof to realize any monies from holding these securities.
ITEM 2. DESCRIPTION OF PROPERTIES
LCG has no properties and at this time has no agreements to acquire any
properties. LCG currently uses its management's office space, located at 2
Lakeside Drive West, Lawrence, New York, 11559, at no cost to LCG. LCG's
management has agreed to continue this arrangement until such time as LCG
requires larger space. Management believes that office space will be available
at reasonable rents when such space is needed.
ITEM 3. LEGAL PROCEEDINGS
We are not presently party to any material legal proceeding nor are we
aware of any material pending or potential legal proceeding which may be
instituted against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
As of the date hereof, none of LCG's securities are traded on any public
market. We intend to explore the possibility of causing the Common Stock to be
admitted for quotation on the Over the Counter Electronic Bulletin Board (the
"OTCBB"); however, the management of LCG cannot assure you that it will pursue
such course of action, that it will identify a broker to sponsor such listing,
that the common stock will be admitted for trading or if admitted for trading
that a liquid market for the securities ever will develop.
As of September 20, 2005, there were approximately 70 holders of record of
LCG's common stock.
We currently intend to retain all available earnings, if any, generated by
our operations. Accordingly, we do not anticipate paying cash dividends on the
common stock in the foreseeable future. Any future determination as to the
payment of dividends will be in the discretion of our Board of Directors and
will be dependent upon LCG's results of operations, financial condition and
other factors deemed relevant by our Board.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The financial information included herein should be read in conjunction
with the Financial Statements, including the Notes thereto.
OPERATIONS
LCG was formed on January 14, 2004 as a Delaware corporation. As of June
30, 2005, LCG had net working capital of approximately $44,800. For the year
ended June 30, 2005 we had revenues of $13,315 as compared to zero revenues for
the period from inception to June 30, 2004. Such revenue was derived from our
three consulting agreements. Expenses for the year ended June 30, 2005 were
$34,667, as compared to $10,775 for the period from inception to June 30, 2004.
The increase in expenses is primarily attributable to increased legal and
accounting expenses. For the year ended June 30, 2005, our net loss from
operations was $(21,352), as compared to a net loss from operations of
$(10,775), for the period from inception to June 30, 2004.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, we have funded our operations from the sale of common
stock to our founders and in connection with the Private Placement. In addition,
our principal stockholder has agreed to lend the Company up to $25,000. We
anticipate that as we expand additional funds will be required.
We may seek to borrow funds from banks or other lending institutions
although we currently ha no commitments for any such borrowings and no assurance
can be given that any such commitments will be obtained on terms acceptable to
us.
In addition we may seek to sell additional shares of our Common Stock in a
private placement or public offering or our Board of Directors may authorize the
sale of our Preferred Stock. No such stock offering is currently contemplated
and no assurance can be given that any such offering will be successfully
completed.
ITEM 7. FINANCIAL STATEMENTS
Please see the Financial Statements, including the Notes thereto, appended
to the end of this Form 10-KSB.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Silverstein & Weiss ("S&W") previously audited our financial statements for
the period ended June 30, 2004. S&W's report for this period did not contain an
adverse opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles.
The decision to change auditors was approved by our sole Director and was
made because S&W was not registered with the Public Company Accounting Oversight
Board ("PCAOB") and thus cannot act as an auditor of a public company. S&W
resigned because it was not registered with the PCAOB. Such resignation was
effective on August 25, 2005. On August 25, 2005, we appointed Raich Ende Malter
& Co., LLP ("Raich Ende") to serve as our new independent auditor.
In connection with the audit of the period from January 14, 2004
(inception) to June 30, 2004 and the quarterly reports subsequent thereto and
prior to the resignation of S&W, there were no disagreements or reportable
events between us and S&W on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not
resolved to the satisfaction of S&W, would have caused them to make a reference
to the subject matter of the disagreements or reportable events in connection
with their reports.
ITEM 8A. CONTROLS AND PROCEDURES
The Company's management, with the participation of its Principal Executive
Officer (who is also its Principal Financial and Accounting Officer), has
evaluated the effectiveness of its disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (the "Exchange Act")) as of the end of the period covered by this
report. Based on such evaluation, the Company's Principal Executive Officer has
concluded that, as of the end of such period, the Company's disclosure controls
and procedures are effective in recording, processing, summarizing and
reporting, on a timely basis, information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act.
ITEM 8B. OTHER INFORMATION
None
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The following table lists, as of September 20, 2005, LCG's directors,
executive officers and key employees, as well as promoters and control persons
of LCG:
NAME AGE TITLE
Dov Perlysky 42 President, Treasurer, Secretary & Director
Dov Perlysky has been the managing member of Nesher, LLC, a private
investment firm since 2000. From 1998 until 2002, Mr. Perlysky was a Vice
President in the Private Client Group of Laidlaw Global Securities, a registered
broker-dealer. He received his B.S. in Mathematics and Computer Science from the
University of Illinois in 1985 and a Masters in Management from the JL Kellogg
Graduate School of Management of Northwestern University in 1991. Mr. Perlysky
is a director of Engex, Inc., a closed-end mutual fund.
Krovim LLC ("Krovim") owns 120,000 shares of our Common Stock which
represents 43.5% of the outstanding Common Stock. In addition, Krovim owns
warrants to purchase an additional 480,000 shares of Common Stock at an exercise
price of $.12 per share. As such, Krovim may be deemed a control person of LCG.
The manager of Krovim is Nesher LLC and Nesher's manager is Mr. Perlysky.
9
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified. The Board of Directors
appoints officers as necessary.
Mr. Perlysky engages in other business activities. Accordingly, he does not
devote his entire efforts or time to the affairs of LCG.
COMMITTEES OF THE BOARD
The Board does not have an audit, nominating or a compensation committee.
The selection of nominees for the Board of Directors is made by the entire Board
of Directors. Compensation of management is determined by the entire Board of
Directors.
We expect that at such time as the business grows we will formulate
appropriate committees of the board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our executive
officers and directors, and persons who own more than 10% of our common stock,
to file reports regarding ownership of, and transactions in, our securities with
the Securities and Exchange Commission and to provide us with copies of those
filings. Based solely on our review of the copies of such forms received by us,
or written representations from certain reporting persons, we believe that
during fiscal year ended June 30, 2005, all filing requirements applicable to
its officers, directors and greater than ten percent beneficial owners were
complied with.
CODE OF ETHICS
LGC has not adopted a code of ethics. Though we do intend to adopt a Code
of Ethics if we are successful in implementing our business plan, our management
currently believes that, due to the fact that we only have one part-time
employee such a Code of Ethics is unnecessary at this time.
ITEM 10. EXECUTIVE COMPENSATION
To date no compensation has been paid to Mr. Perlysky. In August 2004, Mr.
Perlysky entered into an employment agreement (the "Perlysky Agreement") with
LCG. This agreement has an initial term of three years and provides that Mr.
Perlysky will receive compensation of $50,000 per annum once LCG's annualized
revenues exceed $500,000 on a quarterly basis. The Perlysky Agreement does not
require Mr. Perlysky to devote his full time and effort to our business.
COMPENSATION OF DIRECTORS
Directors do not receive any direct or indirect compensation for serving in
such capacity. We will reimburse directors for all reasonable costs and expenses
incurred in connection with attending or participating in meetings of the Board.
EMPLOYMENT AGREEMENTS
Other than the Perlysky Agreement, we are not party to any employment
agreements with management.
STOCK BASED COMPENSATION
We do not have a stock option or compensation plan and has never
issued any stock-based compensation. No stock options or restricted stock grants
have been issued through the date of this annual report.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information as of September 20, 2005,
regarding the beneficial ownership of common stock by (1) each director and
officer of LCG; (2) each person or group known by LCG to beneficially own 5% or
more of the outstanding shares of common stock; and (3) all executive officers
and directors of LCG as a group. Unless otherwise noted, the persons named below
have sole voting and investment power with respect to the shares shown as
beneficially owned by them.
NAME AND ADDRESS AMOUNT OF PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OUTSTANDING
SHARES OWNED (2)
------------------------- --------------------- ----------------
Krovim LLC 120,000 shares (3) 43.5%
Nesher LLC, Manager
Dov Perlysky4, Manager
2 Lakeside Drive West
Lawrence, New York 11559
Alison Bell 27,400 shares (3) 9.9%
1035 Fifth Avenue
New York, New York 10028
Pamela Turkel 20,000 shares (3) 7.2%
440 East 23rd Street
New York, New York 10010
Pamela Katz 24,400 shares (3) 8.8%
One Leeds Drive
Port Washington, New York 11050
Rosalind Davidowitz 52,000 shares 18.8%
7 Sutton Place South
Lawrence, New York 11556
All officers and directors
as a group (1 person) 120,000 shares (3), (4), (5) 43.5%
-----------
(1) The shares set forth in this chart are being held in escrow pursuant to an
agreement among these Shareholders. Such shares shall be released from
escrow upon the occurrence of certain events.
(2) Based on a total of 275,900 shares outstanding as of September 20, 2005.
(3) Does not include warrants to purchase 480,000, 109,600, 80,000 and 97,600
shares of common stock beneficially owned by Krovim LLC, Mrs. Bell, Mrs.
Turkel and Mrs. Katz, respectively, each at an exercise price of $.12 per
share.
(4) Dov Perlysky is the managing member of the manager of Krovim LLC.
(5) All of such shares are owned by Krovim LLC. Mr. Perlysky is the managing
member of the manager of Krovim LLC.
11
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has issued 120,000 shares of its Common Stock and warrants to
purchase an additional 480,000 shares of Common Stock at $.12 per share to
Krovim LLC in exchange for an aggregate of $600. In addition Krovim has agreed
to loan the Company up to $25,000, which loan will bear interest at the rate of
prime plus 2% per annum. No such loans are currently outstanding. Mr. Perlysky
is the manager of Nesher LLC, which is the manager of Krovim LLC.
On August 20, 2004, the Company entered into a one year consulting
agreement with Rivkalex Corp. to assist Rivkalex Corp. to determine the
necessary technology investments in order to maximize its return on those
investments. The Company is paid at the rate of $200 per hour for such
consulting services. The term of agreement has been extended to August 20, 2006.
Rosalind Davidowitz is the sole owner of Rivkalex Corp.
ITEM 13. EXHIBITS
DESCRIPTION OF EXHIBITS
(a) Financial Statements see Index to Financial Statements on page
F-1 of this Annual Report.
(b) Exhibits See Exhibit Index.
EXHIBIT NO.
-------
3.1 Certificate of Incorporation of LCG*
3.2 Bylaws of LCG*
4.1 Form of Warrant*
10.1 Consulting Agreement between LCG and Chocolate Printing Company, Inc.*
10.2 Consulting Agreement between LCG and Rivkalex Corp.*
10.3 Employment Agreement between LCG and Dov Perlysky*
10.4 Consulting Agreement between LCG and The Gorlin Companies*
31.1 Certification of Chief Executive and Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes- Oxley Act of 2002*
* previously filed
12
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The following table sets forth fees billed to us during the fiscal year
ended June 30, 2005 and for the period from inception to June 30, 2004 by our
independent auditors:
June 30, 2005 June 30, 2004
----------------- ----------------
(i) Audit Fees $ 5,856 $ 0
(ii) Audit Related Fees $ 0 $ 0
(iii) Tax Fees $ 0 $ 0
(iv) All Other Fees $ 0 $ 0
Audit Fees. Consists of fees billed for professional services rendered for
the audit of the Company's financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by our auditors in connection with statutory and
regulatory filings or engagements.
Audit-Related Fees. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's financial statements and are not reported under "Audit Fees."
There was no such services provided in fiscal 2005 or 2004.
Tax Fees. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning. There were no tax services provided in
fiscal 2005 or 2004.
All Other Fees. Consists of fees for products and services other than the
services reported above. There were no management consulting services provided
in fiscal 2005 or 2004.
Policy on Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
LCG's policy is that the LCG's auditor performs its services independently
and with the highest integrity and professionalism. There is no formal written
policy. Any engagement of our outside auditor must be consistent with principles
determined by the SEC, namely, that the independent auditor cannot audit its own
work, perform management functions or act as an advocate for the client.
LCG currently does not have a designated Audit Committee, and accordingly,
our Board of Directors' policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services and is generally
subject to a specific budget. The independent auditors and management are
required to periodically report to our Board of Directors regarding the extent
of services provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date. The Board of
Directors may also pre-approve particular services on a case-by-case basis.
13
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this amended report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: December 19, 2005
LAWRENCE CONSULTING GROUP, INC.
/s/ Dov Perlysky
Dov Perlysky
Chief Executive Officer and Chief Financial Officer
(Principal Executive, Financial and Accounting Officer)
In accordance with the Exchange Act, this amended report has been signed by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/ Dov Perlysky Chief Executive Officer,
Dov Perlysky Chief Financial Officer and Director December 19, 2005
EXHIBIT 31.1
CERTIFICATION
I, Dov Perlysky, certify that:
1. I have reviewed this annual report on Form 10-KSB of Lawrence Consulting
Group, Inc. ("Lawrence Consulting Group");
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Lawrence Consulting Group as of and for, the periods presented in this annual
report;
Page 14
4. Lawrence Consulting Group's other certifying officers 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 Lawrence Consulting Group 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 Lawrence Consulting Group,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual 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 Lawrence Consulting Group'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 annual report based on such evaluation; and
d. Disclosed in this report any change in Lawrence Consulting Group's
internal control over financial reporting that occured during its most recent
fiscal quarter (Lawrence Consulting Group's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to
materially affect, Lawrence Consulting Group's internal control over financial
reporting.
5. Lawrence Consulting Group's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to Lawrence Consulting Group's auditors and the audit
committee of Lawrence Consulting Group'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 likely to
adversely affect Lawrence Consulting Group'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 Lawrence Consulting Group's internal
control over financial reporting.
15
Date: September 28, 2005
/s/ Dov Perlysky
Dov Perlysky
Chief Executive Officer and Chief Financial Officer
EXHIBIT 32.1
LAWRENCE CONSULTING GROUP, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Lawrence Consulting Group, Inc.
(the "Company") on Form 10-KSB for the period ending June 30, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the Report), I, Dov
Perlysky, Chief Executive Officer and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. 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 result of operations of the Company.
/s/ Dov Perlysky
Dov Perlysky
Chief Executive Officer and Chief Financial Officer
September 28, 2005
16
LAWRENCE CONSULTING GROUP, INC. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Lawrence Consulting Group, Inc.
Lawrence, NY 11559
We have audited the accompanying balance sheets of Lawrence Consulting
Group, Inc. as of June 30, 2004 and 2005, and the related statements of
operations, changes in stockholders' equity (deficiency) and cash flows for the
period from January 14, 2004 (inception) through June 30, 2004 and the year
ended June 30, 2005. 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 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 financial position of Lawrence Consulting Group,
Inc. Corp. as of June 30, 2004 and 2005, and the results of its operations and
its cash flows for the periods from January 14, 2004 (inception) through June
30, 2004 and the year period ended June 30, 2005 in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note I, the Company has restated its financial statements
as of June 30, 2004 and for the period from January 14, 2004 through June
30,2004.
/s/ Raich Ende Malter & Co. LLP
East Meadow, New York
September 28, 2005
F-1
Lawrence Consulting Group, Inc.
Balance Sheets
As of June 30,
------------------
2004 2005
(RESTATED)
------------- -------------
ASSETS
CURRENT ASSETS
CASH $ 942 $ 46,423
ACCOUNTS RECEIVABLE 2,800
---------------- ---------------
TOTAL CURRENT ASSETS 942 49,223
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
ACCRUED LIABILITIES $ 10,717 $ 4,450
---------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
PREFERRED STOCK $0.0001 PAR VALUE,
AUTHORIZED 2,000,000 SHARES, ISSUED-NONE - -
COMMON STOCK $0.0001 PAR VALUE,
AUTHORIZED 10,000,000 SHARES,
ISSUED & OUTSTANDING 225,000
SHARES as of June 30, 2004
AND 275,900 SHARES as of June 30, 2005 23 28
ADDITIONAL PAID IN CAPITAL 25,977 76,872
COMMON STOCK SUBSCRIPTION RECEIVABLE (25,000)
ACCUMULATED DEFICIT (10,775) (32,127)
---------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (9,775) 44,773
---------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 942 $ 49,223
(DEFICIENCY) ================ ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-2
Lawrence Consulting Group, Inc.
Statements of Operations
For the period from For the
January 14, 2004 (inception) Year Period Ended
through June 30, 2004 June 30, 2005
(RESTATED)
-----------------------------------------------------
REVENUES:
CONSULTING INCOME $ 13,300
INTEREST INCOME $ 0 15
----------------- ---------------
TOTAL REVENUES
0 13,315
GENERAL & ADMINISTRATIVE EXPENSES 10,775 34,667
----------------- ----------------
NET LOSS $ (10,775) $ (21,352)
----------------- ----------------
----------------- ----------------
LOSS PER COMMON SHARE
BASIC AND DILUTED $ (0.05) $ (0.08)
----------------- ----------------
----------------- ----------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-BASIC AND DILUTED 222,904 267,254
---------------- ----------------
---------------- ----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-3
Lawrence Consulting Group, Inc.
Statements of Changes in Stockholders' Equity (Deficiency)
For the period from
January 14, 2004 (inception) through June 30, 2004
and for the year ended June 30, 2005
COMMON
ADDITIONAL STOCK TOTAL
PREFERRED COMMON COMMON PAID-IN SUBSCRIPTION ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK WARRANTS CAPITAL RECEIVABLE DEFICIT EQUITY
(DEFICIENCY)
-------- ------- -------------- ----------- --------------- ---------- -----------
Shares Amount Shares Amount Shares
--- ------ ------ ------ ------
BALANCE-
January 14, 2004 - $- - $- - $- $- $- $-
ISSUANCE OF COMMON
STOCK TO FOUNDERS 1,000,000 100 900 1,000
RECAPITALIZATION,
CONVERSION OF
80% FOUNDERS (800,000) (80) 800,000 80 -
SHARES TO WARRANTS
ISSUANCE OF
COMMON STOCK - $- 25,000 3 24,997 (25,000) -
NET LOSS (10,775) (10,775)
----------------------------------------------------------------------------------------------------------------
BALANCE-
June 30, 2004
(Restated) - - 225,000 23 800,000 25,977 (25,000) (10,775) (9,775)
ISSUANCE
OF COMMON STOCK - - 50,900 5 50,895 50,900
PROCEEDS FROM
COMMON STOCK
SUBSCRIPTION
RECEIVABLE 25,000 25,000
NET LOSS (21,352) (21,352)
------------------------------------------------------------------------------------------------------------
BALANCE-
June 30, 2005 - $- 275,900 $28 800,000 $76,872 - $(32,127) $44,773
--- --- -------- ---- --------- --------- -------- ---------- ---------
--- --- -------- ---- --------- --------- -------- ---------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-4
Lawrence Consulting Group, Inc.
Statements of Cash Flow
For the period from January 14, 2004
(inception) through June 30, 2004
and for the year ended June 30, 2005
For the
Period from January Year
14, 2004 (inception) ended June 30,
through June 30, 2005 2005
(RESTATED)
--------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $ (10,775) $(21,352)
Adjustments to reconcile net loss to
net cash used in operating activities:
Changes in asset and liability balances:
Accounts receivable (2,800)
Accrued Liabilities 10,717 (6,267)
--------------- --------------
NET CASH USED IN OPERATING ACTIVITIES $ (58) $(30,419)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,000 50,900
Proceeds from stock subscription receivable 25,000
--------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,000 75,900
--------------- --------------
NET INCREASE IN CASH $ 942 $ 45,481
CASH -- beginning of period 0 $ 942
--------------- --------------
CASH -- end of period $ 942 $ 46,423
---------------- --------------
Supplemental disclosures of cash flow information:
Non-cash financing activities:
Subscription receivable $25,000
===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-5
LAWRENCE CONSULTING GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
Lawrence Consulting Group, Inc. (the "Company") was organized under the
laws of the State of Delaware on January 14, 2004. The Company offers consulting
and business advisory services. In August 2004, the Company entered into its
first two consulting agreements. In May 2005, the Company entered into its third
consulting agreement. The Company's clients are currently located in New York
and Florida.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 these
estimates. Significant estimates made by management include the valuation of the
deferred tax asset allowance.
Fair Value of Financial Instruments
The amounts at which current assets and current liabilities are presented
approximate their fair value due to their short-term nature.
Revenue Recognition
The Company's consulting agreements may require monthly fees and/or hourly
fees. These fees are recognized as revenue as services are rendered.
Accounts Receivable
Accounts receivable are recorded at their estimated realizable value. An
allowance for doubtful accounts is estimated by management through evaluation of
significant past due accounts. Accounts are deemed past due when payment has not
been received within the stated time period. The Company's policy is to review
individual past due amounts periodically and write off amounts for which all
collection efforts are deemed to have been exhausted.
Income Taxes
The Company follows the provisions of Statement of Financial Accounting
Standards Board No. 109, "Accounting for Income Taxes," which requires the use
of the liability method of accounting for income taxes. The liability method
measures deferred income taxes by applying enacted statutory rates in effect at
the balance sheet date to the differences between the tax basis of assets and
liabilities and their reported amounts on the financial statements. The
resulting deferred tax assets or liabilities are adjusted to reflect changes in
tax laws as they occur. A valuation allowance is provided when it is more likely
than not that a deferred tax asset will not be realized.
Loss Per Common Share
The Company has adopted Statement of Financial Accounting Standards No.
128, Earnings Per Share, which modified the calculation of earnings per share
("EPS"). This statement replaced the previous presentation of primary and fully
diluted EPS to basic and diluted EPS. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS includes the dilution of common stock
equivalents, and is computed similarly to fully diluted EPS pursuant to
Accounting Principles Board (APB) Opinion 15.
Basic loss per common share is calculated by dividing net loss by the
weighted average number of shares of common stock outstanding. Stock warrants
have not been included in the calculation of diluted loss per share, as the
effect would have been antidilutive and the warrants were not exercisable during
the period covered by these financial statements as the Company's common stock
was not trading at $1.00 per share. Accordingly, basic and dilutive loss per
share are the same for the Company.
Loss Per Share
Period from For the
January 14, 2004 Year Period
(inception) to Ended June 30, 2005
June 30, 2004
Basic $ (0.05) $ (0.08)
Diluted (0.05) (0.08)
F-6
NOTE B - INCOME TAXES
Deferred tax assets and liabilities are determined using enacted tax rates
for the effects of net operating losses and temporary differences between the
book and tax bases of assets and liabilities. The Company records a valuation
allowance on deferred tax assets to reflect the expected future tax benefits to
be realized. In determining the appropriate valuation allowance, certain
judgments are made relating to recoverability of deferred tax assets, uses of
tax loss carry forwards, level of expected taxable income and available tax
planning strategies. These judgments are routinely reviewed by management. At
June 30, 2005, the Company had a net operating loss of $32,127 available to
reduce future taxable income expiring through 2024. Management is unable to
determine if the utilization of the future tax benefit is more likely than not
and accordingly, the tax asset of $13,493 has been fully reserved. A
reconcilliation of the statutory income tax effective rate to the actual
provision shown in the financial statements is as follows:
For the period
January 14,
2004 (inception)
through For the Year ended
June 30, 2004 June 30, 2005
----------------- ------------------
Loss before income taxes $10,775 $32,127
-------- --------
-------- --------
Computed tax benefit at
statutory rate:
Federal ($3,663) (34%) ($10,923) (34%)
State (862) (8%) (2,570) (8%)
Net Operating Loss
Valuation reserve 4,525 42% 13,493 42%
------- ------ -------- ------
Total tax benefit $ - -% $ -- -%
------- ------ -------- -------
------- ------ -------- -------
NOTE C - CAPITAL TRANSACTIONS
On January 15, 2004, the Company issued to its founders 1,000,000 shares of
common stock in exchange for $1,000 (the "Equity Purchase Price") ($0.001 per
share). The Company was subsequently recapitalized so that as of January 16,
2004, the Company had 200,000 shares of Common Stock and 800,000 warrants issued
and outstanding. Management allocated $800 of the Equity Purchase Price to the
warrants ($0.001 per warrant) and the balance to the common stock ($0.001 per
share). The warrants are exercisable at $0.12 per share and expire on January
16, 2014. The warrants are not exercisable until the earlier of (i) September 1,
2007 or (ii) date on which the closing price of the shares of the Company's
common stock has equaled or exceeded $1.00 per share on the NASDAQ Bulletin
Board, NASDAQ National Market System or on the American or New York Stock
Exchange for at least ten (10) consecutive trading days.
On March 1, 2004, 25,000 shares were sold for $1.00 per share. The Company
received no cash in connection with the sale of these shares during the period
from January 14, 2004 (inception) through June 30, 2004 and was issued a note
receivable for $25,000, which was collected on August 20, 2004.
On August 31, 2004, the Company completed a private placement of 50,900
shares of common stock at $1.00 per share.
On September 24, 2004, the Company filed a registration statement with the
Securities and Exchange Commission (the "SEC") on Form 10SB. On November 23,
2004, the Company went effective as a registrant.
F-7
NOTE D - RELATED PARTY TRANSACTIONS
During 2004 and 2005, the Company utilized the office space provided by its
president at no cost to the Company. The amount of office space utilized by the
Company is considered insignificant.
In March, 2004, the Company entered into an agreement with Krovim, LLC
("Krovim"), a principal shareholder of the Company, whereby Krovim agreed to
lend the Company up to a maximum of $25,000 at prime plus 2% per annum. No
drawdowns have been made to date and there are no formal repayment terms.
The President of Rivkalex Corp., a client of the Company's, owns 18.8% of
the Company's Common Stock.
NOTE E - LONG TERM EMPLOYMENT AGREEMENT
On August 20, 2004, the Company entered into a three year employment
agreement with its president, which shall be extended from year to year after
the initial term. The president, who is also the Company's Chairman and Chief
and Executive Officers, shall not be entitled to any cash compensation from the
Company for his services until the Company's annualized revenues exceed $500,000
on a quarterly basis. At such time, the president shall be entitled to receive a
salary of $50,000 per annum.
NOTE F - CONCENTRATION OF RISKS
The Company's cash balances are maintained in a high quality bank checking
account. Management deems all its accounts receivables to be fully collectible,
and, as such, does not maintain any allowances for uncollectable receivables.
NOTE G - MATERIAL BALANCE SHEET ACCOUNTS
As of June 30, 2005, two of the Company's clients each accounted for
approximately 36% of the Company's accounts receivable and a third client
accounted for the balance. As of June 30, 2005, all of the Company's accounts
payables were due to a professional services firm for bookkeeping services.
NOTE H - CHANGE OF AUDITORS
Silverstein & Weiss (S&W") previously audited the Company's financial
statements for the period ended June 30, 2004. S&W's report for this period did
not contain an adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles.
The decision to change auditors was approved by the Company's sole Director
and was made because S&W is not registered with the Public Company Accounting
Oversight Board ("PCAOB") and thus cannot act as an auditor of a public company.
S&W resigned because it was not registered with the PCAOB. Such resignation was
effective August 25, 2005. On August 25, 2005, the Company appointed Raiche Ende
Malter & Co., LLP ("Raiche Ende") to serve as its new independent auditor.
In connection with the audit of the period from January 14, 2004
(inception) to June 30, 2004 and the quarterly reports subsequent thereto and
prior to the resignation of S&W, there were no disagreements or reportable
events between the Company and S&W on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of S&W, would have caused them to
make a reference to the subject matter of the disagreements or reportable events
in connection with their reports.
NOTE I - RESTATEMENT OF FINANCIAL STATEMENTS
The Company's financial statements as of June 30, 2004 and for the period
from January 14, 2004 (inception) to June 30, 2004 have been restated from prior
financial statements included in the Company's Form 10SB registration statement
filed with the SEC on September 24, 2004 and subsequent quarterly forms 10QSB.
In the restated financial statements (i) $7,661 of organization costs originally
capitalized were expensed, and (ii) a $25,000 stock subscription receivable was
reclassified from a current asset to a contra-equity account.
F-8
NOTE J - QUARTERLY FINANCIAL DATA (UNAUDITED)
The following fiscal 2005 quarterly financial information for each of the
three months periods ended September 30, 2004, December 31, 2004, March 31, 2005
and June 30, 2005 is unaudited. However, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the results of operations for such periods have been made for
presentation of the results shown.
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
September 30, 2004 December 31, 2004 March 31, 2005 June 30, 2005 TOTAL
(UNAUDTED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenues $ 1,115 $ 2,900 $ 4,500 $4,800 $13,315
Net Income (loss) (540) (12,491) (11,351) 3,030 (21,352)
Earnings Per Share
Basic $ (0) $ (0.05) $ (0.04) $ 0.01 $ (0.08)
Diluted (0) (0.05) (0.04) 0.01 $ (0.08)
F-9