donmarcos_10q-063010.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2010
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number: 000-52692
DON MARCOS TRADING CO.
(Exact name of registrant as specified in its charter)
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Florida
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65-0921319
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(State or other jurisdiction of
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(IRS Employer
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incorporation or organization)
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Identification No.)
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1535 Southeast 17th Street, Suite 107, Ft. Lauderdale, FL 33316
(Address of principal executive offices)
(954) 356-8111
(Registrant’s telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company þ
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
As of August 13, 2010, the number of shares of common stock outstanding was 48,300,000.
INDEX
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Page
Number
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PART I - FINANCIAL INFORMATION
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Item 1.
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Financial Statements (Unaudited)
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2
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Condensed Balance Sheet – June 30, 2010 and 2009
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2
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Condensed Statement of Operations –
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For the three and six months ended June 30, 2010 and 2009
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3 |
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Condensed Statements of Cash Flows –
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For the three and six months ended June 30, 2010 and 2009
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5 |
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Condensed Notes to Financial Statements
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7
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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10 |
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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14
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Item 4.
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Controls and Procedures
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14
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Item 4T.
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Controls and Procedures
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14 |
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PART II - OTHER INFORMATION
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Item 1.
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Legal Proceedings
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15
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Item 1A.
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Risk Factors
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15 |
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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15
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Item 3.
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Defaults Upon Senior Securities
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15
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Item 4.
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(Removed and reserved)
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15
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Item 5.
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Other Information
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15
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Item 6.
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Exhibits
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15
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SIGNATURES
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PART I - FINANCIAL INFORMATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
JUNE 30, 2010 AND DECEMBER 31, 2009
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Unaudited
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Audited
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June 30,
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December 31,
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2010
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2009
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ASSETS
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CURRENT ASSETS
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Cash
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$ |
827 |
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$ |
469 |
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Accounts receivable
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0 |
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96 |
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Inventory
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8,820 |
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8,838 |
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TOTAL CURRENT ASSETS
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$ |
9,647 |
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$ |
9,403 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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CURRENT LIABILITIES
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Accounts payable and accrued expenses
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$ |
24,489 |
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$ |
21,569 |
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Note payable
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25,000 |
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0 |
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TOTAL CURRENT LIABILITIES
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$ |
49,489 |
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$ |
21,569 |
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STOCKHOLDERS' DEFICIT
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Preferred stock, no stated value
Authorized - 10,000,000 shares
Issued and outstanding -0- shares
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0 |
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0 |
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Common stock, no par value
Authorized - 100,000,000 shares
Issued and outstanding - 48,300,000 shares
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243,454 |
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243,454 |
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Deficit accumulated during the
development stage
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(283,296 |
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(255,620 |
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TOTAL STOCKHOLDERS' DEFICIT
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(39,842 |
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(12,166 |
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TOTAL LIABILITIES AND
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STOCKHOLDERS' DEFICIT
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$ |
9,647 |
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$ |
9,403 |
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The accompanying notes are an integral part of these financial statements.
DON MARCOS TRADING CO.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
AND FOR THE PERIOD FROM MAY 11, 1999 (INCEPTION) TO JUNE 30, 2010
(UNAUDITED)
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Three Month Period Ended
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June 30,
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2010
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2009
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REVENUES
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$ |
48 |
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$ |
192 |
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OPERATING EXPENSES
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22,034 |
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11,676 |
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NET (LOSS)
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$ |
(21,986 |
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$ |
(11,484 |
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NET (LOSS) PER SHARE
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Basic and diluted
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$ |
0.00 |
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$ |
0.00 |
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WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
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Basic and diluted
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48,300,000 |
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47,201,099 |
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The accompanying notes are an integral part of these unaudited financial statements
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May 11, 1999
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Six Month Period Ended
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(Inception)
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June 30,
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To
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2010
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2009
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June 30, 2010
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| $ |
344 |
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$ |
576 |
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$ |
1,976 |
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28,020 |
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13,503 |
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285,272 |
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| $ |
(27,676 |
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$ |
(12,927 |
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$ |
(283,296 |
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| $ |
0.00 |
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$ |
0.00 |
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$ |
(0.01 |
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48,300,000 |
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45,758,564 |
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48,300,000 |
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The accompanying notes are an integral part of these unaudited financial statements
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
AND FOR THE PERIOD FROM MAY 11, 1999 (INCEPTION) TO JUNE 30, 2010
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May 11, 1999
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(Inception)
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To
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2010
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2009
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June 30, 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net (loss)
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$ |
(27,676 |
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$ |
(12,927 |
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$ |
(283,296 |
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Adjustments to reconcile net (loss) to net cash (used) by operating activities:
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Common stock issued for services
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0 |
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0 |
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3,635 |
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Stock based compensation
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0 |
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0 |
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45,474 |
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Changes in operating assets and liabilities:
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Accounts receivable
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96 |
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0 |
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0 |
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Inventory
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18 |
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27 |
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(8,820 |
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Accounts payable and accrued expenses
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2,920 |
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(4,555 |
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24,489 |
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
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(24,642 |
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(17,455 |
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(218,518 |
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CASH FLOWS FROM INVESTING ACTIVITIES
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0 |
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0 |
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0 |
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from note payable
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25,000 |
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0 |
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25,000 |
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Issuance of common stock for cash
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0 |
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15,000 |
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192,000 |
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Cash contributed by stockholder
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0 |
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0 |
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2,345 |
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NET CASH PROVIDED BY FINANCING ACTIVITIES
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25,000 |
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15,000 |
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219,345 |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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358 |
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(2,455 |
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|
827 |
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CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
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469 |
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2,613 |
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0 |
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CASH AND CASH EQUIVALENTS,
END OF PERIOD
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$ |
827 |
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$ |
158 |
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$ |
827 |
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The accompanying notes are an integral part of these financial statements
DON MARCOS TRADING CO.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
AND FOR THE PERIOD FROM MAY 11, 1999 (INCEPTION) TO JUNE 30, 2010
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May 11, 1999
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(Inception)
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To
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2010
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2009
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June 30, 2010
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
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CASH PAID DURING THE YEAR FOR:
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Interest
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$ |
0 |
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$ |
0 |
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$ |
0 |
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Taxes
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$ |
0 |
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$ |
0 |
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$ |
0 |
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NON-CASH INVESTING ACTIVITIES
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Stock-based compensation
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$ |
0 |
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$ |
0 |
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$ |
45,474 |
|
The accompanying notes are an integral part of these financial statements
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010 AND 2009
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NOTE 1
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Nature of Business and History of Company
Don Marcos Trading Co. (“the Company”) is a development stage enterprise incorporated on May 11, 1999 in the state of Florida. The Company is the sole importer and distributor of Don Marcos coffee.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Fair value of financial instruments
For certain Company instruments, including cash and accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities.
Net Loss Per Share
The Company adopted ASC 260 (formerly FASB 128) that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC 260 any anti-dilutive effects on net income (loss) per share are excluded.
Revenue Recognition
The Company recognizes revenue from product sales when shipment of product to the customer has been made, which is when title passes. The Company estimates and records provisions for rebates, sales returns and allowances in the period the sale is recorded. Shipping and handling charges are included in gross sales, with the related costs included in selling, general and administrative expenses.
DON MARCOS TRADING CO.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2010 AND 2009
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NOTE 1
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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Inventory
Inventory is stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories are adjusted for estimated obsolescence and written down to net realizable value based upon estimates of future demand, technology developments, and market conditions.
Common Stock Issued for Non-Cash Transaction
It is the Company’s policy to value stock issued for non-cash transactions, such as services, at the fair market value of the goods or services received or the consideration granted, whichever is more readily determinable, at the date the transaction is negotiated.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in ASC 740 (formerly FASB 109) "Accounting for Income Taxes". As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
Stock Based Compensation
Effective November 1, 2005, the Company adopted ASC 718 (formerly FASB 123(R) and 95), “Share-Based Payment: An Amendment of FASB using the modified prospective method. Under this method, compensation cost is recognized on or after the effective date for the portion of outstanding awards, for which the requisite service has not yet been rendered, based on the grant date fair value of those awards. For stock-based awards issued on or after November 1, 2005, the Company recognizes the compensation cost on a straight-line basis over the requisite service period for the entire award. Measurement and attribution of compensation cost for awards that are unvested as of the effective date of ASC 718 are based on the same estimate of the grant-date or modification-date fair value and the same attribution method used previously under ASC 718.
Development Stage Enterprise
The Company is a development state enterprise, as defined in ASC 915 (formerly FASB 7). The Company’s planned principal operations have not commenced, and accordingly, only nominal revenue has been derived during this period.
DON MARCOS TRADING CO.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2010 AND 2009
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.
The Company’s development activities since inception have been financially sustained by issuance of common stock and through stockholder contributions and loans. The Company may raise additional funding to continue its operations through contributions from the current shareholders and stock issuance to other investors.
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.
Management plans to eliminate the going concern situation which includes, but is not limited to, obtaining investors to fund the working capital needs of the Company.
Inventory consists of the following at June 30, 2010 and December 31, 2009.
| |
|
2010
|
|
|
2009
|
|
| |
|
|
|
|
|
|
|
Materials
|
|
$ |
8,820 |
|
|
$ |
8,838 |
|
On April 9, 2010, the Company obtained a $25,000 note payable from an officer of the Company. The note accrues interest at 1%, is unsecured and is due on October 9, 2010.
Management has evaluated subsequent events through August 13, 2010, the date which the financial statements were available for issue. There are no subsequent events to disclose.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Report.
Overview
We were incorporated on May 11, 1999 in the state of Florida to be the sole importer and distributor of Don Marcos® Coffee.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified several accounting principles that we believe are key to the understanding of our financial statements. These important accounting policies require management’s most difficult, subjective judgments.
Development Stage Enterprise
We are a development stage enterprise, as defined in ASC 915 (formerly FASB 7). Our planned principal operations have not commenced, and, accordingly, only nominal revenue has been derived during the period.
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 those estimates.
Net Loss Per Share
We adopted ASC 260 (formerly FASB 128) that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC 260, any anti-dilutive effects on net income (loss) per share are excluded.
Inventory
Inventory is stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories are adjusted for estimated obsolescence and written down to net realizable value based upon estimates of future demand, technology developments, and market conditions.
Stock Issued for Non-Cash Transactions
It is our policy to value stock issued for non-cash transactions, such as services, at the fair market value of the goods or services received or the consideration granted, whichever is more readily determinable, at the date the transaction is negotiated.
There were no shares of common stock issued for services during the six months ended June 30, 2010 and 2009.
Going Concern
Our financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to locate sources of capital, and attain future profitable operations. Our management is currently initiating their business plan. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
Stock Based Compensation
We adopted ASC 718 (formerly FASB 123 (R) and 95), Share-Based Payment, under the modified-prospective transitions method on January 1, 2006. ASC 718 requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair-value. Share-based compensation recognized under the modified-prospective transition method of ASC 718 includes share-based compensation based on the grant-date fair-value determined in accordance with the original provision of ASC 718, Accounting for Stock-Based Compensation, for all share-based compensation based on the grant-date fair-value determined in accordance with ASC 718 for all share-based payments granted after January 1, 2006. ASC 718 eliminates the ability to account for the award of these instruments under the intrinsic value method, and allowed under the original provisions of ASC 718. Prior to the adoption of ASC 718, we accounted for our stock option plans using the intrinsic value method in accordance with the provisions of APB Opinion No. 25 and related interpretations.
Stock-based compensation represents the cost related to stock-based awards granted to employees. We measure stock-based compensation cost at grant date, based on the estimated fair value of the award, and recognize the cost as expense on a straight-line basis, net of estimated forfeitures, over the employee requisite service period. We estimate the fair value of stock options using a Black-Scholes valuation model. The expense is recorded in operating expenses in the statements of operations.
Results of Operations
You should read the selected financial data set forth below along with our “Management’s Discussion and Analysis” and our financial statements and the related notes. We have derived the financial data from our financial statements. We believe the financial data shown in the table below includes all adjustments consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of such information. Operating results for the period are not necessarily indicative of the results that may be expected in the future.
SELECTED FINANCIAL INFORMATION AND RESULTS OF OPERATIONS
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Six Months
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Six Months
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Three Months
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Three Months
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Ended
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Ended
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Ended
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Ended
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June 30, 2010
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June 30, 2009
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June 30, 2010
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June 30, 2009
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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Revenue
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$
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344
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$
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576
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$
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48
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$
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192
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Operating expenses
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28,020
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13,503
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22,034
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11,676
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Net (loss)
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$
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(27,676
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)
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$
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(12,927
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)
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$
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(21,986
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)
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$
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(11,484
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)
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Net (loss) per share
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$
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(.00
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)
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$
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(.00
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)
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$
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(.00
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)
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$
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(.00
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)
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Results for the six months ended June 30, 2010 compared to the six months ended June 30, 2009.
Revenues
We had revenue of $344 and $576 for the six months ended June 30, 2010 and 2009, respectively.
Operating Expenses
Operating expenses increased by $14,517 to $28,020 for the six months ended June 30, 2010 as compared to $13,503 for the six months ended June 30, 2009. The increase arose from increases in legal fees and accounting fees required for our SEC filings.
Net Loss
Primarily as a result of our operating expenses, we had a net loss of $27,676 for the six months ended June 30, 2010 compared to a net loss of $12,927 for the six months ended June 30, 2009.
Results for the three months ended June 30, 2010 compared to the three months ended June 30, 2009.
Revenues
We had revenue of $48 and $192 for the three months ended June 30, 2010 and 2009, respectively.
Operating Expenses
Operating expenses increased by $10,358 to $22,034 for the three months ended June 30, 2010 as compared to $11,676 for the three months ended June 30, 2009. The increase arose from increases in legal fees and accounting fees required for our SEC filings.
Net Loss
Primarily as a result of our operating expenses, we had a net loss of $21,986 for the three months ended June 30, 2010 compared to a net loss of $11,484 for the three months ended June 30, 2009.
Liquidity and Capital Resources
We currently have no material commitments for capital expenditures and have no fixed expenses.
Working capital is summarized and compared as follows:
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June 30, 2009
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Current assets
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$ |
9,647 |
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$ |
9,022 |
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Current liabilities
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49,489 |
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7,621 |
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Working Capital (Deficit)
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$ |
(39,842 |
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$ |
1,401 |
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The changes in our working capital are primarily due to operating losses.
Changes in cash flows are summarized as follows:
Our net cash used by operations was $24,642 for the six months ended June 30, 2010 as compared to $17,455 used by operations for the six months ended June 30, 2009. During the six months ended June 30, 2010, we experienced a net loss of $27,676. This was offset by a decrease in accounts receivable of $96, an increase in accounts payable and accrued expenses of $2,920, and a decrease in inventory of $18. During the six months ended June 30, 2009, we experienced a net loss of $12,927. In addition, we had a decrease in accounts payable and accrued expenses of $4,555. These were offset by a decrease in inventory of $27.
There was no net cash used or provided from investing activities for the six months ended June 30, 2010 and 2009.
For the six months ended June 30, 2010, we had $25,000 from financing activities, as a result of proceeds from a note payable. For the six months ended June 30, 2009, we had $15,000 from financing activities as a result of the issuance of common stock for cash.
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
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ITEM 4.
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CONTROLS AND PROCEDURES
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Evaluation of Disclosure Controls and Procedures
Our President and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of period covered by this report. Based upon such evaluation, the President and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 4T.
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CONTROLS AND PROCEDURES
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We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
PART II - OTHER INFORMATION
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ITEM 1.
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LEGAL PROCEEDINGS
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To the best knowledge of our management, there are no legal proceedings pending or threatened against us.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
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ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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None.
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ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
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None.
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ITEM 4.
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(REMOVED AND RESERVED)
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ITEM 5.
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OTHER INFORMATION
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None.
The following Exhibits are filed herein:
No. Title
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31.1
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Certification of President Pursuant to the Securities Exchange Act of 1934, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2
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Certification of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32
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Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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DON MARCOS TRADING CO. |
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DATED: August 13, 2010
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By:
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/s/ Earl T. Shannon |
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ITS: President |
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(Principal Executive Officer) |
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By:
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/s/ Scott W. Bodenweber |
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ITS: Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
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