TABLE OF CONTENTS

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this registration statement the terms “NuState", "we", "our", the "Company" and similar terms refer to NuState Energy Holdings, Inc., a Nevada corporation. In addition, when used herein and unless specifically set forth to the contrary, “2012” refers to the year ended June 30, 2012 and “2011” refers to the year ended June 30, 2011.

 

Additional Information

 

 

Item 1. Business

 

Description of Business

We do not have any business or operations and are considered a "shell" company under Federal securities laws. We are actively seeking to acquire assets or shares of an entity actively engaged in business which generates revenues, in exchange for our securities. Our purpose is to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to us by persons or firms who or which desire to seek the perceived advantages our company may offer. We will not restrict our search to any specific business, industry, or geographical location and we may participate in a business venture of virtually any kind or nature. This discussion of the proposed business is purposefully general and is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential business opportunities. Management anticipates that it may be able to participate in only one potential business venture because we have nominal assets and limited financial resources. This lack of diversification should be considered a substantial risk to our stockholders because it will not permit us to offset potential losses from one venture against gains from another.

 

New Business Opportunity

 

We may seek a business opportunity with entities which have recently commenced operations, or which wish to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries. We anticipate that the selection of a business opportunity in which to participate will be complex and extremely risky. Due to general economic conditions, rapid technological advances being made in some industries and shortages of available capital, management believes that there are numerous firms seeking the perceived benefits of a publicly registered corporation. These perceived benefits may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for incentive stock options or similar benefits to key employees, providing liquidity, subject to restrictions of applicable statutes, for all stockholders and other factors. Potentially, available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

 

The analysis of new business opportunities will be undertaken by, or under the supervision of, Mr. Kevin Yates, our Chief Executive Officer, who may not be considered a professional business analyst. Mr. Yates will be the key person in the search, review and negotiation with potential acquisition or merger candidates. We intend to concentrate on identifying preliminary prospective business opportunities that may be brought to our attention through present associations of Mr. Yates and legal counsel or by our stockholders. In analyzing prospective business opportunities, we will 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;

●

the potential for further research, development, or exploration;

●

specific risk factors not now foreseeable but which then may be anticipated to impact our proposed activities;

●

the potential for growth or expansion;

●

the potential for profit;

●

the perceived public recognition of acceptance of products, services, or trades; name identification; and

●

other relevant factors.

 

We will use the details listed above to evaluate and select a business opportunity. In evaluating and selecting a business opportunity, we will use a multi-step process consisting of the following:

 

 

We will not acquire or merge with any company for which audited financial statements cannot be obtained within the time period prescribed by applicable rules of the United States Securities and Exchange Commission which is presently four business days from the closing date of the transaction. This requirement for readily available audited financial statement may require us to preclude a transaction with a potential candidate that might otherwise be beneficial to our stockholders.

 

 

We will not restrict our search for any specific kind of company, but may acquire a venture that is in its preliminary or development stage, which is already in operation, or in essentially any stage of its corporate 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. However, we do not intend to obtain funds in one or more private placements to finance the operation of any acquired business opportunity until such time as we have successfully consummated such a merger or acquisition.

 

In implementing a structure for a particular business acquisition, we may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity. We may also acquire stock or assets of an existing business. On the consummation of a transaction, it is possible that our present management and stockholders will no longer be in control of our company. In addition, our sole director may, as part of the terms of the acquisition transaction, resign and be replaced by new directors without a vote of our stockholders.

 

We anticipate that any securities issued in any such reorganization would be issued in reliance upon exemption from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of a transaction, we may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. If such registration occurs, of which there can be no assurance, it will be undertaken by the surviving entity after we have successfully consummated a merger or acquisition and we are no longer considered a "shell" company. Until such time as this occurs, we will not attempt to register any additional securities. The issuance of substantial additional securities and their potential sale into any trading market which may develop in our securities may have a depressive effect on the value of our securities in the future, if such a market develops, of which there is no assurance.

 

Identify Potential Merger or Acquisition Candidates

In August 2011, the Company entered into a Share Exchange Agreement (“SEA”) with GLINS International NV (“GLINS”), a Curacao company doing business in the country of Suriname, which would have resulted in a change of control. In December 2011, the closing date of the SEA was extended to July 31, 2012. By mutual agreement, the SEA was terminated in August 2012. The Company continues to have relationships throughout the country of Suriname and anticipates developing new business arrangements in the future. We have not identified a potential merger or acquisition candidate at this time. Our search for a business opportunity is not limited to the country of Suriname.

 

The Country of Suriname General Data

The Republic of Suriname is a country in the north-east part of South America bordered by two rivers, the Corantijne River at the west (Guyana) and the Marowijne River at the east (French Guyana). Suriname has a coastline of about 350 kilometers and the distance from north to south is about 450 kilometers. Most of the population lives along the coastline in the capital city of Paramaribo. In total, an estimated 566,846 people live in Suriname as of July 2013.

 

One of the smallest, yet most ethnically diverse and ecologically significant nations in Latin America, Suriname also is one of the Caribbean’s top economic performers. The World Bank recently ranked Suriname among the 10 potentially richest countries. Indeed, its wealth of natural resources is vast yet still largely unexplored, and the country is a net exporter of agriculture products. Tourism is growing as more people become aware of its pristine rainforests and eco-tourism possibilities.

 

Company Background

The company was incorporated in Nevada as Jaguar Investments, Inc. during October 1987. During March 2003, a wholly owned subsidiary of the Company merged with Freight Rate, Inc., a development stage company in the logistics software business. During May 2003, the Company changed its name to Power2Ship, Inc. During October 2006, the Company merged with a newly formed, wholly owned subsidiary, Fittipaldi Logistics, Inc., a Nevada corporation, with the Company surviving but its name changed to Fittipaldi Logistics, Inc. effective November 2006. During December 2007, the Company merged with a newly formed, wholly owned subsidiary, NuState Energy Holdings, Inc., a Nevada corporation, with the Company surviving but renamed NuState Energy Holdings, Inc. effective December 2007.

 

 

The Company has two wholly owned subsidiaries, Commodity Express Transportation, Inc. or CXT, a former provider of truck transportation and third-party logistics services, and Power2Ship Intermodal, Inc. or P2SI, a former provider of intermodal drayage transportation services, which ceased operations in May 2009 and June 2006, respectively. CXT has a wholly owned subsidiary, Commodity Express Brokerage, Inc.

 

On February 12, 2009, the Company filed Form 15 to terminate registration of its common stock under section 12(g) of the Securities Exchange Act of 1934 and subsequently has not submitted any filings to the Securities and Exchange Commission.

 

During the period from February 2009 through April 2010, the Company had several changes to its officers and directors and moved its offices twice. Presently, the Company’s Chairman and President, since April 2010, and its Chief Executive Officer, since July 2010, is Kevin Yates. The Company’s headquarters is located at 1201 Main Street, Suite 1980, Columbia, S.C. 29201.

 

Since April 2010, the Company’s current management developed, and began implementing, the following strategic plan designed to increase the Company’s shareholders’ value:

 

2.

Settle litigation,

 

This strategic plan has resulted in the following material events:

 

Reduced Liabilities

In August 2012, its subsidiaries CXT and P2SI each filed a Voluntary Bankruptcy Petition and Schedules in the United States Bankruptcy Court in the District of South Carolina. On October 19, 2012 the Company was awarded the bankruptcy and will be filing the proper paperwork and as result will reduce its liabilities by $1,494,406.

 

Regained Use of Intellectual Property

Licensing Use of Intellectual Property

We are currently discussing the potential licensing of our software, My Driver’s Seat, with certain third-parties.

 

Employees

At Juen 11, 2013, we had 1 full time employee.

 

Item 1A. Risk Factors

 

The common shares of our Company are considered speculative. You should carefully consider the following risks and uncertainties in addition to other information in this registration statement in evaluating our Company and our business before purchasing our common shares. Our business, operating or financial condition could be harmed due to any of the following risks:

 

 

Our auditors have raised substantial doubts as to our ability to continue as a going concern .

 

We currently have a working capital deficit and are uncertain if and when we will be able to pay our current liabilities.

 

We currently do not have sufficient capital to finance the anticipated recurring costs of being a publicly-traded company.

 

As of June 11, 2013, we had less than $1,000 cash on hand. We anticipate incurring incremental annual costs of approximately $180,000 related to being a publicly-traded company. We currently do not have sufficient resources to finance these costs, and will need to raise additional capital to support our public-company-related activities. If we are unable to raise sufficient capital, we may fail to comply with current reporting regulations.

 

We may still have some exposure to creditors of two of our subsidiaries which filed for bankruptcy.

 

Unpaid creditors of our subsidiaries may look to us as a target to recover on their claims under any number of legal theories, including piercing the corporate veil, breach of fiduciary duty, and deepening insolvency. We also   may find that we have exposure to the subsidiaries’ creditors under various state and federal statutes, or under contracts among the parties.

 

We currently do not have an operating business and cannot provide any assurance that we will have an operating business in the future.

 

We currently do not have any operating business. We continue to incur operating expenses while we consider alternative operating plans. These plans may include business combinations with or investments in other operating companies, or entering into a completely new line of business. We cannot assure you that we will be able to identify any appropriate business opportunities. Even if we are able to identify business opportunities that our Board deems appropriate, we cannot assure you that such a strategy will provide you with a positive return on your investment, and it may in fact result in a substantial decrease in the value of your stock. These factors will substantially increase the uncertainty, and thus the risk, of investing in our shares.

 

 

Our sole officer and director does not devote all of his time and attention to our business which may result in his not being able to identify and consummate an acquisition with an operating company.

 

Mr. Yates, who serves as our sole officer and director, devotes only approximately 90% of his time to the business and affairs of our company. Because Mr. Yates is primarily responsible for the identification and consummation of an acquisition of an operating company for us, we are materially dependent upon his efforts on our part. It is possible that because he does not spend his full time and efforts on our behalf that it may take longer to identify and close an acquisition of an operating company than if he was employed by us on a full-time basis.

 

Our internal control over financial reporting was considered ineffective as of June 30, 2012, and may continue to be ineffective in the future, which could result in our financial statements being unreliable, government investigation or loss of investor confidence in our financial reports.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and the SEC rules promulgated thereunder, we are required to furnish an annual report by our management assessing the effectiveness of our internal control over financial reporting. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. Management's reports as of the year ended June 30, 2012 identified several material weaknesses and concluded that we did not have effective internal control over financial reporting. Ineffective internal controls can result in errors or other problems in our financial statements. Even if material weaknesses identified do not cause our financial statements to be unreliable, if we continue to be unable to assert that our internal controls are effective, our investors could still lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline. Failure to maintain effective internal control over financial reporting could also result in investigation or sanctions by regulatory authorities. We will be unable to achieve acceptable internal controls with only one officer and director.  

 

In the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with their audit of our financial statements, and in the further event that they are unable to devise alternative procedures in order to satisfy themselves as to the material accuracy of our financial statements and related disclosures, it is possible that we would receive a qualified or an adverse audit opinion on those financial statements which could also adversely affect the market price of our Common Stock and our ability to secure additional financing as needed.

 

We may not be able to identify or fully capitalize on any appropriate business opportunities due to many factors which may negatively impact your investment in our company.

 

Due to a variety of factors outside of our control, we may not be able to identify or fully capitalize on any business opportunities we may identify. These factors include:

 

●

competition from other potential acquirers and partners of and investors in potential acquisitions, many of whom may have greater financial resources than we do;

●

in specific cases, failure to agree on the terms of a potential acquisition, such as the amount or price of our acquired interest, or incompatibility between us and management of the Company we wish to acquire; and

●

the possibility that we may lack sufficient capital and/or expertise to develop promising opportunities.

 

Even if we are able to identify business opportunities that our Board deems appropriate, we cannot assure you that such a strategy will provide you with a positive return on your investment, and may in fact result in a substantial decrease in the value of your stock.

 

 

Any potential acquisition or merger with a foreign company may subject us to additional risks.

 

If we enter into a business combination with a foreign company, we will be subject to risks inherent in business operations outside of the United States.  These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences.  Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency, and balance of payments positions, and in other respects. The country of Suriname carries several specific risks to business operations; due to the mineral industry’s dominance of country, the local economy is highly vulnerable to mineral price volatility. Additionally, to control rising inflation, the country of Suriname has devalued their local currency by 20% in 2011 in addition to raising local income taxes.  

 

In the event we consummate a transaction with a profitable company, we may not be able to utilize our net operating loss carryover which may have a negative impact on your investment.

 

If we enter into a combination with a business that has operating income, we cannot assure you that we will be able to utilize all or even a portion of our existing net operating loss carryover for federal or state tax purposes following such a business combination. If we are unable to make use of our existing net operating loss carryover, the tax advantages of such a combination may be limited, which could negatively impact the price of our stock and the value of your investment. These factors will substantially increase the uncertainty, and thus the risk, of investing in our shares.

 

Economic conditions may affect our ability to obtain financing and to complete a merger or acquisition.

 

Due to general economic conditions, rapid technological advances being made in some industries, and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will need. In the presence of these economic conditions, we may have difficulty raising sufficient capital to support the investigation of potential business opportunities, and to consummate a merger or acquisition. These factors substantially increase the uncertainty, and thus the risk, of investing in our shares.

 

There are a number of factors related to our common stock which may have an adverse effect on our shareholders.

 

Shareholders' interests in our Company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities. In the event that we are required to issue additional shares, enter into private placements to raise financing through the sale of equity securities or acquire business interests in the future from the issuance of shares of our common stock to acquire such interests, the interests of existing shareholders in our Company will be diluted and existing shareholders may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we do issue additional shares, it will cause a reduction in the proportionate ownership and voting power of all existing shareholders.

 

We are a shell company, and liquidity of shares of our common stock is limited.

 

The fact that we are a “shell company” within the meaning of certain regulations means that holders of our common stock are subject to certain restrictions on their ability to sell their shares pursuant to the resale exemptions from registration provided by Rule 144 (“Rule 144”) under, or Section 4(1) of, the Securities Act, and this further limits the liquidity of our common stock.  Specifically, holders of shares of common stock of a “shell company” are only permitted to sell their shares of common stock under Rule 144, subject to certain restrictions, starting one year after (i) the completion of a business combination with a private company in a merger or other transaction after which the company would cease to be a “shell company” (as defined in Rule 12b-2 under the Exchange Act) and (ii) the disclosure of certain financial and information regarding the company in relation to which the business combination was consummated on a Current Report on Form 8-K within four business days thereafter.

 

We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. As part of the JOBS Act, companies with less than $1 billion in gross revenue can qualify as an “emerging growth company.” Therefore, we qualify as an emerging growth company, and we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include, but are not limited to:

 

We plan to take advantage of the reduced disclosure obligations. Additionally, we will qualify as a “smaller reporting company” and thus have the advantage of not being required to provide the same level of disclosure as larger public companies. Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. We have elected not to opt in to Section 107 and, therefore, will not delay adoption of certain accounting standards applicable to public companies. This election is irrevocable.  

 

We could remain an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. We could lose our emerging growth status on the earliest of 1) the last day of the first fiscal year in which we have annual gross revenues of $1 billion or more, 2) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or 3) the date on which we are deemed to be a “large accelerated filer” as  defined by rule 12b-2 under the Securities Act of 1934, as amended, or the Exchange Act, which would occur if the market value of the Company’s common units that are held by non-affiliates exceeds $700 million as of the last business day of the Company’s most recently completed second fiscal quarter. At this time we expect to remain both a “small reporting company” and an “emerging growth company” for the foreseeable future.

 

The concentration of share ownership by Company insiders could pose conflicts of interest which may adversely affect all other Company shareholders.

 

Shareholders with beneficial ownership of at least 5%, senior management and directors have significant ownership of our shares amounting to 91% as of June 11, 2013. This concentration could lead to conflicts of interest and difficulties for non-insider investors effecting corporate changes, and could adversely affect our Company's share price and influence all matters submitted to our Company's shareholders for approval. Accordingly, this concentration of ownership may have the effect of delaying, deferring or preventing a change in control of our Company, impeding a merger, consolidation, takeover or other business combination involving our Company or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company, which in turn could have a material adverse effect on the market price of our shares. Employee, Director and consultant stock options and warrants could lead to greater concentration of share ownership among insiders and could lead to dilution of share ownership which could lead to depressed share prices.

 

We have certain provisions in our Articles of Incorporation and Bylaws, and there are other provisions under Nevada law, that may serve to make a takeover of our Company more difficult.

 

Provisions of our articles of incorporation and bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders. Provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of Nevada law also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation's disinterested stockholders.

 

Our common stock is quoted in the over the counter market on the OTC Pink.

 

Our common stock is quoted on the OTC Pink. OTC Pink offers a quotation service to companies that are unable to list their securities on an exchange or for companies, such as ours, whose securities are not eligible for quotation on the OTC Bulletin Board. The requirements for quotation on the OTC Pink are considerably lower and less regulated than those of the OTC Bulletin Board or an exchange. Because our common stock is quoted on the OTC Pink, it is possible that even fewer brokers or dealers would be interested in making a market in our common stock which further adversely impacts its liquidity.

 

 

The tradability of our common stock is limited under the penny stock regulations which may cause the holders of our common stock difficulty should they wish to sell their shares.

 

Because the quoted price of our common stock is less than $5.00 per share, our common stock is considered a "penny stock," and trading in our common stock is subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser's written consent prior to the transaction. SEC regulations also require additional disclosure in connection with any trades involving a "penny stock," including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because few broker or dealers are likely to undertake these compliance activities and this limited liquidity will make it more difficult for an investor to sell his shares of our common stock in the secondary market should the investor wish to liquidate the investment. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This registration statement contains forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, the impact of the pending bankruptcy of our subsidiaries, our ability to consummate the acquisition of an operating entity and/or assets, our ability to generate revenues and pay our operating expenses, our ability to raise capital as necessary, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this registration statement in its entirety. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this registration statement, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results Of Operations

 

The following discussion of our financial condition and results of operation for 2011 through 2012 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 10. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Plan of Operations

 

Our current business objective is to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. Our principal business objective is to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

 

In evaluating and selecting a business opportunity, we intend will consider the following factors:

 

●

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;

●

the potential for further research, development, or exploration;

●

specific risk factors not now foreseeable but which then may be anticipated to impact our proposed activities;

●

the potential for growth or expansion;

●

the potential for profit;

●

the perceived public recognition of acceptance of products, services, or trades; name identification; and

●

other relevant factors.

 

We will use the details listed above to evaluate and select a business opportunity. In evaluating and selecting a business opportunity, we will use a multi-step process consisting of the following:

 

 

We currently engage in limited business activities and have limited cash resources. As such, the costs of investigating and analyzing business combinations will be paid through capital raises. The incremental cost to implement a plan of operations is anticipated to cost approximately $120,000.  We also anticipate incurring costs incremental costs of $180,000 related to the filing of quarterly, annual and other reports with the Securities and Exchange Commission and costs relating to consummating an acquisition. We do not have any firm commitments, however, for the provision of any additional capital to our company to fund these costs.

 

We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.

 

Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.

 

Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing, and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.

 

We anticipate that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

 

 

NM: Not meaningful

 

 

Selling, General, and Administrative Expenses

 

Selling, general, and administrative expenses primarily consist of compensation to officers, legal and professional fees, and consulting fees.

 

Gain on Extinguishment of Debt

Decrease in Fair Value of Derivative Liabilities

Interest Expense

Results of Operations for the Year ended June 30, 2012 as compared to the Year ended June 30, 2011

 

 

NM: Not meaningful

 

 

Selling, General, and Administrative Expenses

 

Selling, general, and administrative expenses primarily consist of compensation to officers, legal and professional fees, and consulting fees.

 

The increase in selling, general and administrative expenses during fiscal 2012, when compared with the prior year, is primarily due to the following:

 

 

Decrease in Fair Value of Derivative Liabilities

Decrease in fair value of derivative liabilities results from the changes in the fair value of the derivative liability due to the application of ASC 815, resulting in either income or expense, depending on the difference in fair value of the derivative liabilities between their measurement dates. The decrease in fair value of derivative liabilities recognized during fiscal 2012 and 2011 is primarily due to an increase of our common stock quoted price between measurement dates and during such periods, respectively. Our common stock quoted price is one of the primary assumptions used in the computation of our derivative liabilities.

 

Interest Expense

Interest expense represents stated interest of notes and convertible notes payable as well as amortization of debt discount. The increase in interest expense is primarily due to higher amortization of debt discount during fiscal 2011 and 2012. The increase is primarily due to the issuance of $237,000 and $150,000 in convertible notes payable during fiscal 2012 and 2011, respectively, with embedded conversion features amounting to approximately $90,000 and $107,000, respectively, of which approximately $159,000 and $33,000 was amortized during fiscal 2012 and 2011, respectively. The embedded conversion features were accounted for as debt discount and amortized over the terms of the related convertible notes, which ranged between 6 and 12 months. Additionally, interest expense increased due to higher weighted average interest bearing debt during fiscal 2012 when compared to the prior year.