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EX-32.1 - CEO SECTION 906 CERTIFICATION - IN Media Corpex32-1.txt
EX-32.2 - CFO SECTION 906 CERTIFICATION - IN Media Corpex32-2.txt
EX-31.1 - CEO SECTION 302 CERTIFICATION - IN Media Corpex31-1.txt
EX-31.2 - CFO SECTION 302 CERTIFICATION - IN Media Corpex31-2.txt

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                 Quarterly Report under Section 13 or 15 (d) of
                         Securities Exchange Act of 1934

                     For the Period ended September 30, 2009

                        Commission File Number 333-146263


                        Tres Estrellas Enterprises, Inc.
             (Exact name of Registrant as specified in its charter)

        Nevada                                                  20-8644177
(State of Incorporation)                                (IRS Employer ID Number)

                          3401 Adams Avenue, Suite 302
                            San Diego, CA 92116-2490
                    Phone: (775) 352-3896 Fax (775) 996-8780
          (Address and telephone number of principal executive offices)

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 [X] 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 (ss.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 [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer [ ]                        Accelerated Filer [ ]

Non-accelerated filer [ ]                          Smaller reporting company [X]
(Do Not Check if a Smaller Reporting Company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

As of November 11, 2009, the registrant had 11,500,000 shares of common stock,
$0.001 par value, issued and outstanding.

Transitional Small Business Disclosure Format Yes [ ] No [X]

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS GENERAL The accompanying reviewed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2008. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months and nine months ended September 30, 2009 are not necessarily indicative of the results that can be expected for the year ending December 31, 2009. 2
TRES ESTRELLAS ENTERPRISES, INC. (A Development Stage Company) Balance Sheets -------------------------------------------------------------------------------- As of As of Sept. 30, December 31, 2009 2008 -------- -------- ASSETS CURRENT ASSETS Cash $ 697 $ 4,803 -------- -------- TOTAL CURRENT ASSETS 697 4,803 OTHER ASSETS Organization Costs 1,970 1,970 -------- -------- TOTAL OTHER ASSETS 1,970 1,970 -------- -------- $ 2,667 $ 6,773 ======== ======== LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts Payable 7,200 2,100 Loan from Director 27,465 22,470 -------- -------- Total Current Liabilities 34,665 24,570 -------- -------- TOTAL LIABILITIES 34,665 24,570 STOCKHOLDERS' EQUITY (DEFICIT) Common stock, ($0.001 par value, 75,000,000 shares authorized;11,500,000 shares issued and outstanding as of June 30 2008 and Dec 31, 2007 respectively 11,500 11,500 Additional paid-in capital 23,500 23,500 Deficit accumulated during exploration stage (66,998) (52,797) -------- -------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (31,998) (17,797) -------- -------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 2,667 $ 6,773 ======== ======== See Accompanying Notes 3
TRES ESTRELLAS ENTERPRISES, INC. (A Development Stage Company) Statements of Operations -------------------------------------------------------------------------------- March 5, 2007 Three Months Nine Months Three Months Nine Months (inception) Ended Ended Ended Ended through Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2009 2009 2008 2008 2009 ------------ ------------ ------------ ------------ ------------ REVENUES Revenues $ -- $ -- $ -- $ -- $ -- ------------ ------------ ------------ ------------ ------------ TOTAL REVENUES -- -- -- -- -- OPERATING COSTS Administrative Expenses 4,740 14,201 5,140 27,816 66,998 ------------ ------------ ------------ ------------ ------------ TOTAL OPERATING COSTS 4,740 14,201 5,140 27,816 66,998 ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (4,740) $ (14,201) $ (5,140) $ (27,816) $ (66,998) ============ ============ ============ ============ ============ BASIC EARNINGS (LOSS) PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00) ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,500,000 11,500,000 11,500,000 11,500,000 ============ ============ ============ ============ See Accompanying Notes 4
TRES ESTRELLAS ENTERPRISES, INC. (A Development Stage Company) Statements of Cash Flows -------------------------------------------------------------------------------- March 5, 2007 Three Months Nine Months (inception) Ended Ended through Sept. 30, Sept. 30, Sept. 30, 2009 2009 2009 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(14,201) $(27,816) $(66,998) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Changes in operating assets and liabilities: (Increase) decrease in Organizational Costs -- -- (1,970) Increase (decrease) in Accounts Payable 5,100 800 7,200 Increase (decrease) in Loan from Director 4,995 4,000 27,465 -------- -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (4,106) (23,016) (34,303) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment -- -- -- -------- -------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- -- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock -- -- 11,500 Additional paid-in capital -- -- 23,500 -------- -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -- -- 35,000 -------- -------- -------- NET INCREASE (DECREASE) IN CASH (4,106) (23,016) 697 CASH AT BEGINNING OF PERIOD 4,803 27,741 -- -------- -------- -------- CASH AT END OF PERIOD $ 697 $ 4,725 $ 697 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during year for: Interest $ -- $ -- $ -- ======== ======== ======== Income Taxes $ -- $ -- $ -- ======== ======== ======== See Accompanying Notes 5
Tres Estrellas Enterprises, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2009 -------------------------------------------------------------------------------- 1. ORGANIZATION Tres Estrellas Enterprises, Inc. (the "Company") is a Nevada corporation incorporated on March 5, 2007. The Company is a development stage company. To date, the Company's activities have been limited to its formation and the raising of equity capital. The Company's fiscal year end is December 31. GOING CONCERN AND LIQUIDITY CONSIDERATIONS The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As at September 30, 2009, the Company had a loss from operations of $66,998 and has earned no revenues since inception. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2009. The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, development of its business plan and generation of revenue. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. 2. SIGNIFICANT ACCOUNTING POLICIES a) BASIS OF PRESENTATION The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (US GAAP) applicable to development stage companies. b) USE OF ESTIMATES The preparation of financial statements in conformity with U.S. 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. c) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. 6
Tres Estrellas Enterprises, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2009 -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED d) FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS The Company has adopted Statement of Financial Accounting Standards ("SFAS") Number 119, "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments." The carrying amount of accrued liabilities approximates its fair value because of the short maturity of this item. Certain fair value estimates may be subject to and involve, uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of its foreign exchange, commodity price or interest rate market risks. e) SEGMENTED REPORTING SFAS Number 131, "Disclosure About Segments of an Enterprise and Related Information", changed the way public companies report information about segments of their business in their quarterly reports issued to shareholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers. f) FEDERAL INCOME TAXES Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with SFAS Number 109, "Accounting for Income Taxes", which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carryforwards when realization is more likely than not. g) EARNINGS (LOSS) PER SHARE The Company has adopted Financial Accounting Standards Board ("FASB") Statement Number 128, "Earnings per Share," ("EPS") which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income/loss by the weighted average number of shares of common stock outstanding during the period. 7
Tres Estrellas Enterprises, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2009 -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED h) STOCK-BASED COMPENSATION The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123(R), "SHARE-BASED PAYMENT", which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS 123(R), stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees' requisite service period (generally the vesting period of the equity grant). The Company accounts for share-based payments to non-employees, in accordance with SFAS 123 (as originally issued) and Emerging Issues Task Force Issue No. 96-18, "ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS OR SERVICES". For the period ended September 30, 2009 the Company did not have any stock-based compensation. i) REVENUE RECOGNITION The Company recognizes revenue from the sale of products and services in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition in Financial Statements." Revenue will consist of services income and will be recognized only when all of the following criteria have been met: (i) Persuasive evidence for an agreement exists; (ii) Service has occurred; (iii) The fee is fixed or determinable; and (iv) Revenue is reasonably assured. 3. CAPITAL STOCK a) AUTHORIZED STOCK The Company has authorized 75,000,000 common shares with $0.001 par value. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought. b) SHARE ISSUANCES Since inception (March 5, 2007), to September 30, 2009, the Company has issued the following shares: A total of 5,500,000 common stock shares to the sole officer and director at $0.002 per share for a total of $11,000. A total of 6,000,000 common stock shares to 40 unaffiliated investors at $.004 per share for a total of $24,000 pursuant to an SB-2 Registration Statement. 8
Tres Estrellas Enterprises, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2009 -------------------------------------------------------------------------------- 4. INCOME TAXES The company has incurred operating losses of $66,998, which, if unutilized, will begin to expire in 2027. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been off set by a valuation allowance. Details of future income tax assets are as follows: September 30, 2009 -------- Future income tax assets: Net operating loss (from inception (March 5, 2007 to September 30, 2009) $ 66,998 Statutory tax rate (combined federal and state) 34% -------- Non-capital tax loss 22,779 Valuation allowance (22,779) -------- $ -- ======== The potential future tax benefits of these losses have not been recognized in these financial statements due to uncertainty of their realization. When the future utilization of some portion of the carryforwards is determined not to be "more likely than not," a valuation allowance is provided to reduce the recorded tax benefits from such assets. 5. NEW ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements that are listed below did and/or are not currently expected to have a material effect on the Company's financial statements. FASB STATEMENTS: In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB 51 ("SFAS 160"). SFAS 160 changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent's equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentation and disclosure requirements, which will apply retrospectively. There will be no impact upon adoption to our current consolidated results of operations and financial condition. 9
Tres Estrellas Enterprises, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2009 -------------------------------------------------------------------------------- 5. NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, AN AMENDMENT OF FASB STATEMENT NO. 133 ("SFAS 161"). SFAS 161 expands the disclosure requirements in Statement 133 about an entity's derivative instruments and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact of adopting FAS 161. In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company's financial position, statements of operations, or cash flows at this time. In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company's financial position, statements of operations, or cash flows at this time. 6. RELATED PARTY TRANSACTIONS Mr. Chavez, a director of the Company, has advanced funds to the company to pay for any costs incurred by it. These funds are interest free and there are no specific terms of repayment or any contract regarding the funds loaned. The balance due Mr. Chavez was $27,465 on September 30, 2009. The officer and director of the Company may, in the future, become involved in other business opportunities as they become available, thus he may face a conflict in selecting between the Company and his other business opportunities. The company has not formulated a policy for the resolution of such conflicts. 7. SUBSEQUENT EVENT On October 30, 2009, the Company executed an agreement with IN Media Corporation, Inc. ("IN-Media"), and the Company (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, IN Media shareholders acquired thirty three million, five hundred thousand (33,500,000) shares of the Company's common stock, whereby IN Media was merged into the Company. This issuance of stock did not involve any public offering, general advertising or solicitation. At the time of the issuance, IN Media had fair access to and was in possession of all available material information about the Company. The shares bear a restrictive transfer legend in accordance with Rule 144 under the Securities Act. 10
Tres Estrellas Enterprises, Inc. (A Development Stage Company) Notes to Financial Statements September 30, 2009 -------------------------------------------------------------------------------- 7. SUBSEQUENT EVENT - CONTINUED Upon effectiveness of the Agreement, the Company has now changed its business plan to the business of IN Media. IN Media is a content provider and integrator of Internet Protocol Television ("IPTV") services for cable, satellite, internet, telephony and mobile services. The IN Media business model is comprised of both content fees and shared revenue from large infrastructure providers offering total solutions: television, telephony and internet services, also referred to as "Triple Play" services. The addition of content or video on demand (VoD) adds to the solution or "Quad Play" services. IN Media is an integral part of both IPTV and VoD services with their ownership of content and streamlined IPTV implementations. However, IN Media mitigates their exposure by partnering with large Platform Providers whom are responsible for the customer billing and service. 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION Management's Discussion and Analysis contains various "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to "anticipates", "believes", "plans", "expects", "future" and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company's business and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company adopted at management's discretion, the most conservative recognition of revenue based on the most astringent guidelines of the SEC. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein. Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements. BUSINESS Our business was formed to offer a proposed pipe restoration services to commercial and residential rental building owners in Baja California, Mexico in 2008. During the past year we have witnessed a dramatic reduction in investor and lender willingness to provide funding throughout the world. We are also experiencing increased levels of resistance to our inquiries for new sources of cash flows. We need to generate additional funding beyond that provided in the past by our director. Management determined it was in the best interests of the company and the shareholders to consider other potential business opportunities that could include possibly changing our business plan, acquiring an existing business with sufficient cash flows, or merging with another company. On October 30, 2009, we executed an agreement with IN Media Corporation, Inc. ("IN-Media"), and our Company (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, IN Media shareholders acquired thirty three million, five hundred thousand (33,500,000) shares of our common stock, whereby IN Media was merged into the Company. The Company reported this event on Form 8-K, filed with the Securities and Exchange Agreement on November 2, 2009. The disclosure included the financial statements of IN-Media, pro-forma financials, 12
and disclosures regarding IN-Media. The closing of the transactions in the agreement are contingent upon satisfaction of closing conditions listed in the Agreement, a form of which is attached Exhibit 2.1 to that Form 8-K. RESULTS OF OPERATIONS We have generated no revenues since inception and have incurred $66,998 in expenses from inception through September 30, 2009. We incurred $4,740 and 5,140 in expenses for the three months ended September 30, 2009 and 2008, respectively. These costs consisted of general and administrative expenses. For the nine months ended September 30, 2009 and 2008 we incurred $14,201 and $27,816 in expenses, these were all general and administrative expenses. Management determined it was in the best interests of the company and the shareholders to consider other potential business opportunities that could include possibly changing our business plan, acquiring an existing business with sufficient cash flows, or merging with another company. The following table provides selected financial data about our company for the three months ended September 30, 2009. Balance Sheet Data: 9/30/09 ------------------- ------- Cash $ 697 Total assets $ 2,667 Total liabilities $ 34,665 Shareholders' equity $(31,998) There was no cash provided from operating activities for the quarter ended September 30, 2009. From inception the director had loaned the company $27,465. Cash provided by financing since inception was $35,000, consisting of $11,000 from the sale of shares to our officer and director and $24,000 resulting from the sale of our common stock to 40 unaffiliated investors. LIQUIDITY AND CAPITAL RESOURCES We cannot continually incur operating losses in the future and may decide that we can no longer continue with our business operations as detailed in our original business plan because of a lack of financial results and a lack of available financial resources. Our cash balance at September 30, 2009 was $697. If we are unable to secure adequate capital to continue in business, our shareholders will lose some or all of their investment and our business will likely fail. Our director has advanced us funds of $27,465 and has agreed to advance funds in a limited operations scenario. In the event our director does not provide such funding, our business will likely fail. We are a development stage company and have generated no revenue to date. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. RECENT ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below. 13
On September 30, 2009, the Company adopted updates issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards CodificationTM (ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Condensed Consolidated Financial Statements. In June 2009, the FASB issued guidance now codified as ASC Topic 105, "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" ("ASC 105"), which establishes the FASB Accounting Standards Codification as the source of GAAP to be applied to nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive releases of the SEC under authority of federal securities laws as authoritative GAAP for SEC registrants. ASC 105 became effective for interim or annual periods ending after September 15, 2009. ASC 105 does not have a material impact on the Company's consolidated financial statements presented hereby. In May 2009, the FASB issued guidance now codified as ASC Topic 855, "SUBSEQUENT EVENTS" ("ASC 855"). The pronouncement modifies the definition of what qualifies as a subsequent event--those events or transactions that occur following the balance sheet date, but before the financial statements are issued, or are available to be issued--and requires companies to disclose the date through which it has evaluated subsequent events and the basis for determining that date. The Company adopted the provisions of ASC 855 in the second quarter of 2009, in accordance with the effective date. WHERE YOU CAN FIND MORE INFORMATION You are advised to read this Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual report on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC's Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We do not hold any derivative instruments and do not engage in any hedging activities. ITEM 4. CONTROLS AND PROCEDURES a) Evaluation of Disclosure Controls and Procedures Our management team, including our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, September 30, 2009. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the 14
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2009. Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our principal executive officer and our principal financial officer are required to base their assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations (COSO). The COSO framework, published in INTERNAL CONTROL-INTEGRATED FRAMEWORK, is known as the COSO Report. Our principal executive officer and our principal financial officer, have chosen the COSO framework on which to base their assessment. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our internal control over financial reporting was effective as of September 30, 2009. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls. It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. b) Changes in Internal Control over Financial Reporting. During the Quarter ended September 30, 2009, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 15
PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously discussed in Item 1A of the Company's Form 10-K for the year ended December 31, 2008, including but not limited, to the following: OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors. FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK. In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL TO PURSUE OUR BUSINESS AND THEREFORE WOULD BE UNABLE TO ACHIEVE OUR PLANNED FUTURE GROWTH. We intend to pursue a growth strategy that includes development of the Company business and technology. Currently we have limited capital which is insufficient to pursue our plans for development and growth. Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing. We are currently seeking additional capital. Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us. Our failure to obtain additional capital will have a material adverse effect on our business. 16
NEVADA LAW AND OUR ARTICLES OF INCORPORATION PROTECT OUR DIRECTORS FROM CERTAIN TYPES OF LAWSUITS, WHICH COULD MAKE IT DIFFICULT FOR US TO RECOVER DAMAGES FROM THEM IN THE EVENT OF A LAWSUIT. Nevada law provides that our directors will not be liable to our company or to our stockholders for monetary damages for all but certain types of conduct as directors. Our Articles of Incorporation require us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require our company to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances. FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS. It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies. If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock. Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2009, we will be required to prepare assessments regarding internal controls over financial reporting and beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2009, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. There also can be no assurance that our auditors will be able to issue an unqualified opinion on management's assessment of the effectiveness of our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price. In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover "material weaknesses" in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines "significant deficiency" as a deficiency that results in more than 17
a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected. In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future. Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION There is no information with respect to which information is not otherwise called for by this form. ITEM 6. EXHIBITS Exhibit Number ------ Certification of Chief Executive Officer pursuant to 31.1 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Financial Officer pursuant to 31.2 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Executive Officer pursuant to 32.1 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Certification of Chief Financial Officer pursuant to 32.2 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18
SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Tres Estrellas Enterprises, Inc. (Registrant) /s/ Nitin Karnik Date: November 11, 2009 ------------------------------------ Nitin Karnik President, Chief Executive Officer and Director /s/ Jose Chavez Date: November 11, 2009 ------------------------------------ Jose Chavez Chief Financial Officer and Director 1