Attached files
file | filename |
---|---|
EX-4.1 - PROMISSORY NOTE DATED AUGUST 7, 2009 - Biozoom, Inc. | f10q1209ex4i_entertainarts.htm |
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATIONS OF JOSEPH KOEGEL, THE PRESIDENT, CHIEF EXECUTIVE OFFICER, CHAIRMAN AND DIRECTOR - Biozoom, Inc. | f10q1209ex31i_entertainarts.htm |
EX-4.2 - PROMISSORY NOTE DATED OCTOBER 31, 2009 - Biozoom, Inc. | f10q1209ex4ii_entertainarts.htm |
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATIONS OF DAVID LUBIN, CHIEF FINANCIAL OFFICER, TREASURER, SECRETARY AND DIRECTOR - Biozoom, Inc. | f10q1209ex31ii_entertainarts.htm |
EX-32.2 - SECTION 1350 CERTIFICATIONS OF DAVID LUBIN, CHIEF FINANCIAL OFFICER, TREASURER, SECRETARY AND DIRECTOR - Biozoom, Inc. | f10q1209ex32ii_entertainarts.htm |
EX-32.1 - SECTION 1350 CERTIFICATIONS OF JOSEPH KOEGEL, THE PRESIDENT, CHIEF EXECUTIVE OFFICER CHAIRMAN AND DIRECTOR - Biozoom, Inc. | f10q1209ex32i_entertainarts.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarter ended December 31, 2009
o TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _____ to _____
Commission
File Number: 333-152404
ENTERTAINMENT
ART, INC.
(Exact
name of small business issuer as specified in its charter)
Nevada | 26-0370478 | |
(State
of incorporation)
|
(IRS
Employer ID Number)
|
c/o
Joseph Koegel
Entertainment
Art, Inc.
571
Washington Street
West
Hempstead, New York 11552
(Address
of principal executive offices)
516-333-8034
(Issuer's
telephone number)
________________________________________________________________
(Former
name, former address and former fiscal year, if changed since last
report)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated
filer
o
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
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
February 16, 2010, 59,730,000 shares of common stock, par value $0.001 per
share, were outstanding.
TABLE
OF CONTENTS
Page
|
|
PART
I
|
1 |
Item
1. Financial Statements
|
1 |
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
8 |
Item
3 Quantitative and Qualitative Disclosures About Market
Risk
|
15 |
Item
4 Controls and Procedures
|
15 |
PART
II
|
15 |
Item
1. Legal Proceedings
|
15 |
Item
IA. Risk Factors
|
15 |
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
16 |
Item
3. Defaults Upon Senior Securities
|
16 |
Item
4. Submission of Matters to a Vote of Security Holders
|
16 |
Item
5. Other Information
|
16 |
Item
6. Exhibits
|
16 |
PART I
FINANCIAL
INFORMATION
Item
1. Financial Statements.
ENTERTAINMENT ART,
INC.
(A DEVELOPMENT STAGE
COMPANY)
CONDENSED BALANCE
SHEET
ASSETS | December 31, 2009 | March 31, 2009 | ||||||
(Unaudited) | ||||||||
Current Assets: | ||||||||
Cash | $ | 4,877 | $ | 5,289 | ||||
Sundry Receivables | 327 | - | ||||||
Total Current Assets | 5,204 | 5,289 | ||||||
Total Assets | $ | 5,204 | $ | 5,289 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
(DEFICIENCY)
|
||||||||
Current Liabilities: | ||||||||
Notes Payable | $ | 25,000 | $ | - | ||||
Accounts Payable - Related Party | - | 28,593 | ||||||
Accrued Liabilities | 4,318 | 3,373 | ||||||
Loans Payable - Related Party | 27,500 | - | ||||||
Total Current Liabilities | 56,818 | 31,966 | ||||||
Total Liabilities | 56,818 | 31,966 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity: | ||||||||
Preferred Stock, $.001 par value; 10,000,000 shares | ||||||||
authorized, none issued and outstanding | - | - | ||||||
Common Stock, $.001 par value; 100,000,000 shares | ||||||||
authorized, 59,730,000 issued and outstanding | 59,730 | 59,730 | ||||||
Additional Paid-In Capital | 6,370 | 6,370 | ||||||
Deficit Accumulated During the Development Stage | (117,714 | ) | (92,777 | ) | ||||
Total Stockholders’ Equity (Deficiency) | ( 51,614 | ) | (26,677 | ) | ||||
Total Liabilities and Stockholders’ Equity (Deficiency) | $ | 5,204 | $ | 5,289 |
The
accompanying notes are an integral part of these financial
statements.
1
ENTERTAINMENT ART,
INC.
(A DEVELOPMENT STAGE
COMPANY)
CONDENSED STATEMENT OF
OPERATIONS
(Unaudited)
For
the Nine Months Ended December 31,
|
For
the Quarters Ended December 31,
|
For the Period June 15, 2007 (Inception)To December 31, 2009 | ||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||
Revenues:
|
||||||||||||||||||||
Sales -
Net
|
$ | 1500 | - | - | - | $ | 1500 | |||||||||||||
Costs
and Expenses:
|
||||||||||||||||||||
Cost of
Sales
|
1,500 | - | - | - | 1,500 | |||||||||||||||
Professional
Fees
|
19,747 | 37,802 | 4,504 | 22,500 | 64,549 | |||||||||||||||
Rent
|
- | 3,000 | - | - | 13,000 | |||||||||||||||
Consulting
Fees
|
- | - | - | - | 9,000 | |||||||||||||||
Other
Selling, General and
|
||||||||||||||||||||
Administrative Expenses
|
9,488 | 9,110 | 611 | 1,753 | 35,463 | |||||||||||||||
Total
Costs and Expenses
|
30,735 | 49,912 | 5,115 | 24,253 | 123,512 | |||||||||||||||
Loss
from Operations
|
( 29,235 | ) | ( 49,912 | ) | (5,115 | ) | ( 24,253 | ) | ( 122,012 | ) | ||||||||||
Other
Income (Expense):
|
||||||||||||||||||||
Extinguishment
of Debt
|
6,093 | - | - | - | 6,093 | |||||||||||||||
Interest
Expense
|
( 1,795 | ) | - | ( 840 | ) | - | ( 1,795 | ) | ||||||||||||
Total
Other Income (Expense)
|
4,298 | - | ( 840 | ) | - | $ | 4,298 | |||||||||||||
Net
Loss
|
$ | ( 24,937 | ) | $ | ( 49,912 | ) | $ | ( 5,955 | ) | $ | ( 24.253 | ) | $ | ( 117,714 | ) | |||||
Basic
and Diluted Loss Per Share
|
$ | ( .00 | ) | $ | (.00 | ) | $ | ( .00 | ) | $ | (.00 | ) | ||||||||
Weighted
Average Common
|
||||||||||||||||||||
Shares
Outstanding
|
59,730,000 | 59,730,000 | 59,730,000 | 59,730,000 |
The accompanying notes are an integral part of these financial
statements.
2
ENTERTAINMENT ART,
INC.
(A DEVELOPMENT STAGE
COMPANY)
CONDENSED STATEMENT OF
STOCKHOLDERS’ EQUITY (DEFICIENCY)
FOR THE PERIOD JUNE 15, 2007
(INCEPTION) TO DECEMBER 31, 2009
Common Stock | Additional Paid- | Deficit Accumulated During the | ||||||||||||||||||
Shares | Amount | In Capital | Development Stage | Total | ||||||||||||||||
Balance, June 15, 2007 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Common Stock Issued to Founder | ||||||||||||||||||||
at $.00013 per share, June 2007 | 39,600,000 | 39,600 | ( 34,500 | ) | - | 5,100 | ||||||||||||||
Common Stock Issued to Private Investors | ||||||||||||||||||||
at $.003 per share, November 2007 to March 2008 | 20,130,000 | 20,130 | 40,870 | - | 61,000 | |||||||||||||||
Net Loss for the Period | - | - | - | ( 39,375 | ) | ( 39,375 | ) | |||||||||||||
Balance, March 31, 2008 | 59,730,000 | 59,730 | 6,370 | ( 39,375 | ) | 26,725 | ||||||||||||||
Net Loss for the Year Ended | ||||||||||||||||||||
March 31, 2009 | - | - | - | ( 53,402 | ) | (53,402 | ) | |||||||||||||
Balance, March 31, 2009 | 59,730,000 | 59,730 | 6,370 | ( 92,777 | ) | (26,677 | ) | |||||||||||||
Net Loss for the Nine Months Ended | ||||||||||||||||||||
December 31, 2009 (Unaudited) | - | - | - | ( 24,937 | ) | (24,937 | ) | |||||||||||||
Balance, December 31, 2009 (Unaudited) | 59,730,000 | $ | 59,730 | $ | 6,370 | $ | (117,714 | ) | $ | (51,614 | ) |
The
accompanying notes are an integral part of these financial
statements.
3
ENTERTAINMENT ART,
INC.
(A DEVELOPMENT STAGE
COMPANY)
CONDENSED STATEMENT OF CASH
FLOWS
(Unaudited)
For the Nine Months Ended December 31, | For the Period June 15, 2007 (Inception) to December 31, 2009 | |||||||||||
2009 | 2008 | |||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net Loss | $ | ( 24,937 | ) | $ | ( 49,912 | ) | $ | (117,714 | ) | |||
Debt Extinguishment | ( 6,093 | ) | - | ( 6,093 | ) | |||||||
Adjustments to Reconcile Net Loss to Net | ||||||||||||
Cash Used in Operating Activities: | ||||||||||||
(Increase) in Sundry Receivables | ( 327 | ) | - | ( 327 | ) | |||||||
Changes in Assets and Liabilities: | ||||||||||||
Decrease in Prepaid Expenses | - | 1,050 | - | |||||||||
Decrease in Deferred Offering Costs | - | 8,000 | 8,000 | |||||||||
Increase (Decrease) in Accounts Payable - | ||||||||||||
Related Parties | ( 22,500 | ) | 17,593 | ( 1,907 | ) | |||||||
Increase in Accrued Liabilities | 945 | 4,883 | 4,318 | |||||||||
Net Cash Used in Operating Activities | ( 52,912 | ) | ( 18,386 | ) | (113,723 | ) | ||||||
Cash Flows from Investing Activities: | - | - | - | |||||||||
Cash Flows from Financing Activities: | - | |||||||||||
Proceeds from Notes Payable | 25,000 | 25,000 | ||||||||||
Proceeds from Loans Payable - Related Party | 27,500 | - | 27,500 | |||||||||
Proceeds from Sale of Common Stock | - | - | 66,100 | |||||||||
Net Cash Provided by Financing Activities | 52,500 | - | 118,600 | |||||||||
Increase (Decrease) in Cash | ( 412 | ) | ( 18,386 | ) | 4,877 | |||||||
Cash – Beginning of Period | 5,289 | 28,675 | - | |||||||||
Cash – End of Period | $ | 4,877 | $ | 10,289 | $ | 4,877 | ||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||
Interest Paid | $ | - | $ | - | $ | - | ||||||
Income Taxes Paid | $ | - | $ | - | $ | - | ||||||
Supplemental Disclosures of Non-Cash Financing Activities: | ||||||||||||
Deferred Offering Costs Recorded in Accounts Payable - | ||||||||||||
Related Party | $ | - | $ | - | $ | 8,000 |
The
accompanying notes are an integral part of these financial
statements.
4
ENTERTAINMENT ART,
INC.
(A DEVELOPMENT STAGE
COMPANY)
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
NOTE 1
- Organization
and Basis of Presentation
Entertainment Art, Inc. (“the Company”)
was incorporated on June 15, 2007 under the laws of the State of
Nevada.
The
Company has not yet generated revenues from planned principal operations and is
considered a development stage company as defined in Accounting Standards
Codification ("ASC") 915. The Company intended to focus on designing,
providing and selling a line of fashionable zip bags. The Company has
since abandoned its business plan and is now seeking an operation with which to
merge or acquire. There is no assurance, however, that the Company
will achieve its objectives or goals.
In the opinion of the Company’s
management, the accompanying unaudited condensed financial statements contain
all adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the information set forth therein. These financial
statements are condensed and therefore do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
Results of operations for interim
periods are not necessarily indicative of the results of operations for a full
year.
The Company is a development stage
company and has not commenced planned principal operations. The
Company had no revenues and incurred a net loss of $24,937 for the nine months
ended December 31, 2009 and a net loss of $117,714 for the period June 15, 2007
(inception) to December 31, 2009. In addition, the Company had
working capital and stockholders' deficiencies of $51,614 at December 31,
2009. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
There
can be no assurance that sufficient funds will be generated during the next year
or thereafter from operations or that funds will be available from external
sources such as debt or equity financings or other potential
sources. The lack of additional capital could force the Company to
curtail or cease operations and would, therefore, have a material adverse effect
on its business. Furthermore, there can be no assurance that any such
required funds, if available, will be available on attractive terms or that they
will not have a significant dilutive effect on the Company's existing
stockholders.
The
Company is attempting to address its lack of liquidity by raising additional
funds, either in the form of debt or equity or some combination
thereof. During the quarter ended December 31, 2009 the Company
borrowed $9,000. During the quarter ended September 30, 2009 the
Company borrowed $16,000 and during the quarter ended June 30, 2009 the Company
borrowed $27,500 from a related party. There can be no assurances
that the Company will be able to raise the additional funds it
requires.
The
accompanying condensed financial statements do not include any adjustments
related to the recoverability or classification of asset-carrying amounts or the
amounts and classifications of liabilities that may result should the Company be
unable to continue as a going concern.
5
ENTERTAINMENT ART,
INC.
(A DEVELOPMENT STAGE
COMPANY)
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
NOTE 2
- Recently Enacted Accounting
Principles
In
June 2009, the FASB issued Accounting Standards Codification 105, "Generally
Accepted Accounting Principles" ("ASC 105"). On July 1, 2009, the
FASB completed ASC 105 as the single source of authoritative U.S. generally
accepted accounting principles ("GAAP"), superseding all then-existing
authoritative accounting and reporting standards, except for rules and
interpretive releases for the SEC under authority of federal securities laws,
which are sources of authoritative GAAP for Securities and Exchange Commission
registrants. ASC 105 reorganizes the authoritative literature
comprising U.S. GAAP into a topical format that eliminates the current GAAP
hierarchy. ASC 105 was effective for the Company in its quarter ended
September 30, 2009. ASC 105 is not intended to change U.S. GAAP and
will have no impact on the Company's consolidated financial position, results of
operations or cash flows. However, since it completely supersedes
existing standards, it will affect the way the Company references authoritative
accounting pronouncements in its financial statements and other disclosure
documents.
NOTE 3
- Loans Payable
- Related Party
Loans payable to a related party
consist of advances made by an officer of the Company. They are due
on demand and bear interest at 5% per annum.
NOTE 4
- Common
Stock
In June 2007 the Company issued
39,600,000 shares of common stock to its Founders for $5,100.
The Company sold 20,130,000 shares of
common stock to private investors from November 2007 to March 2008 at $.003 per
share for gross proceeds of $61,000.
On June 30, 2009 the Board of Directors
authorized a 33 for 1 forward split of the Company's common stock to
stockholders of record on July 8, 2009 and with a payment date of July 21,
2009. All share and per share data have been retroactively restated
to reflect this recapitalization.
NOTE 5
- Preferred
Stock
The Company’s Board of Directors may,
without further action by the Company’s stockholders, from time to time, direct
the issuance of any authorized but unissued or unreserved shares of preferred
stock in series and at the time of issuance, determine the rights, preferences
and limitations of each series. The holders of preferred stock may be
entitled to receive a preference payment in the event of any liquidation,
dissolution or winding-up of the Company before any payment is made to the
holders of the common stock. Furthermore, the board of directors
could issue preferred stock with voting and other rights that could adversely
affect the voting power of the holders of the common stock.
NOTE 6
- Related
Party Transactions
During the period June 15, 2007
(inception) to March 31, 2008, the Company paid approximately $35,000 to an
entity owned by two of its officers' and directors. Included in such
payments was consulting fees and rent in the amount of $9,000 and $10,000,
respectively. The Company rented space from this entity on a month to
month basis.
6
ENTERTAINMENT ART,
INC.
(A DEVELOPMENT STAGE
COMPANY)
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
NOTE 6
- Related
Party Transactions (Continued)
During the period June 15, 2007
(inception) to March 31, 2008, the Company paid a law firm owned by an officer
and director approximately $1,000 for start-up organization
expenses.
During the year ended March 31, 2009,
the Company was charged approximately $3,600 by an entity owned by two of its
officers and directors. Included in such payments was rent in the
amount of $3,000. The Company previously rented space from this
entity on a month to month basis.
At March 31, 2009, accounts payable -
related party represents legal fees owed to a law firm owned by an officer and
director of the Company, in the amount of approximately $25,000 and
approximately $3,600 in expenses owed to an entity owned by two of its officers
and directors.
During the quarter ended June 30, 2009,
the Company paid $22,500 in legal fees to a law firm owned by an officer and
director of the Company.
During the quarter ended June 30, 2009,
the Company satisfied its accounts payable - related party obligation of $28,593
by the payment of $22,500. The balance of $6,093 was recorded as debt
extinguishment income in the current period.
During the quarter ended June 30, 2009,
the Company, in connection with the termination of its originally planned
business, purchased goods for $1,500 from an entity owned by two of its officers
and directors. These goods were sold at cost, in order to dispose of
them.
At December 31, 2009, the Company owed
$1,500 in legal fees to a law firm owned by an officer and director of the
Company which is included in accrued liabilities.
At December 31, 2009 loans payable to
related party in the amount of $27,500 bears interest at 5% per annum and is
payable on demand.
NOTE 7
- Change in
Ownership
On May 1, 2009, the principal
shareholders of the Company entered into a Stock Purchase Agreement which
provided for the sale of 39,600,000 shares of common stock of the Company (the
"Purchased Shares") owned by the three principals to Medford Financial Ltd. (the
"Purchaser"). The consideration paid for the Purchased Shares, which
represent 66.3% of the issued and outstanding share capital of the Company on a
fully-diluted basis, was $120,000.
NOTE 8
- Notes
Payable
On August 7, 2009, the Company issued a
promissory note for $16,000. The promissory note is payable on demand
and bears interest at 9% per annum.
On October 31, 2009 the Company issued
a promissory note for $9,000. The promissory note is payable on
demand and bears interest at 9% per annum.
7
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results Operations.
As used
in this Form 10-Q, references to the “Entertainment Art,” Company,” “we,” “our”
or “us” refer to Entertainment Art, Inc. unless the context otherwise
indicates.
Forward-Looking
Statements
The
following discussion should be read in conjunction with our financial
statements, which are included elsewhere in this Form 10-Q (the “Report”). This
Report contains forward-looking statements which relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties, and
other factors that may cause our or our industry’s actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.
For a
description of such risks and uncertainties refer to our Registration Statement
on Form S-1, filed with the Securities and Exchange Commission on July 18, 2008.
While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect our current judgment regarding the
direction of our business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggested herein. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Overview
Entertainment
Art, Inc. (the “Company”) was incorporated on June 15, 2007 in the State of
Nevada. We were initially focused on the business of designing, marketing and
selling a line of fashionable zipper bags. In October 2007 we sold 610,000
shares of common stock to private investors at $.10 per share for gross proceeds
of $61,000. The Company registered these shares, which represents 33.70% of the
issued and outstanding shares of common stock, for resale. On June 30, 2009, the
board of directors approved the implementation of a 33:1 forward stock split
without correspondingly increasing the authorized shares of common stock. The
effective date of the forward split was July 21, 2009 and as a result of the
forward split, the Company has 59,730,000 shares of common stock issued and
outstanding.
Collectible
Sales, Inc., an affiliate of the Company, shipped us goods on consignment. In
September 2008, the Company received a purchase order from a not for profit
organization for the purchase of 500 units of zipper bags. The merchandise was
delivered to the organization on consignment. We have not received any further
orders and have effectively ceased operations in this business. In May 2009 the
merchandise that was originally shipped to the organization on consignment was
sold and we received $1,500 as proceeds.
8
On August
7, 2009 and October 31, 2009, the Company issued promissory notes for $16,000
and $9,000, respectively, to third parties memorializing the debts. The
promissory notes are payable on demand and bear interest at 9% per
annum.
The
advances made by an officer of the Company, currently aggregating $27,500,
continue to accrue interest at the rate of 5% per annum and are payable on
demand.
The
address of our principal executive office is c/o Mr. Joseph Koegel,
Entertainment Art, Inc. 571 Washington Street, West Hempstead, New York 11552.
Our telephone number is (516) 946-2049. We do not have a functioning
website at this time.
Due to
the state of the economy, the Company has conducted virtually no business other
than organizational matters, filing its Registration Statement and filings of
periodic reports with the SEC. The Company has since abandoned its business plan
and is now seeking an operating company with which to merge or to
acquire.
We are
now considered a blank check company. The U.S. Securities and Exchange
Commission (the “SEC”) defines those companies as “any development stage company
that is issuing a penny stock, within the meaning of Section 3(a)(51) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that has
no specific business plan or purpose, or has indicated that its business plan is
to merge with an unidentified company or companies.” Under SEC Rule 12b-2 under
the Securities Act of 1933, as amended (the “Securities Act”), we also qualify
as a “shell company,” because we have no or nominal assets (other than cash) and
no or nominal operations. Many states have enacted statutes, rules and
regulations limiting the sale of securities of “blank check” companies in their
respective jurisdictions. Management does not intend to undertake any efforts to
cause a market to develop in our securities, either debt or equity, until we
have successfully concluded a business combination. We intend to comply with the
periodic reporting requirements of the Exchange Act for so long as we are
subject to those requirements.
The
Company’s current business plan is to attempt to identify and negotiate with a
business target for the merger of that entity with and into the Company. In
certain instances, a target company may wish to become a subsidiary of ours or
may wish to contribute or sell assets to the Company rather than to merge. No
assurances can be given that we will be successful in identifying or negotiating
with any target company, or, if we do enter into such a business combination, no
assurances can be given as to the terms of a business combination, or as to the
nature of the target company. We seek to provide a method for a foreign or
domestic private company to become a reporting or public company whose
securities are qualified for trading in the United States secondary
markets.
Plan
of Operation
During the next 12 months, the Company intends
to seek, investigate and, if such investigation warrants, acquire an interest in
one or more business opportunities presented to it by persons or
firms who or which desire to seek the perceived advantages of a publicly held
corporation. At this time, the Company has
no plan, proposal, agreement, understanding or
arrangement to acquire or merge with any specific business or
company, and the Company has not identified any specific business
or company for investigation and evaluation. No member of
management has had any material discussions with any other company with respect
to any acquisition of that company.
The
Company will not restrict its search to any specific business, industry or
geographical location, and the Company may participate in a business venture of
virtually any kind or nature. The discussion of the proposed plan of operation
under this caption and throughout this Quarterly Report is purposefully general
and is not meant to be restrictive of the Company’s virtually unlimited
discretion to search for and enter into potential business
opportunities.
9
The
Company will have to obtain funds in one or more private placements to finance
the operation of any acquired business. Persons purchasing securities in these
placements and other shareholders will likely not have the opportunity to
participate in the decision relating to any acquisition. The Company’s proposed
business is sometimes referred to as a “blind pool” because any investors will
entrust their investment monies to the Company’s management before they have a
chance to analyze any ultimate use to which their money may be put.
Consequently, the Company’s potential success is heavily dependent on the
Company’s management, which will have virtually unlimited discretion in
searching for and entering into a business opportunity. None of the officers and
directors of the Company has had any experience in the proposed business of the
Company. There can be no assurance that the Company will be able to raise any
funds in private placements. In any private placement, management may purchase
shares on the same terms as offered in the private placement.
Management
anticipates that it will only participate in one potential business venture.
This lack of diversification should be considered a substantial risk in
investing in the Company because it will not permit the Company to offset
potential losses from one venture against gains from another. The Company may
seek a business opportunity with a firm which only recently commenced
operations, or a developing company in need of additional funds for expansion
into new products or markets, or seeking to develop a new product or service, or
an established business which may be experiencing financial or operating
difficulties and is in the need for additional capital which is perceived to be
easier to raise by a public company. In some instances, a business
opportunity may involve the acquisition or merger with a corporation which does
not need substantial additional cash but which desires to establish a public
trading market for its common stock. The Company may purchase assets and
establish wholly owned subsidiaries in various businesses or purchase existing
businesses as subsidiaries.
The
Company anticipates that the selection of a business opportunity in which to
participate will be complex and extremely risky. Because of general economic
conditions, rapid technological advances being made in some industries, and
shortages of available capital, management believes that there are numerous
firms seeking the benefits of a publicly traded corporation. Such perceived
benefits of a publicly traded corporation may include facilitating or
improving the terms on which additional equity financing may be sought,
providing liquidity for the principals of a business, creating a means for
providing incentive stock options or similar benefits to key employees,
providing liquidity (subject to restrictions of applicable statutes) for all
shareholders, and other factors. Potentially available business opportunities
may occur in many different industries and at various stages of development, all
of which will make the task of comparative investigation and analysis of such
business opportunities extremely difficult and complex.
As part
of any transaction, the acquired company may require that management or other
stockholders of the Company sell all or a portion of their shares to the
acquired company, or the principals of the acquired company. It is anticipated
that the sales price of such shares will be lower than the current market price
or anticipated market price of the Company’s common stock. The Company’s funds
are not expected to be used for purposes of any stock purchase from insiders.
The Company shareholders will not be provided the opportunity to approve or
consent to such sale.
The above
description of potential sales of management stock is not based upon any
corporate bylaw, shareholder or board resolution, or contract or agreement. No
other payments of cash or property are expected to be received by management in
connection with any acquisition.
The
Company has not formulated any policy regarding the use of consultants or
outside advisors, but does not anticipate that it will use the services of such
persons.
10
The
Company has, and will continue to have, insufficient capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will offer owners of
business opportunities the opportunity to acquire a controlling ownership
interest in a public company at substantially less cost than is required to
conduct an initial public offering. The owners of the business
opportunities will, however, incur significant post-merger or acquisition
registration costs in the event they wish to register a portion of their shares
for subsequent sale. The Company will also incur significant legal and
accounting costs in connection with the acquisition of a business opportunity
including the costs of preparing post-effective amendments, Forms 8-K,
agreements and related reports and documents nevertheless, the
officers and directors of the Company have not conducted market research and are
not aware of statistical data which would support the perceived benefits of
a merger or acquisition transaction for the owners of a business
opportunity.
The
Company does not intend to make any loans to any prospective merger or
acquisition candidates or to unaffiliated third parties.
Sources
of Opportunities
The
Company anticipates that business opportunities for possible acquisition will be
referred by various sources, including its officers and directors, professional
advisers, securities broker-dealers, venture capitalists, members of the
financial community, and others who may present unsolicited
proposals.
The
Company will seek a potential business opportunity from all known sources, but
will rely principally on personal contacts of its officers and directors as well
as indirect associations between them and other business and professional
people. It is not presently anticipated that the Company will engage
professional firms specializing in business acquisitions or
reorganizations.
The
officers and directors of the Company are currently employed in other positions
and will devote only a portion of their time (not more than three hours per
week) to the business affairs of the Company, until such time as an acquisition
has been determined to be highly favorable. In addition, in the face of
competing demands for their time, the officers and directors may grant priority
to their full-time positions rather than to the Company.
Evaluation
of Opportunities
The
analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company. Management intends to
concentrate on identifying prospective business opportunities which may be
brought to its attention through present associations with management. In
analyzing prospective business opportunities, management will consider such
matters as the available technical, financial and managerial resources; working
capital and other financial requirements; history of operation, if any;
prospects for the future; present and expected competition; the quality and
experience of management services which may be available and the depth of that
management; the potential for further research, development or exploration;
specific risk factors not now foreseeable but which then may be anticipated to
impact the proposed activities of the Company; the potential for growth or
expansion; the potential for profit; the perceived public recognition or
acceptance of products, services or trades; name identification; and other
relevant factors. Officers and directors of the Company will meet personally
with management and key personnel of the firm sponsoring the business
opportunity as part of their investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited financial statements cannot be obtained.
The
Company will not restrict its search for any specific kind of business, but may
acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
currently impossible to predict the status of any business in which the Company
may become engaged, in that such business may need additional capital, may
merely desire to have its shares publicly traded, or may seek other perceived
advantages which the Company may offer.
11
Acquisition
of Opportunities
In
implementing a structure for a particular business acquisition, the Company may
become a party to a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. It may also
purchase stock or assets of an existing business. On the consummation of a
transaction, it is possible that the present management and shareholders of the
Company will not be in control of the Company. In addition, a majority or all of
the Company’s officers and directors
may, as part of the terms of the acquisition
transaction, resign and be replaced by new officers and directors
without a vote of the Company’s shareholders.
It is
anticipated that any securities issued in any such reorganization would be
issued in reliance on exemptions from registration under applicable Federal and
state securities laws. In some circumstances, however, as a negotiated element
of this transaction, the Company may agree to register such securities either at
the time the transaction is consummated, under certain conditions, or at a
specified time thereafter. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
the Company’s common stock may have a depressive effect on such market. While
the actual terms of a transaction to which the Company may be a party cannot be
predicted, it may be expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so called “tax free” reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code of 1986, as amended (the “Code”).
In order to obtain tax free treatment under the Code, it may be necessary for
the owners of the acquired business to own 80% or more of the voting stock
of the surviving entity. In such event, the shareholders of the Company,
including investors in this offering, would retain less than 20% of the issued
and outstanding shares of the surviving entity, which could result in
significant dilution in the equity of such shareholders.
As part
of the Company’s investigation, officers and directors of the Company will meet
personally with management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of certain information
provided, check references of management and key personnel, and takes other
reasonable investigative measures, to the extent of the Company’s limited
financial resources and management expertise.
The
manner in which each company participates in an opportunity will depend on the
nature of the opportunity, the respective needs and desires of the company and
other parties, and the relative negotiating strength of the company and its
management.
With
respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company’s
assets and liabilities, the Company’s shareholders will in all likelihood hold a
lesser percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilutive effect on the percentage of shares held by the Company’s
shareholders.
The
Company will not have sufficient funds (unless it is able to raise funds in a
private placement) to undertake any significant development, marketing and
manufacturing of any products which may be acquired.
Accordingly,
following the acquisition of any such product, the Company will, in
all likelihood, be required to either seek debt or
equity financing or obtain funding from third parties, in exchange for
which the Company would probably be required to give up a substantial
portion of its interest in any acquired product. There is no assurance that the
Company will be able either to obtain additional financing or interest third
parties in providing funding for the further development, marketing and
manufacturing of any products acquired.
12
It is
anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity the costs
therefore incurred in the related investigation would not be
recoverable.
Furthermore,
even if an agreement is reached for the participation in a specific business
opportunity, the failure to consummate that transaction may result in the loss
of the Company of the related costs incurred.
Management
believes that the Company may be able to benefit from the use of “leverage” in
the acquisition of a business opportunity. Leveraging a transaction involves the
acquisition of a business through incurring significant indebtedness for a large
percentage of the purchase price for that business.
Through a
leveraged transaction, the Company would be required to use less of its
available funds for acquiring the business opportunity and, therefore, could
commit those funds to the operations of the business opportunity, to acquisition
of other business opportunities or to other activities. The borrowing involved
in a leveraged transaction will ordinarily be secured by the assets of the
business opportunity to be acquired. If the business opportunity acquired is not
able to generate sufficient revenues to make payments on the debt incurred by
the Company to acquire that business opportunity, the lender would be able to
exercise the remedies provided by law or by contract. These leveraging
techniques, while reducing the amount of funds that the Company must commit to
acquiring a business opportunity, may correspondingly increase the risk of loss
to the Company. No assurance can be given as to the terms or the availability of
financing for any acquisition by the Company. No assurance can be given as to
the terms or the availability of financing for any acquisition by the Company.
During periods when interest rates are relatively high, the
benefits of leveraging are not as great as during periods of
lower interest rates because the investment in the
business opportunity held on a leveraged basis will only be profitable
if it generates sufficient revenues to cover the related debt and other costs of
the financing. Lenders from which the Company may obtain funds for purposes of a
leveraged buy-out may impose restrictions on the future borrowing, distribution,
and operating policies of the Company. It is not possible at this time to
predict the restrictions, if any, which lenders may impose or the impact thereof
on the Company.
Results
of Operations For the nine months ended December 31, 2009 compared to the nine
months ended December 31, 2008
The
following discussion should be read in conjunction with the condensed financial
statements and in conjunction with the Company's Form 10-K filed on June 19,
2009. Results for interim periods may not be indicative of results for the
full year.
Revenues
The
Company did not generate any revenues for the three (3) months ended December
31, 2009 and 2008. We are not expecting to generate any revenues in the
future.
During
the nine (9) months ended December 31, 2009 and 2008, total operating expenses
were $30,735 and $49,912, respectively. The general and administrative expenses
were primarily the result of professional fees and other expenses associated
with fulfilling the Company’s SEC reporting requirements (including bookkeeping
and accounting services).
13
Net
loss
During
the nine (9) months ended December 31, 2009 and 2008, the net loss was $24,937
and $49,912, respectively.
Liquidity
and Capital Resources
As of
December 31, 2009, the Company had cash in the amount of $4,877.
The focus
of Entertainment Art’s efforts is to acquire or develop an operating business.
Despite no active operations at this time, management intends to continue in
business and has no intention to liquidate the Company. Entertainment Art has
considered various business alternatives including the possible acquisition of
an existing business, but to date has found possible opportunities unsuitable or
excessively priced. Entertainment Art does not contemplate limiting the scope of
its search to any particular industry. Management has considered the risk of
possible opportunities as well as their potential rewards. Management has
invested time evaluating several proposals for possible acquisition or
combination; however, none of these opportunities were pursued. Entertainment
Art presently owns no real property and at this time has no intention of
acquiring any such property. Entertainment Art’s expected expenses are comprised
of professional fees are primarily incident to its reporting
requirements.
The
accompanying financial statements have been prepared assuming Entertainment Art
will continue as a going concern. Entertainment Art’s recurring losses from
operations, stockholders’ deficiency and working capital deficiency, and lack of
revenue generating operations, raise substantial doubt about the Company’s
ability to continue as a going concern.
Management
believes Entertainment Art will continue to incur losses and negative cash flows
from operating activities for the foreseeable future and will need additional
equity or debt financing to sustain its operations until it can achieve
profitability and positive cash flows, if ever. Management plans to seek
additional debt and/or equity financing for Entertainment Art, but cannot assure
that such financing will be available on acceptable terms.
The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty. There can be no assurance that
management will be successful in implementing its business plan or that the
successful implementation of such business plan will actually improve the
Company’s operating results.
Going
Concern Consideration
The
Company is a development stage company and has not commenced planned principal
operations. The Company had no revenues and incurred a net loss of
$24,937 for the nine months ended December 31, 2009 and a net loss of $117,714
for the period June 15, 2007 (inception) to December 31, 2009. In
addition, the Company had working capital and stockholders' deficiencies of
$51,614 at December 31, 2009. These factors raise substantial doubt
about the Company’s ability to continue as a going concern.
14
There can
be no assurance that sufficient funds will be generated during the next three
months or thereafter from operations or that funds will be available from
external sources such as debt or equity financings or other potential
sources. The lack of additional capital could force the Company to
curtail or cease operations and would, therefore, have a material adverse effect
on its business. Furthermore, there can be no assurance that any such required
funds, if available, will be available on attractive terms or that they will not
have a significant dilutive effect on the Company's existing
stockholders.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk.
As a
“smaller reporting company” as defined by Rule 229.10(f)(1), we are not required
to provide the information required by this Item 3.
Item
4. Controls and Procedures.
Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the United States Securities
and Exchange Commission. Our principal executive officer and principal financial
officer has reviewed the effectiveness of our “disclosure controls and
procedures” (as defined in the Securities Exchange Act of 1934 Rules 13(a)-15(e)
and 15(d)-15(e)) within the end of the period covered by this Quarterly Report
on Form 10-Q and has concluded that the disclosure controls and procedures are
effective to ensure that material information relating to the Company is
recorded, processed, summarized, and reported in a timely manner. There were no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the last day they were
evaluated by our principal executive officer and principal financial
officer.
Changes
in Internal Controls over Financial Reporting
There
have been no changes in the Company's internal control over financial reporting
during the last quarterly period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART
II
OTHER
INFORMATION
Item
1. Legal Proceedings.
There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.
Item
1A. Risk Factors
As a
“smaller reporting company” as defined by Rule 229.10(f)(1), we are not required
to provide the information required by this Item 1A.
15
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
Unregistered
Sales of Equity Securities
None.
Purchases
of equity securities by the issuer and affiliated purchasers
None.
Use
of Proceeds
None
Item 3. Defaults Upon Senior Securities.
None.
Item
4. Submission of Matters to a Vote of Security Holders.
There was
no matter submitted to a vote of security holders during the fiscal quarter
ended December 31, 2009.
Item
5. Other Information.
None.
Item
6. Exhibits
Exhibit
No.
|
Description
|
|
4.1
|
Promissory
Note dated August 7, 2009 made by Entertainment Art, Inc. in favor of
Camal Group SA.
|
|
4.2
|
Promissory
Note dated October 31, 2009 made by Entertainment Art, Inc. in favor of
Camal Group SA.
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certifications of Joseph Koegel, the President, Chief
Executive Officer, Chairman and Director (attached
hereto)
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certifications of David Lubin, Chief Financial
Officer, Treasurer, Secretary and Director (attached
hereto).
|
|
32.1
|
Section
1350 Certifications of Joseph Koegel, the President, Chief Executive
Officer Chairman and Director (attached hereto)
|
|
32.2
|
Section
1350 Certifications of David Lubin, Chief Financial Officer, Treasurer,
Secretary and Director (attached
hereto)
|
16
SIGNATURES
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.
ENTERTAINMENT ART,
INC.
|
||
By: | /s/ Joseph Koegel | |
Dated:
February 16, 2010
|
Name: Joseph
Koegel
Title: President,
Chief Executive Officer, Chairman and Director (Principal Executive
Officer)
|
|
By: | /s/ David Lubin | |
Dated:
February 16, 2010
|
Name:
David Lubin
Title:
Chief Financial Officer, Treasurer, Secretary and Director (Principal
Financial and Accounting Officer)
|
|
17