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EX-31.1 - ANV SECURITY GROUP INC. | v174310_ex31-1.htm |
EX-32.2 - ANV SECURITY GROUP INC. | v174310_ex32-2.htm |
EX-31.2 - ANV SECURITY GROUP INC. | v174310_ex31-2.htm |
EX-32.1 - ANV SECURITY GROUP INC. | v174310_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
For
the quarterly period ended December 31, 2009
OR
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
For
the transition period from
to
Commission File Number:
000-53802
ANV
Security Group, Inc.
(Exact
name of registrant as specified in its charter)
Nevada
|
13-3089537
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
2105
- 11871 Horseshoe Way, Richmond, BC, Canada
|
V7A
5H5
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(604) 277-6606
(Registrant’s
telephone number, including area code)
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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
|
Accelerated filer
¨
|
|||
Non-accelerated
filer ¨ (Do
not check if a smaller reporting company)
|
Smaller reporting company
þ
|
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
December 31, 2009, 33,190,071 shares of common stock, par value $.001 per share,
were outstanding, of which 20,700,071 shares were held by
non-affiliates.
ANV
SECURITY GROUP, INC.
FORM
10-Q
CONTENTS
PART
I
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements
|
3
|
Balance
Sheets at December31, 2009 (unaudited) and
|
||
March
31, 2009 (audited)
|
3
|
|
Statements
of Operations (unaudited) for the three months
|
||
ended
and nine months ended December 31, 2009 and 2008
|
4
|
|
Statements
of Cash Flows (unaudited) for the nine months
|
||
ended
December 31, 2009 and 2008
|
5
|
|
Notes
to Condensed Financial Statements (unaudited)
|
6
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial
|
|
Condition
and Results of Operations
|
13
|
|
Item
4.
|
Controls
and Procedures
|
15
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
15
|
Item
2.
|
Changes
in Securities and Use of Proceeds
|
15
|
Item
3.
|
Defaults
Upon Senior Securities
|
15
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
15
|
Item
5.
|
Other
Information
|
15
|
Item
6.
|
Exhibits
and Reports on Form 8-K
|
15
|
SIGNATURES
|
17
|
|
CERTIFICATIONS
|
|
2
PART I
Financial Information
Item 1
Financial Statements
ANV
Security Group, Inc.
Consolidated
Balance Sheets
(Expressed
in US dollars)
(Unaudited)
As of
|
|||||||||
December
31,
|
March
31,
|
||||||||
2009
|
2009
|
||||||||
(unaudited)
|
(audited)
|
||||||||
ASSETS
|
|||||||||
Current
Assets
|
|||||||||
Cash
|
Note
1-g
|
$ | 52,122 | $ | 28,470 | ||||
Accounts
Receivable - Trade and Common Stock
|
Note
2
|
3,352 | 508 | ||||||
Common
Stock Receivable
|
Note
2
|
144,351 | - | ||||||
GST
Receivable
|
Note
1-j
|
1,156 | 1,408 | ||||||
Inventory
|
Note
3
|
78,767 | 55,167 | ||||||
Other Assets
|
Note 4
|
65,674 | 4,211 | ||||||
Total
Current Assets
|
345,422 | 89,763 | |||||||
Property and Equipment ,
net
|
Note 5
|
21,844 | 21,226 | ||||||
Intangible Assets
|
Note 6
|
1,310,566 | 1,034,627 | ||||||
Total Assets
|
$ | 1,677,832 | $ | 1,145,616 | |||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||||
Current
Liabilities
|
|||||||||
Accounts
payable
|
Note
7
|
$ | 2,753 | $ | 4,354 | ||||
Due to related parties
|
Note 9
|
- | - | ||||||
Total Liabilities
|
2,753 | 4,354 | |||||||
Commitments
and Contingencies
|
Note
15
|
||||||||
Stockholders’
Equity
|
|||||||||
Common
Stock, Unlimited shares authorized, without par value 33,190,071 and
27,074,500 shares issued and outstanding, respectively
|
Note
10
|
2,102,226 | 1,613,137 | ||||||
Additional
Paid-in Capital for Stock Options
|
24,836 | 24,836 | |||||||
Deficit
Accumulated
|
(612,239 | ) | (369,870 | ) | |||||
Accumulated Other Comprehensive Income
(Loss)
|
160,256 | (126,842 | ) | ||||||
Total Stockholders’ Equity
|
1,675,079 | 1,141,261 | |||||||
Total Liabilities and Stockholders’
Equity
|
$ | 1,677,832 | $ | 1,145,616 |
(The
accompanying notes are in an integral part of these financial
statements)
3
ANV
Security Group, Inc.
Consolidated
Statements of Operations
(Expressed
in US dollars)
(unaudited)
For
the
|
For
the
|
For
the
|
For
the
|
||||||||||||||
Three
Months
|
Three
Months
|
Nine
Months
|
Nine
Months
|
||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
||||||||||||||
December
31,
|
December
31,
|
December
31,
|
December
31,
|
||||||||||||||
Notes
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue
|
Note
1-p
|
$ | 327 | $ | 54,498 | $ | 11,426 | $ | 65,376 | ||||||||
Cost
of Sales
|
322 | 51,441 | 3,797 | 57,156 | |||||||||||||
Gross
profit
|
5 | 3,057 | 7,629 | 8,220 | |||||||||||||
Expenses
|
|||||||||||||||||
Advertising
and promotion
|
Not
1-v
|
4,298 | 11,979 | 17,226 | 51,955 | ||||||||||||
Amortization
|
1,523 | 1,149 | 4,337 | 2,476 | |||||||||||||
Automobile
|
130 | 16 | 324 | 354 | |||||||||||||
Commission
|
744 | - | 31,696 | 1,080 | |||||||||||||
Dues
|
- | 3,933 | 165 | 4,101 | |||||||||||||
General
and administrative
|
8,463 | 4,015 | 21,501 | 54,127 | |||||||||||||
Licence
|
- | - | - | 609 | |||||||||||||
Payroll
|
36,997 | 17,952 | 92,231 | 17,952 | |||||||||||||
Stock-based
Compensation
|
Note
1-u
|
- | - | - | - | ||||||||||||
Professional
fees
|
15,603 | 2,958 | 37,370 | 15,064 | |||||||||||||
Rent
|
6,102 | 7,672 | 17,870 | 14,500 | |||||||||||||
Research
and Development
|
Note
1-q
|
- | 16,529 | - | 136,399 | ||||||||||||
Repair
and Maintenance
|
- | 290 | - | 10,684 | |||||||||||||
Travel
|
6,862 | 8,869 | 17,951 | 9,405 | |||||||||||||
Total
Expenses
|
80,722 | 75,362 | 240,671 | 318,706 | |||||||||||||
Other
Income (Expenses)
|
|||||||||||||||||
Interest
Income
|
- | - | - | 820 | |||||||||||||
Rental
Income
|
- | - | 2,827 | - | |||||||||||||
Customer
Rebate
|
- | - | 3,973 | - | |||||||||||||
Exchange
Loss
|
(671 | ) | - | (14,603 | ) | 240 | |||||||||||
Interest
Expense
|
(559 | ) | (336 | ) | (1,526 | ) | (1,247 | ) | |||||||||
Total
Other Income (Expense)
|
(1,230 | ) | (336 | ) | (9,329 | ) | (187 | ) | |||||||||
Net
(Loss) Before Income Tax Expense
|
(81,947 | ) | (72,641 | ) | (242,369 | ) | (310,673 | ) | |||||||||
Income
Tax Expense, Net of Income Tax Benefit
|
Note
8
|
||||||||||||||||
Net
Loss
|
(81,947 | ) | (72,641 | ) | (242,369 | ) | (310,673 | ) | |||||||||
Other
Comprehensive Income
|
$ | $ | |||||||||||||||
Foreign
Currency Translation Adjustment
|
Note
12
|
14,300 | (177,550 | ) | 287,098 | 365,683 | |||||||||||
Comprehensive
Income
|
(67,647 | ) | (250,191 | ) | 44,729 | 55,010 | |||||||||||
Net
Loss Per Share – Basic and Diluted
|
Note
1-t
|
(0.00 | ) | (0.05 | ) | (0.01 | ) | (0.20 | ) | ||||||||
Weighted
Average Shares Outstanding
|
28,957,266 | 1,572,700 | 31,816,333 | 1,572,700 |
(The
accompanying notes are in an integral part of these financial
statements)
4
ANV
Security Group, Inc.
Consolidated
Statements of Cash Flows
(Expressed
in US dollars)
(unaudited)
|
For
the
|
|||||||
For
the
|
Nine-Months
|
|||||||
Nine-
Months
|
Ended
|
|||||||
Ended
31-Dec-09
|
December
31,,
2008
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (242,369 | ) | (238,032 | ) | |||
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Amortization
|
4,250 | 1,329 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Prepaid
expenses and deposits
|
- | 17,090 | ||||||
GST
Receivable
|
534 | (7,602 | ) | |||||
Inventory
|
(12,574 | ) | (52,290 | ) | ||||
Accounts
Payable
|
(2,471 | ) | 13,220 | |||||
Due
to related parties
|
(63,364 | ) | (1,531 | ) | ||||
Net
Cash (Used for) by Operating Activities
|
(315,994 | ) | (267,816 | ) | ||||
Cash
flows from investing activities
|
||||||||
Purchase
of equipment and furniture
|
(854 | ) | (22,277 | ) | ||||
Capitalized
software development costs
|
(39,659 | ) | 68,697 | |||||
Incorporation
costs
|
(29,485 | ) | ||||||
Net
Cash (Used for) Provided by Investing
Activities
|
(69,998 | ) | 46,420 | |||||
Cash
flows from financing activities
|
||||||||
Proceeds
from related party
|
144,351 | 19,678 | ||||||
Issuance
of Common stock
|
357,649 | 138,484 | ||||||
Net
Cash Provided by Financing Activities
|
502,000 | 158,162 | ||||||
Effect
of exchange rate changes on cash
|
(92,355 | ) | (818 | ) | ||||
Increase
(Decrease) In Cash
|
23,652 | (64,052 | ) | |||||
Cash
– Beginning of Period
|
28,470 | 186,631 | ||||||
Cash
– End of Period
|
$ | 52,122 | 122,579 | |||||
Supplemental
Schedule of Cash Flows Disclosures
|
||||||||
Interest
paid
|
$ | - | 911 | |||||
Income
taxes paid
|
$ | |||||||
Supplemental Schedule of Non-Cash Flows Activities | ||||||||
Common
Stock subscribed
|
$ | 131,440 | - |
(The
accompanying notes are in an integral part of these financial
statements)
5
NOTES TO
ANV Security Group, Inc.
Notes
to Consolidated Financial Statements
December 31,
2009
Note
1. Organization and Summary of Significant Accounting Policies
Organization
Canada
ANV Systems Inc. (the “Company”) was incorporated in British Columbia, Canada on
December 18, 2006. The Company is an innovator in video systems and specialize
in both silicon and software solutions for the video products design and
manufacturing. The Company offers enabling technologies that can provide the
digital consumer and enterprise applications with excellent video quality and
extended hours of portable operations across networks, be it home, enterprise or
telecom networks. Also the Company offers a wide range of video cameras powered
by the next generation H.264 video technologies and our patent pending USCI8.com
services platforms.
Summary
of Significant Accounting Policies
|
a)
|
Basis
of Presentation
|
These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company’s fiscal year-end is March 31.
|
b)
|
Principles
of Consolidation
|
These
consolidated financial statements include the accounts of ANV Security Group
Inc. and its wholly-owned subsidiary, ANV Video Alarm Service Inc which was
incorporated in British Columbia, Canada on May 30, 2008. All intercompany
accounts and transactions have been eliminated in consolidation.
|
c)
|
Use
of Estimates
|
The
preparation of financial statements in conformity with United States 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. The Company regularly evaluates estimates and
assumptions related to useful life and recoverability of long-lived assets,
donated expenses, and deferred income tax valuation allowances. The Company
bases its estimates and assumptions on current facts, historical experience and
various other factors that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses that are
not readily apparent from other sources. The actual results experienced by the
Company may differ materially and adversely from the Company’s estimates. To the
extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
|
d)
|
Reclassification
|
Certain
account reclassifications have been made to the financial statements of the
prior year in order to conform to classifications used in the current year.
These changes had no impact on previously stated financial statements of the
Company.
|
e)
|
Comprehensive
Income (Loss)
|
SFAS No.
130, “Reporting Comprehensive
Income,” establishes standards for the reporting and display of
comprehensive loss and its components in the financial statements. As at December 31, 2009, the Company’s
only component of comprehensive income consisted of foreign currency translation
adjustments.
|
f)
|
Cash
and Cash Equivalents
|
The
Company considers all highly liquid instruments with maturity of three months or
less at the time of issuance to be cash equivalents.
6
|
g)
|
Concentration
of Credit Risks
|
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and trade accounts receivable. The Company
places its cash with high credit quality financial institutions in
Canada. The Company has not experienced any losses in such bank
accounts through December 31, 2009. At December 31, our bank deposits were as
follows:
December
31,
|
December
31,
|
|||||||
COUNTRY
|
2009
|
2008
|
||||||
Canada
|
$ | 52,122 | $ | 52,001 | ||||
Total
cash and cash equivalents
|
$ | 52,122 | $ | 52,001 |
In an
effort to mitigate any potential risk, the Company periodically evaluates the
credit quality of the financial institutions at which it holds
deposits.
|
h)
|
Accounts
Receivable
|
Accounts
receivable are presented net of an allowance for doubtful accounts. The Company
maintains allowances for doubtful accounts for estimated losses. The
Company reviews the accounts receivable on a periodic basis and makes general
and specific allowances when there is doubt as to the collectability
of individual balances. In evaluating the collectability of individual
receivable balances, the Company considers many factors, including the age
of the balance, customer's historical payment history, its current
credit-worthiness and current economic trends. Accounts are written off after
exhaustive efforts at collection.
|
i)
|
Inventories
|
Inventories
are stated at the lower of average cost or market and consist of raw materials
and finished goods. The Company writes down inventory for estimated obsolescence
or unmarketable inventory based upon assumptions and estimates about future
demand and market conditions. If actual market conditions are less favorable
than those projected by the Company, additional inventory write-downs may be
required.
|
j)
|
GST
Receivable
|
GST
receivable represents tax credit that the Canadian Company receives when the
Company pays GST tax during normal operations. As of December 31, 2009, the
Company had a GST tax receivable of $1,156.
|
k)
|
Advances
to Suppliers
|
Advances
to suppliers included in other assets represent the cash paid in advance for
purchasing of inventory items from Suppliers and the amount as of December 31,
2009 was none.
l)
|
Property
and Equipment
|
Property
and equipment consists of furniture, office equipment, computer
equipment/software and leasehold improvement, is recorded at cost. The property
and equipment other than leasehold improvement is depreciated on a straight line
basis over an estimated useful life of three years. Leasehold improvement is
depreciated on a straight line basis over the lease period of ten
years
m)
|
Intangible
Assets
|
Intangible
assets consist of two parts. The first is a surveillance recording system,
surveillance software, technical know-how and non-compete agreements, developed
by Jiwei Zhang, Xianbo Fu, Kewei Feng, Mingyue Fan (all individuals), acquired
originally by Landmark Enterprise Group Inc.(“Landmark”) , a related party, and
subsequently sold to the Company in exchange for common shares. The value of
intangible assets acquired from Landmark was established by an independent
valuation report. The second part is incorporation cost of Shell Company
purchasing.
|
n)
|
Long-Lived
Assets
|
In
accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the Company tests long-lived assets or
asset groups for recoverability when events or changes in circumstances indicate
that their carrying amount may not be recoverable. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair
value.
|
o)
|
Financial
Instruments and Fair Value Measures
|
SFAS No.
157 “Fair Value
Measurements” requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. SFAS No.
157 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A
financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value
measurement. SFAS No. 157 prioritizes the inputs into three levels that may be
used to measure fair value:
7
|
p)
|
Revenue
Recognition
|
The
Company follows the guidance of the Securities and Exchange Commission's Staff
Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements". In
general, the Company records revenue when persuasive evidence of an arrangement
exists, services have been rendered or product delivery has occurred, the sales
price to the customer is fixed or determinable, and collectability is reasonably
assured. The following policies reflect specific criteria for the various
revenues streams of the Company:
The
Company generates revenue from the sale of its products and records revenues
from the sale of products when the goods are shipped, title passes, and
collectability is reasonably assured.
Revenue
from periodic maintenance monitoring agreements is generally recognized on a
monthly basis provided no significant obligations remain and collectability of
the related receivable is probable.
Revenue
from the performance of installation services is recognized upon completion of
the service.
The
Company derives the bulk of its revenue from the supply and installation of
surveillance and safety equipment and the two deliverables do not meet the
separation criteria under EITF issue 00-21. The installation is not
considered to be essential to the functionality of the equipment having regard
to the following criteria as set out in SAB 104:
i) The
surveillance and safety equipment is a standard product with minor modifications
according to customers’ specifications;
ii) Installation
does not significantly alter the surveillance and safety equipment’s
capabilities; and
iii) Other
companies which possess the relevant licenses are available to perform the
installation services.
The
Company reduced its estimate of future warranty requirements to approximately 1%
of contract installation revenue. In the nine months ended December 31, 2009,
estimated warranty was $ -0-.
Revenue
from the outright sale of surveillance and safety equipment is recognized when
delivery occurs and risk of ownership passes to the customers.
|
q)
|
Research
& Development Costs
|
Research
and development costs are expensed as incurred. Research and development costs
included in general and administrative expenses for the nine months ended
December 31, 2009 and 2008, amounted to $-0- and $136,399, respectively. The
Research and Development expenses consist of engineers’ salaries, research
expenses paid to the 3rd party subcontractors, monthly rent fee for research and
development centers and related utility outlay. Up to December 31, 2009, the
company has developed the following products and solutions: (1) USCI8™ Video
Alarm Platform, which offers an all-in-one security system for both commercial
and residential customers, and allows customers to take control of their own
security requirements; (2) iCam H.264 IP Camera, which currently has three
series covering market demand from home and small businesses, large businesses
and government and high-end surveillance users; (3) ANV Digital Video Server, or
H.264 DVS300, which is an embedded surveillance device specially designed for
network application; and (4) NVS Center 500 Management Software, which can
manage 1728 IP cameras simultaneously and set and control every IP camera
separately, supporting 32 channels output of TV walls, centralized storage, data
transmission and electric map.
|
r)
|
Income
Taxes
|
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted SFAS No. 109 “Accounting for Income Taxes”
as of its inception. Pursuant to SFAS No. 109 the Company is required to compute
tax asset benefits for net operating losses carried forward. Potential benefit
of net operating losses have not been recognized in these financial statements
because the Company cannot be assured it is more likely than not it will utilize
the net operating losses carried forward in future years.
8
|
s)
|
Foreign
Currency Translation
|
The
Company’s functional currency is the Canadian dollar. The financial statements
are translated to United States dollars in accordance with SFAS No. 52 “Foreign Currency Translation”
using period-end rates of exchange for assets and liabilities, and
average rates of exchange for the year for revenues and expenses. Translation
gains (losses) are recorded in accumulated other comprehensive income (loss) as
a component of stockholders’ equity (deficit). Gains and losses arising on
translation or settlement of foreign currency denominated transactions or
balances are included in the determination of income. Foreign currency
transactions are primarily undertaken in United States dollars. The Company has
not, to the date of these financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
|
t)
|
Basic
and Diluted Net Income (Loss) Per
Share
|
The
Company computes net income (loss) per share in accordance with SFAS No. 128,
"Earnings per Share".
SFAS No. 128 requires presentation of both basic and diluted earnings per share
(EPS) on the face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding during the
period using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti dilutive.
Basic net
earnings (loss) per share equals net earnings (loss) divided by the weighted
average shares outstanding during the year. The computation of diluted net
earnings per share does not include dilutive common stock equivalents in the
weighted average shares outstanding as they would be anti-dilutive. The
Company's common stock equivalents at December 31, 2009 and 2008 include the
following:
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Options
|
140,000 | -0- | ||||||
Warrants
|
-0- | -0- | ||||||
140,000 | -0- |
|
u)
|
Stock-based
Compensation
|
The
Company records stock-based compensation in accordance with SFAS No. 123R “Share
Based Payments”, using the fair value method. The Company provides its officers,
consultants, and directors stock options to purchase common stock of the Company
on a discretionary basis. Generally, options are granted at exercise prices not
less than the fair market value at the date of grant. As of December 31, 2009,
the Company has granted 140,000 shares stock options to its director, consultant
and top manager and the fair market value is $24,836.
|
v)
|
Advertising
|
Advertising
is expensed as incurred and was $ 17,226 for the nine months ended December 31,
2009 and $51,955 for the nine months ended December 31, 2008,
respectively.
w)
|
Recent
Accounting Pronouncements
|
Impact
of New Accounting Standards
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position, or cash flow.
Note
2. Accounts Receivable – Trade and Common Stock Subscription
Receivable
Accounts
receivable as of December 31, 2009 consist of $3,352 of trade receivable and $
144,351 of common stock subscription; Accounts receivable as of December 31,
2008 consist of $ 5,152 of trade receivable.
9
Note
3. Inventory
At
December 31, 2009 and 2008, inventories consisted of:
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Parts
|
$ | -0- | $ | -0- | ||||
Finished
goods
|
78,767 | 1,365 | ||||||
78,767 | 1,365 | |||||||
Less:
Reserve for slow moving inventory
|
-0- | -0- | ||||||
$ | 78,767 | $ | 1,365 |
Note
4. Other Assets
Other
assets as at December 31, 2009 amounted $65,674 consist of rental deposit $5,052
and due from Wilson Wang, president, $60,622 and as at December 31,
2008 consist of $59,367 of research and development cost paid in
advance.
Note
5. Property and Equipment
Fixed
assets are summarized by classifications as follows
Cost
$
|
Accumulated
Amortization
$
|
December
31,
2009
Net Carrying
Value
$
|
December
31,
2008
Net
Carrying
Value
$
|
|||||||||||||
Furniture
and equipment
|
4,216 | 2,319 | 1,897 | 2,850 | ||||||||||||
Computer
equipment
|
8,072 | 4,162 | 3,911 | 3,958 | ||||||||||||
Customer
software
|
603 | 425 | 178 | 327 | ||||||||||||
Leasehold
Improvement
|
18,124 | 2,265 | 15,858 | 15,247 | ||||||||||||
31,015 | 9,171 | 21,844 | 22,382 |
Note
6. Intangible Assets
Intangible
assets amounted $1,310,566 and $1,044,887 as of December 31, 2009 and 2008,
respectively. As at December 31, 2009 intangible assets consist of incorporation
cost of $29,485 and software of $1,281,081 acquired from Landmark Enterprise
Group Inc., a related party in December 2006.
Note
7. Accounts Payable
As at
December 31, 2009, accounts payable amounted $2,753 consists of amounts owing to
Serena Wang. As at December 31, 2008, accounts payable amounted $13,965 consists
of amounts government agency payable $5,755 for the period of December 2008, and
customer deposit $8,210.
Note
8. Income Taxes
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statements and the tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax losses and tax credit carryforwards. SFAS 109 additionally requires the
establishment of a valuation allowance to reflect the likelihood of realization
of deferred tax assets. Realization of deferred tax assets is dependent upon
future earnings, if any, of which the timing and amount are uncertain.
Accordingly, the net deferred tax asset related to the Canada net operating loss
carryforward has been fully offset by a valuation allowance. The Company is
governed by the Income Tax Law of the Canadian government.
10
The
Company has a net operating loss carry forward for tax purposes totaling
approximately $ 612,239 at December 31, 2009. The net operating loss carries
forwards for Canadian income taxes, which may be available to reduce future
years' taxable income. These carry forwards will expire, if not utilize, through
2029. Management believes that the realization of the benefits from these losses
appears uncertain due to the Company's continuing losses for income tax
purposes. Accordingly, the Company has provided a 100% valuation allowance on
the deferred tax asset benefit to reduce the asset to zero. Management will
review this valuation allowance periodically and make adjustments as
warranted.
Note
9. Related Party Transactions
Amounts
owing to the significant shareholder, Landmark amounted nil and $35,060 as of
December 31, 2009 and 2008, respectively. In December 2006, Company purchased
certain software from Landmark Enterprise Group Inc. Its value was
appraised by an independent third-party and more than its carrying
cost.
Note
10. Capital Stock
The
company is authorized to issue unlimited shares of common stocks – Class A and
Class B, no par value share. As of December 31, 2009, the amount of voting
common shares issued and outstanding are 33,190,071.
On June
28, 2009, Company entered in to an agreement and plan of reorganization
(“agreement”) by and among Dini Products, Inc. (“DINP”) , a Nevada corporation
whereas, each of the common share in the Company was exchanged on a share for
share basis so that after such exchange DINP has 33,190,071 shares of common
stock issued and outstanding inclusive of 29,860,000 shares issued to the
Company’s stockholders.
Upon
execution of agreement, the Company has amended its name to ANV Security Group,
Inc.
Note
11. Equity Compensation Plan
On
October 1, 2008, the board of directors adopted the Company's Stock Option Plan.
The Company has reserved 1,000,000 shares of common stock for issuance upon
exercise of options granted from time to time under the stock option plan. The
stock option plan is intended to assist the Company in securing and retaining
key employees, directors and consultants by allowing them to participate in the
Company's ownership and growth through the grant of incentive and non-qualified
options. Under the stock option plan, the Company may grant incentive stock
options only to key employees and employee directors, or the Company may grant
non-qualified options to employees, officers, directors and consultants. The
stock option plan is currently administered by the Company's board of directors.
Subject to the provisions of the stock option plan, the board will determine who
shall receive options, the number of shares of common stock that may be
purchased under the options.
Note
12. Foreign Currency Translation
Accounting
for Canada ANV System Inc. and its subsidiary is conducted in Canadian
currency. It converts figures on a period basis in accordance with
FASB # 52. The functional currency is in Canadian
currency. The Companies balance sheet as of December 31, 2009 was
translated at period ended rate of 0.9515 (Canadian currency to US
currency). Statements of operations were reported on the weighted
average for the three months ended December 31, 2009 as required by FASB # 52.
at the rate of 0.9460 (Canadian currency to US currency). Statement of cash
flows were reported on the weighted average for the nine months ended December
31, 2009 as required by FASB # 52. at the rate of 0.9029 (Canadian currency to
US currency).
Note
13. Operating Risk
(a)
Concentration of credit risk
Financial
instruments that potentially expose the ANV Security Group Inc. (the “Company”
or “ANV”) to concentration of credit risk consist primarily of cash, accounts
and notes receivable. The Company places its cash with financial institutions
with high credit ratings.
(b)
Country risk
Revenues
of the Company are mainly derived from the sale in Canada. The Company hopes to
expand its operations to countries outside the Canada, however, such expansion
has not been commenced and there are no assurances that the Company will be able
to achieve such an expansion successfully. Therefore, a downturn or stagnation
in the economic environment of Canada could have a material adverse effect on
the Company's financial condition.
11
(c)
Product risk
ANV might
have to compete with larger companies who have greater funds available for
expansion, marketing, research and development and the ability to attract more
qualified personnel. There can be no assurance that ANV will remain
competitive should this occur.
(d)
Exchange risk
The
Company cannot guarantee that the current exchange rate will remain steady,
therefore there is a possibility that the Company could post the same amount of
profit for two comparable periods and because of a fluctuating exchange rate
actually post higher or lower profit depending on exchange rate
of Canadian dollars converted to U.S. dollars on that date. The
exchange rate could fluctuate depending on changes in the political and economic
environments without notice.
(e) Key
personnel risk
The
Company's future success depends on the continued services of Mr. Wilson Wang.
CEO and Matt Li, CTO. The loss of one of their service would be detrimental to
the Company and could have an adverse effect on business development. The
Company does not currently maintain key man insurance on their life but plan to
implement in near future. Future success is also dependent on the ability to
identify, hire, train and retain other qualified managerial and other
employees.
Note
14. Segment Information
The
following information is presented in accordance with SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information. In the nine months
ended December 31, 2009, the Company operated in two reportable business
segments - (1) sales of security devise and units (2) installation service and
(3) monthly monitoring service.
The
Company's reportable segments are strategic business units that offer different
products. The Company's reportable segments, although integral to the success of
the others, offer distinctly different products and services and require
different types of management focus. As such, these segments are managed
separately.
Note
15. Commitments and Contingencies
15.1 Lease
Commitments
Company
leases its office space and laboratory facility in Richmond, British Columbia
which expires on January 15, 2010 and June 30, 2010, respectively. Its total
monthly minimum rental is $ 1,874.
The
minimum obligations under such commitments for the years ending March 31 until
its expiration are;
Year
2010
|
$ | 20,300 | ||
Year
2011
|
2,998 |
Rental
expense for the nine months ended December 31, 2009 was $ 17,870.
15.2 Litigation
As per
the Company, as of December 31, 2009, there are no actions, suits, proceedings
or claims pending against or materially affecting the Company, which if
adversely determined, would have a material adverse effect on the financial
condition of ANV.
Note
16. Subsequent Events
In
January 2010, Company established ANV Security Group ( Asia) Co. Ltd. a
Hong Kong Company ( “ ANV Asia” ) as a wholly- owned subsidiary of the Company
for the purpose of acquiring operating companies in China. ANV Asia has no
operations to this date.
During
the period covered by these financial statements, Mr. Wilson Wang, president of
Company acting as legal representative of ANV Asia ( to be formed at the time of
contract signing) entered into two separate agreements with Mr Tingyi
Li and Mrs. Xiu Jiang, all Shareholders and legal representative of
Shenzhen Angesi Technology Co. Ltd., based in Shenzhen China and Mr. Zhaohui
Zeng, 100 % shareholder of Flybt Inetrnational Ltd. a Hong Kong company also
based in Shenzen China to acquire 100 % of controlling shares in the sellers.
The closing date was February 1, 2010.
On
January 19, 2010, Mr. Wilson Wang, president
of Company acting as legal representative of ANV Asia ( to be formed at the time
of contract signing) entered into an agreement (the “Flybit
Agreement”) to acquire all of the issued and outstanding stock of Flybit
International, Ltd., a Hong Kong corporation, from its sole owner Zhaohui
Zeng for three
million shares of the Company’s common stock and $720,000 in cash. The closing
under the Flybit Agreement was held on February 1, 2010. Flybit is in
developing and marketing mobile video security system used on vehicles and it is
a certified OEM manufacturer for Panasonic in mobile video
systems.
12
On
December 24, 2009, Mr.Wilson Wang in the same capacity for ANV Asia entered into
an agreement (the “Angesi Agreement”) with the shareholders of Shenzhen Angesi
Technology Co., Ltd (“Angesi”) to acquire Angesi and its nine affiliated
entities for 32 million shares of common stock. Angesi and its
affiliates are in the business of developing, manufacturing and marketing video
cameras throughout China. Based on unaudited financial information available to
management, Angesi had revenue of $45 million with a net profit of $2 million in
2009. The closing of the acquisition of Angesi was held February 1,
2010.
The
purchase price under each agreement is subject to adjustment, and each agreement
could be cancelled based on the result of an audit of the target
company.
The
Company intends to utilize the assets of these companies to expand its
manufacturing base and increase its retail operations in China.
ITEM
2. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward
Looking Statements
This
Quarterly Report on Form 10-Q contains "forward-looking" statements as such term
is defined in the Private Securities Litigation Reform Act of 1995 and
information relating to the Company that is based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and words or phrases
of similar import, as they relate to the Company or Company management, are
intended to identify forward-looking statements. Such statements reflect the
current risks, uncertainties and assumptions related to certain factors
including, without limitations, competitive factors, general economic
conditions, customer relations, relationships with vendors, the interest rate
environment, governmental regulation and supervision, seasonality, distribution
networks, product introductions and acceptance, technological change, changes in
industry practices, onetime events and other factors described herein and in
other filings made by the company with the Securities and Exchange Commission.
Based upon changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.
RESULTS
OF OPERATIONS
First
three Quarters FY 2010 v First three Quarters FY 2009
Revenues. We had
revenues of $11,426 in the first nine months of FY 2010 and revenues of $65,376
for the first nine months of FY 2009 as FY 2009 was devoted to product design
and establishing a business model in Canada. The results in the 2010
FY, particularly in the third quarter, as described below, reflect management’s
decision to concentrate on the Company’s efforts to enter the larger Chinese
market rather than pursue further development of the Canadian market. Management
believes that the Chinese market, which is much larger than the Canadian market
will enable the Company to enjoy greater revenues in the future. As reported on
a Current Report on Form 8-K, filed February 5, 2010, we have made several
acquisitions to facilitate our entry into the Chinese market. We are in the
early stages of developing the Chinese market we expect that revenues and
results will fluctuate from quarter to quarter.. We anticipate
opening retail stress in China during calendar 2010. The costs of opening a
Company operated store include inventory, real estate costs, employee expense
and promotional expenses such as advertising. The costs to open a Company owned
in China anticipated to be approximately $10,000 per retail
store. The size and scope of each of these programs will be governed
by management’s assessment of the Company’s capital resources and can not be
specified at this time.
Cost of Sales; Gross
Profit. Our
cost of sales in the first nine months of FY 2010 was $3,797, yielding a gross
profit of $7,629 or 67% of sales. Our cost of sales in the first nine
months of FY 2009 was $57,156, yielding a gross profit of $8,220 or 13% of
sales. Both of these results and ratios are from an early stage
operation and management does not believe that significant conclusions should be
drawn from these limited results.
Operating
Expenses
Operating
expenses decreased to $240,671in the first nine months of FY 2010 compared to
$318,706 in the first nine months of FY 2009 as decreases in general and
administrative expense, research and development and advertising were partially
offset by increased commissions, payroll and professional
fees. Again, as the operations are in an early stage management would
caution against drawing any significant conclusions from these limited
results.
13
Net
Loss; Comprehensive Loss
Our net
loss and comprehensive loss consists of two parts: net operating
gain (loss) and foreign currency translation adjustments. Because all our
transactions are recorded in Canadian dollars, we need to exchange them
into US dollar using the exchange rate for different period when we release the
financial statements to the public. If the exchange rate fluctuates and
if we have a large balance of assets, liabilities or equity, the foreign
currency translation adjustment will be large.
For the
nine months ended December 31, 2009, the net loss was -$(242,369), but
foreign currency translation adjustment gain was $287,098, so the comprehensive
income is $44,729. (Because we have substantial intangible assets the foreign
transaction adjustment is large). For the nine months ended December 31,
2009, the net loss is -$(310,673) but foreign currency translation
adjustment gain is $365,683 so the comprehensive income is $55,010. (Because we
have substantial intangible assets the foreign transaction adjustment is
large)
Third
Quarter FY 2010 v Third Quarter FY 2009
Revenues. We had
revenues of $327 in the Q3 of FY 2010 and revenues of $54,948 in Q3 of FY 2009
as FY 2009 was devoted to product design and establishing a business model in
Canada. The results in Q3 of 2010 FY reflect management’s decision to
concentrate on the Company’s efforts to enter the larger Chinese market rather
than pursue further development of the Canadian market. Management believes that
the Chinese market, which is much larger than the Canadian market will enable
the Company to enjoy greater revenues in the future. As reported on a Current
Report on Form 8-K, filed February 5, 2010, we have made several acquisitions to
facilitate our entry into the Chinese market. We are in the early stages of
developing the Chinese market we expect that revenues and results will fluctuate
from quarter to quarter.. We anticipate opening retail stress in
China during calendar 2010. The costs of opening a Company operated store
include inventory, real estate costs, employee expense and promotional expenses
such as advertising. The costs to open a Company owned in
China anticipated to be approximately $10,000 per retail
store. The size and scope of each of these programs will be governed
by management’s assessment of the Company’s capital resources and can not be
specified at this time.
Cost of Sales; Gross
Profit. Our
cost of sales in Q3 of FY 2010 was $322, yielding a gross profit of $5 or 2% of
sales. Our cost of sales in the Q3 of FY 2009 was $51,441, yielding a
gross profit of $3,057 or 6 % of sales. Q3 of 2009 results and ratios
are from an early stage operation and Q3 2010 reflect the Company’s refocusing
its efforts on the Chinese market, which efforts had not yet resulted in any
revenues and management does not believe that significant conclusions should be
drawn from these limited results.
Operating
Expenses
Operating
expenses increased to $80,722 in Q3 of FY 2010 compared to $75,362 in Q3 of
FY 2009 as decreases in advertising, research and development and travel were
offset by increased commissions, payroll and professional
fees. Again, as the operations are in an early stage management would
caution against drawing any significant conclusions from these limited
results.
Net
Loss; Comprehensive Loss
Our net
loss and comprehensive loss consists of two parts: net operating
gain (loss) and foreign currency translation adjustments. Because all our
transactions are recorded in Canadian dollars, we need to exchange them
into US dollar using the exchange rate for different period when we release the
financial statements to the public. If the exchange rate fluctuates and
if we have a large balance of assets, liabilities or equity, the foreign
currency translation adjustment will be large.
In Q3 of
FY2010, the net loss was -$(81,947), but foreign currency translation adjustment
gain was $14,300, so the comprehensive loss was $(67,647). In Q3 of
FY2009, the net loss was $(72,641) and foreign currency translation
adjustment loss was $(177,550) so the comprehensive loss was $(250,191).
(Because we have substantial intangible assets the foreign transaction
adjustment was large)
LIQUIDITY
AND CAPITAL RESOURCES
Net cash
flows used in operating activities for the nine-month period ended December 31,
2009 totaled $315,994. .
Cash
flows used in investing activities in the nine months ened December 31, 2009
totaled $69,998.
Net cash
provided by financing activities, the sale of our stock, was $502,000 for the
nine months ended December 31, 2009.
The
Company has limited cash resources and intends to raise additional capital
through the issuance of debt or equity in order to expand operations. The
Company has entered into a letter agreement with an investment banking group to
raise funds to allow the Company to expand its operations in
China. The availability of cash through such resources is not assured
and if the Company is not able to raise enough cash, the Company might be forced
to delay or limit the expansion of its Chinese operations.
14
ITEM
4. CONTROLS AND PRODCECURES
(a)
Evaluation of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our Principal Executive Officer and
Principal Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, as ours are designed to do, and
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
As of
December 31, 2009, we carried out an evaluation, under the supervision and with
the participation of our management, including our Principal Financial Officer
of the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934. Based upon that evaluation, our Principal
Financial Officer concluded that our disclosure controls and procedures are
effective in enabling us to record, process, summarize and report information
required to be included in our periodic SEC filings within the required time
period.
(b)
Changes in Internal Controls
There
were no changes in our internal controls and procedures in internal control over
financial reporting that occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting. We continue to rely on the members of
the Board of Directors to provide assurance that our entity-level controls
remain effective and we believe our process-level controls remain
effective.
PART
II
Item
1. Legal Proceedings
We are
not party to any material legal proceeding.
Item
2. Changes in Securities
Item
3. Defaults Upon Senior Securities
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
6. Exhibits and Reports on Form 8-K
a)
EXHIBITS
31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2
Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
15
b)
REPORTS ON FORM 8-K
No
Reports on Form 8-K were filed during the period covered by this
report.
16
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.
ANV
SECURITY GROUP, INC.
|
||
By:
|
/S/
Weixing Wang
|
|
Weixing Wang
|
||
Chief
Executive Officer (Principal Executive Officer)
|
||
By:
|
/S/ Yan Wang
|
|
Yan Wang
|
||
VP
and Chief Financial
|
||
Officer
(Principal Financial and Accounting Officer)
|
||
February
12, 2010
|
17