UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
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(Mark one)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 31, 2006
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________ to _____________
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Commission File Number: 33-25350-FW
United National Film Corporation
(Exact name of small business issuer as specified in its charter)
Nevada 84-1092589
(State of incorporation) (IRS Employer ID Number)
211 West Wall Street, Midland, TX 79701
(Address of principal executive offices)
(432) 682-1761
(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act): YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: February 5, 2007: 1,784,467
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
UNITED NATIONAL FILM CORPORATION
Form 10-QSB for the Quarter ended December 31, 2006
Table of Contents
Page
----
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 12
Item 3 Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Recent Sales of Unregistered Securities and Use of Proceeds 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits 15
SIGNATURES 15
2
PART I
ITEM 1 - FINANCIAL STATEMENTS
UNITED NATIONAL FILM CORPORATION
BALANCE SHEETS
December 31, 2006 and 2005
(UNAUDITED)
December 31, December 31,
2006 2005
--------- ---------
ASSETS
CURRENT ASSETS
Cash on hand and in bank $ 3,872 $ --
--------- ---------
TOTAL CURRENT ASSETS 3,872 --
--------- ---------
TOTAL ASSETS $ 3,872 $ --
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ -- $ 23,839
Accrued interest payable 5,508 --
Loan from shareholder -- 15,635
--------- ---------
TOTAL CURRENT LIABILITIES 5,508 39,474
--------- ---------
LONG-TERM LIABILITIES
Loan from stockholder 130,202 --
--------- ---------
TOTAL LIABILITIES 135,710 --
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Preferred stock - $0.001 par value
3,000,000 shares authorized
None issued and outstanding - Common stock - $0.0001 par value
30,000,000 shares authorized
84,467 and 59,456 shares issued and outstanding 8 6
Additional paid-in capital 582,985 564,169
Accumulated deficit (714,831) (603,649)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT (131,838) (39,474)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,872 $ --
========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
3
UNITED NATIONAL FILM CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Six and Three months ended December 31, 2006 and 2005
(UNAUDITED)
Six months Six months Three months Three months
ended ended ended ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
-------- -------- -------- --------
REVENUES $ -- $ -- $ -- $ --
-------- -------- -------- --------
EXPENSES
General and administrative expenses 16,767 7,365 11,100 7,329
-------- -------- -------- --------
Total operating expenses 16,767 7,365 11,100 7,329
-------- -------- -------- --------
LOSS FROM OPERATIONS (16,767) (7,365) (11,100) (7,329)
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest income 59 -- 33 --
Interest expense (3,882) (782) (2,115) (391)
-------- -------- -------- --------
LOSS FROM OPERATIONS
BEFORE PROVISION FOR INCOME TAXES (20,590) (8,147) (13,182) (7,720)
PROVISION FOR INCOME TAXES -- -- -- --
-------- -------- -------- --------
NET LOSS (20,590) (8,147) (13,182) (7,720)
OTHER COMPREHENSIVE INCOME -- -- -- --
-------- -------- -------- --------
COMPREHENSIVE LOSS $(20,590) $ (8,147) $(13,182) $ (7,720)
======== ======== ======== ========
Earnings per share of common stock
outstanding computed on net loss -
basic and fully diluted $ (0.24) $ (0.11) $ (0.16) $ (0.10)
======== ======== ======== ========
Weighted-average number of shares
outstanding - basic and fully diluted 84,467 74,727 84,467 74,596
======== ======== ======== ========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
4
UNITED NATIONAL FILM CORPORATION
STATEMENTS OF CASH FLOWS
Six months ended December 31, 2006 and 2005
(UNAUDITED)
Six months Six months
ended ended
December 31, December 31,
2006 2005
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $(20,590) $ (8,147)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization -- --
Expenses paid with shares of common stock -- 7,300
Increase (Decrease) in
Accounts payable - trade -- 782
Accrued interest payable 3,882 782
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (16,708) (65)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash advanced on Loan from Shareholder 15,000 --
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,000 --
-------- --------
INCREASE (DECREASE) IN CASH (1,708) (65)
Cash at beginning of period 5,580 65
-------- --------
CASH AT END OF PERIOD $ 3,872 $ --
======== ========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND INCOME TAXES PAID
Interest paid for the year $ -- $ --
======== ========
Income taxes paid for the year $ -- $ --
======== ========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
5
UNITED NATIONAL FILM CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2006 and 2005
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
United National Film Corporation (the Company) was formed under the laws of the
State of Colorado on July 19, 1988 as Riverside Capital, Inc.
On October 20, 2006, the Company changed its state of incorporation from
Colorado to Nevada by means of a merger with and into a Nevada corporation
formed on September 12, 2006 solely for the purpose of effecting the
reincorporation. The Certificate of Incorporation and Bylaws of the Nevada
corporation are the Certificate of Incorporation and Bylaws of the surviving
corporation. Such Certificate of Incorporation kept the Company's name of United
National Film Corporation and modified the Company's capital structure to allow
for the issuance of up to 100,000,000 shares of $0.0001 par value Common Stock
and up to 50,000,000 shares of $0.0001 par value Preferred Stock. This action
was approved by a majority of the Company's stockholders on August 22, 2006.
In June 2001, the Company suspended all business activities and established a
business plan to locate and combine with an existing, privately-held company
which is profitable or, in management's view, has growth potential, irrespective
of the industry in which it is engaged. However, the Company does not intend to
combine with a private company which may be deemed to be an investment company
subject to the Investment Company Act of 1940. A combination may be structured
as a merger, consolidation, exchange of the Company's common stock for stock or
assets or any other form which will result in the combined enterprise's becoming
a publicly-held corporation.
During Fiscal 2006, the Company effectively dissolved or abandoned all
subsidiaries which may or may not have been active in periods prior to June
2001.
NOTE B - PREPARATION OF FINANCIAL STATEMENTS
The Company follows the accrual basis of accounting in accordance with generally
accepted accounting principles and has adopted a year-end of June 30.
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 those estimates.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-KSB for the year ended June
30, 2006. The information presented within these interim financial statements
may not include all disclosures required by generally accepted accounting
principles and the users of financial information provided for interim periods
should refer to the annual financial information and footnotes when reviewing
the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-QSB, are unaudited and contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and cash flows of
the Company for the respective interim periods presented. The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending June 30, 2007.
6
UNITED NATIONAL FILM CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE C - GOING CONCERN UNCERTAINTY
The Company has nominal cash on hand, has no operating assets and has a business
plan with inherent risk. Because of these factors, the Company's auditors have
issued an audit opinion on the Company's financial statements which includes a
statement describing our going concern status. This means, in the auditor's
opinion, substantial doubt about our ability to continue as a going concern
exists at the date of their opinion.
The Company's majority stockholder maintains the corporate status of the Company
and has provided all nominal working capital support on the Company's behalf
since the bankruptcy discharge date. Because of the Company's lack of operating
assets, its continuance is fully dependent upon the majority stockholder's
continuing support. The majority stockholder intends to continue the funding of
nominal necessary expenses to sustain the corporate entity.
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis. Further, the Company faces considerable risk in it's business plan
and a potential shortfall of funding due to our inability to raise capital in
the equity securities market. If no additional operating capital is received
during the next twelve months, the Company will be forced to rely on existing
cash in the bank and additional funds loaned by management and/or significant
stockholders.
The Company's business plan is to seek an acquisition or merger with a private
operating company which offers an opportunity for growth and possible
appreciation of our stockholders' investment in the then issued and outstanding
common stock. However, there is no assurance that the Company will be able to
successfully consummate an acquisition or merger with a private operating
company or, if successful, that any acquisition or merger will result in the
appreciation of our stockholders' investment in the then outstanding common
stock.
The Company remains dependent upon additional external sources of financing;
including being dependent upon its management and/or significant stockholders to
provide sufficient working capital in excess of the Company's initial
capitalization to preserve the integrity of the corporate entity.
The Company anticipates offering future sales of equity securities. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, certificates of
deposit and other highly-liquid investments with maturities of three months
or less, when purchased, to be cash and cash equivalents.
2. Reorganization costs
The Company has adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all costs incurred
with the incorporation and reorganization, post-bankruptcy, of the Company
were charged to operations as incurred.
3. Income taxes
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 2006 and 2005, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences generally represent differences in the recognition of
assets and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
7
UNITED NATIONAL FILM CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3. Income taxes - continued
As of December 31, 2006 and 2005, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods as a result of a change in
control involving 50 percentage points or more of the issued and
outstanding securities of the Company.
4. Income (Loss) per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common stockholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
At December 31, 2006 and 2005, and subsequent thereto, the Company has no
outstanding stock warrants, options or convertible securities which could
be considered as dilutive for purposes of the loss per share calculation
due to the Company's net operating loss position.
NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to financial risk, if any.
NOTE F - LOANS DUE TO STOCKHOLDER
The Company's former Chief Executive Officer made aggregate advances of
approximately $15,635 to provide working capital to the Company in prior
periods. These advances bear interest at 10.0% per annum and are repayable upon
demand. In conjunction with the March 2006 change in control, these advances
were repaid in full.
On March 31, 2006, pursuant to an October 2005 Loan and Purchase Stock Agreement
with Glenn A. Little (Little), Little funded a loan to the Company in the amount
of $88,181.98 at an interest rate of 6% per annum. This note shall mature on
March 31, 2008 and is convertible at any time prior to maturity at Little's
option into restricted common stock of the Company at par value.
8
UNITED NATIONAL FILM CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE F - LOANS DUE TO STOCKHOLDER - CONTINUED
Additionally, the Company and it's current controlling shareholder, Glenn A.
Little, agreed that additional funds may be necessary in the future to support
the corporate entity and comply with the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended. To this end, Little has agreed to
lend the Company up to an additional $50,000 with a maturity period not to
exceed two (2) years from the initial funding date at an interest rate of 6.0%
per annum. As of December 31, 2006, Little has advanced approximately $42,000
under this agreement.
NOTE G - COMMON STOCK TRANSACTIONS
On October 20, 2006, the Company changed its state of incorporation from
Colorado to Nevada by means of a merger with and into a Nevada corporation
formed on September 12, 2006 solely for the purpose of effecting the
reincorporation. The Certificate of Incorporation and Bylaws of the Nevada
corporation are the Certificate of Incorporation and Bylaws of the surviving
corporation. Such Certificate of Incorporation kept the Company's name of United
National Film Corporation and modified the Company's capital structure to allow
for the issuance of up to 100,000,000 shares of $0.0001 par value Common Stock
and up to 50,000,000 shares of $0.0001 par value Preferred Stock. This action
was approved by a majority of the Company's stockholders on August 22, 2006 and
is reflected in the accompanying financial statements as of the first day of the
first period presented.
Pursuant to a written consent in lieu of meeting, a majority of the Company's
stockholders approved a recommendation by the Company's Board of Directors to
effect a reverse stock split the currently issued and outstanding common stock
(Common Stock) of the Company on a 2,000 shares for 1 share basis, with no
stockholder being reversed to less than a round lot of 100 shares with
fractional shares rounded up to the nearest whole share:
Shares prior to Shares after
reverse split reverse split
------------- -------------
1 100
10 100
100 100
1,000 100
10,000 100
100,000 100
200,000 100
200,001 101
As a result of the reverse split, the total number of issued and outstanding
shares of the Company's common stock decreased from 27,751,500 to 84,467 shares,
after giving effect to both the special provisions discussed above and the
rounding for fractional shares. The effect of this action is reflected in the
Company's financial statements as of the first day of the first period
presented.
On November 22, 2005, the Company entered into an agreement to sell
approximately 9,410 post-reverse split shares (18,818,017 pre-reverse split
shares) of common stock to Glenn A. Little pursuant to a Loan and Purchase Stock
Agreement, for gross proceeds of $18,818.02. The completion of this transaction
is subject to the provision of certain documents by the Company and it's former
officers/directors. All of the transaction provisions were met and this
transaction closed on March 31, 2006. The Company relied upon Section 4(2) for
an exemption from registration on these shares and no underwriter was used in
this transaction.
On November 23, 2005, the Company issued an aggregate 800 post-reverse split
shares (730,000 pre-reverse split shares), valued at approximately $7,300, to
various officers and directors for services rendered. The Company relied upon
Section 4(2) for an exemption from registration on these shares and no
underwriter was used in this transaction.
9
UNITED NATIONAL FILM CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE H - INCOME TAXES
The components of income tax (benefit) expense for each of the six month periods
ended December 31, 2006 and 2005, respectively, are as follows:
Six months Six months
ended ended
December 31, December 31,
2006 2005
------- -------
Federal:
Current $ -- $ --
Deferred -- --
------- -------
-- --
------- -------
State:
Current -- --
Deferred -- --
------- -------
-- --
------- -------
Total $ -- $ --
======= =======
Due to a change in control on March 31, 2006, the Company has a net operating
loss carryforward of approximately $111,000 to offset future Federal and State
income taxes. The amount and availability of any net operating loss
carryforwards will be subject to the limitations set forth in the Internal
Revenue Code. Such factors as the number of shares ultimately issued within a
three year look-back period; whether there is a deemed more than 50 percent
change in control; the applicable long-term tax exempt bond rate; continuity of
historical business; and subsequent income of the Company all enter into the
annual computation of allowable annual utilization of any net operating loss
carryforward(s).
The Company's income tax expense for each of the six month periods ended
December 31, 2006 and 2005, respectively, are as follows:
Six months Six months
ended ended
December 31, December 31,
2006 2005
------- -------
Statutory rate applied to income before income taxes $ (7,000) $ (2,500)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Other, including reserve for deferred tax asset
and application of net operating loss carryforward 7,000 2,500
-------- --------
Income tax expense $ -- $ --
======== ========
The Company's only temporary differences as of December 31, 2006 and 2005,
respectively, relate to the Company's net operating loss carryforward.
Accordingly, any deferred tax asset, as fully reserved, or liability, if any, as
of December 31, 2006 and 2005, respectively, is not material to the accompanying
financial statements.
NOTE I - SUBSEQUENT EVENTS
On January 25, 2007, the Company completed a private placement of 500,000 shares
of restricted, unregistered common stock to the Company's sole officer and
director at $0.08 per share for total proceeds of $40,000.
On January 29, 2007, the Company repaid the $40,000 of the $42,000 outstanding
balance on the $50,000 line of credit payable to the Company's controlling
shareholder, officer and director.
10
UNITED NATIONAL FILM CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE I - SUBSEQUENT EVENTS - CONTINUED
On January 29, 2007, the Company's sole officer and director converted the
$88,182 note payable and all related accrued interest for an aggregate 1,200,000
shares of restricted, unregistered common stock.
(Remainder of this page left blank intentionally)
11
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(1) CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) RESULTS OF OPERATIONS
The Company had no revenue for either of the respective six or three month
periods ended December 31, 2006 and 2005, respectively.
General and administrative expenses for each of the respective three month
periods ended December 31, 2006 and 2005 were nominal, consisting of
professional and filing fees related to the Company's periodic reporting
obligation pursuant to the Securities Exchange Act of 1934, as amended.. In
March 2006, concurrent with the change in management and ownership, the Company
cured all prior delinquencies with respect to the filing of various required
periodic reports pursuant to the Securities Exchange Act of 1934. It is
anticipated that future expenditure levels will increase as the Company intends
to fully comply with it's periodic reporting requirements.
Earnings per share for the respective six and three month periods ended December
31, 2006 and 2005 were approximately $(0.30), $(0.14), $(0.19) and $(0.13) based
on the post-reverse split weighted-average number of shares issued and
outstanding at the end of each respective period.
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under the Securities Exchange Act of 1934 unless and until
such time that the Company's operating subsidiary begins meaningful operations.
At December 31, 2006 and 2005, the Company had working capital of approximately
$(1,636) and $(39,500), respectively.
On January 25, 2007, the Company completed a private placement of 500,000 shares
of restricted, unregistered common stock to Glenn A. Little, the Company's sole
officer and director, at $0.08 per share for total proceeds of $40,000.00
On January 29, 2007, the Company repaid the $40,000 outstanding balance on the
$50,000 line of credit payable to Glenn A. Little.
On January 29, 2007, the Company's sole officer and director converted the
$88,182 note payable and all related accrued interest for an aggregate 1,200,000
shares of restricted, unregistered common stock.
It is the belief of management and significant stockholders that sufficient
working capital necessary to support and preserve the integrity of the corporate
entity will be present. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
12
The Company's need for working capital may change dramatically as a result of
any business acquisition or combination transaction. There can be no assurance
that the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
PLAN OF BUSINESS
GENERAL
The Company intends to locate and combine with an existing, privately-held
company which is profitable or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, the Company does
not intend to combine with a private company which may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
COMBINATION SUITABILITY STANDARDS
In its pursuit for a combination partner, the Company's management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage attorneys
and/or accountants in its efforts to investigate a combination candidate and to
consummate a business combination. The Company may require payment of fees by
such combination candidate to fund the investigation of such candidate. In the
event such a combination candidate is engaged in a high technology business, the
Company may also obtain reports from independent organizations of recognized
standing covering the technology being developed and/or used by the candidate.
The Company's limited financial resources may make the acquisition of such
reports difficult or even impossible to obtain and, thus, there can be no
assurance that the Company will have sufficient funds to obtain such reports
when considering combination proposals or candidates. To the extent the Company
is unable to obtain the advice or reports from experts, the risks of any
combined enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal stockholders or general
partners:
(1) will not have been convicted of securities fraud, mail fraud, tax
fraud, embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
(2) will not have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
(3) will not have been a defendant in a civil action which resulted in a
final judgement against it or him awarding damages or rescission based
upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination candidates.
Such persons will also ask pertinent questions of others who may be involved in
the combination proceedings. However, the officers and directors of the Company
will not generally take other steps to verify independently information obtained
in this manner which is favorable. Unless something comes to their attention
which puts them on notice of a possible disqualification which is being
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concealed from them, such persons will rely on information received from the
management of the prospective combination candidate and from others who may be
involved in the combination proceedings.
(4) LIQUIDITY AND CAPITAL RESOURCES
In October 2005, the Company signed a Loan and Purchase Stock Agreement with
Glenn A. Little (Little) in which Little agreed to purchase 18,818,017 shares of
restricted common stock for $18,818.02 and provide a working capital loan of
$88,181.98 at an interest rate of 6% per annum. The Promissory note shall be
convertible at any time prior to maturity, solely at Little's option, into
restricted and unregistered shares of the Company's common stock at par value.
The proceeds of the approximately $88,000 mote were used to retire the note
payable to former controlling stockholder(s), retire all outstanding accounts
payable and to pay various costs and expenses related to the reorganization of
the Company and change in control.
Additionally, the Company and it's current controlling shareholder, Glenn A.
Little, agreed that additional funds may be necessary in the future to support
the corporate entity and comply with the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended. To this end, Little has agreed to
lend the Company up to an additional $50,000 with a maturity period not to
exceed two (2) years from the initial funding date at an interest rate of 6.0%
per annum. As of December 31, 2006, Little has advanced approximately $42,000
under this agreement.
On January 25, 2007, the Company completed a private placement of 500,000 shares
of restricted, unregistered common stock to Glenn A. Little, the Company's sole
officer and director, at $0.08 per share for total proceeds of $40,000. The
proceeds of this private placement were used to repay $40,000 of the outstanding
balance on the $50,000 line of credit payable to Glenn A. Little on January 29,
2007.
On January 29, 2007, Glenn A. Little, the Company's sole officer and director,
converted the $88,182 note payable and all related accrued interest for an
aggregate 1,200,000 shares of restricted, unregistered common stock.
It is the belief of management and significant stockholders that sufficient
working capital necessary to support and preserve the integrity of the corporate
entity will be present. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location
of a merger or acquisition candidate. Accordingly, there can be no assurance
that sufficient funds will be available to the Company to allow it to cover the
expenses related to such activities.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.
ITEM 3 - CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in its Exchange Act
reports is recorded, processed, summarized and reported within the time
periods specified in the Security and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to the
Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Management necessarily applied its judgment
in assessing the costs and benefits of such controls and procedures, which,
by their nature, can provide only reasonable assurance regarding
management's control objectives.
The Company carried out an evaluation, under the supervision and with the
participation of its management, including its Chief Executive Officer and
Chief Financial Officer, on the effectiveness of the design and operation
of its disclosure controls and procedures pursuant to Exchange Act Rules
13a-15 and 15d-15 as of the end of the period covered by this report. Based
upon that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to information relating to
the Company required to be included in the Company's Exchange Act reports.
While the Company believes that its existing disclosure controls and
procedures have been effective to accomplish their objectives, the Company
intends to continue to examine, refine and document its disclosure controls
and procedures and to monitor ongoing developments in this area.
14
(b) Changes in Internal Controls
During the quarter ended December 31, 2006, there were no changes
(including corrective actions with regard to significant deficiencies or
material weaknesses) in the Company's internal control over financial
reporting that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
On January 25, 2007, the Company completed a private placement of 500,000 shares
of restricted, unregistered common stock to Glenn A. Little, the Company's sole
officer and director, at $0.08 per share for total proceeds of $40,000. The
proceeds of this private placement were used to repay $40,000 of the outstanding
balance on the $50,000 line of credit payable to Glenn A. Little on January 29,
2007.
On January 29, 2007, Glenn A. Little, the Company's sole officer and director,
converted the $88,182 note payable and all related accrued interest for an
aggregate 1,200,000 shares of restricted, unregistered common stock.
ITEM 3 - DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has held no regularly scheduled, called or special meetings of
stockholders during the reporting period.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED NATIONAL FILM CORPORATION
Dated: February 5, 2007 By: /s/ Glenn A. Little
---------------- --------------------------------------
Glenn A. Little
Chairman, Chief Executive Officer,
Chief Financial Officer and Director
15