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EX-31 - LADYBUG RESOURCE GROUP, INC. | ex31.htm |
EX-32 - LADYBUG RESOURCE GROUP, INC. | ex32.htm |
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended March 31, 2010
[
] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
For the
transition period from ___________ to _____________
LADYBUG
RESOURCE GROUP, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
333-153306
|
26-1973389
|
(State
or other jurisdiction of incorporation or organization)
|
(Commission
file number)
|
(IRS
Employer Identification No.)
|
Mitchell
Trace
Ladybug
Resource Group, Inc.
11630
Slater Avenue Northeast, Suite 1A
Kirkland, WA 98034
(Address
of principal executive offices)
|
425-306-5028
|
(Issuer's
telephone number)
|
Check
whether the registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
[X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes ¨
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company filer.
See definition of “accelerated filer” and “large accelerated filer” in Rule
12b-2 of the Exchange Act (Check one):
Large
Accelerated Filer [ ] Accelerated Filer [ ]
Non-Accelerated
Filer [ ] Smaller Reporting Company [X]
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: 11,320,000 shares of Common Stock, as of
April 2, 2010.
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of 1934) (check one): Yes
[ ] No [X]
LADYBUG
RESOURCE GROUP, INC.
FORM
10-Q
March
31, 2010
INDEX
PART
I-- FINANCIAL INFORMATION
Page
|
||
Item
1.
|
Financial
Statements
|
3
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
21
|
Item
4.
|
Control
and Procedures
|
21
|
PART
II-- OTHER INFORMATION
Item
1
|
Legal
Proceedings
|
22
|
Item
1A
|
Risk
Factors
|
22
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
31
|
Item
3.
|
Defaults
Upon Senior Securities
|
31
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
31
|
Item
5.
|
Other
Information
|
31
|
Item
6.
|
Exhibits
|
31
|
PART
I. FINANCIAL INFORMATION
ITEM
1. Financial Information
LADYBUG
RESOURCE GROUP, INC.
Balance
Sheets
March
31, 2010
|
June
30, 2009
|
|||||||
CURRENT
ASSETS:
|
(Unaudited)
|
|||||||
Cash
|
$
|
2,314
|
$
|
8,213
|
||||
Accounts
receivable
|
-
|
850
|
||||||
Total
Current Assets
|
2,314
|
9,063
|
||||||
COMPUTER
EQUIPMENT – net of accumulated depreciation of $3,000 and $1,725,
respectively
|
2,111
|
3,386
|
||||||
TOTAL
ASSETS
|
$
|
4,425
|
$
|
12,449
|
||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT:
|
||||||||
Accounts
payable and accrued professional fees
|
$
|
83,579
|
$
|
74,930
|
||||
STOCKHOLDERS'
DEFICIT:
|
||||||||
Preferred
stock: $0.001 par value; 20,000,000 shares authorized; no shares issued or
outstanding
|
-
|
-
|
||||||
Common
stock: $0.001 par value; 300,000,000 shares authorized; 11,320,000 shares
issued and outstanding
|
11,320
|
11,320
|
||||||
Additional
paid-in capital
|
44,820
|
40,320
|
||||||
Accumulated
deficit
|
(135,294
|
)
|
(114,121
|
)
|
||||
Total
Stockholders’ Deficit
|
(79,154
|
)
|
(62,481
|
)
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$
|
4,425
|
$
|
12,449
|
See
accompanying notes to the financial statements.
-3-
LADYBUG
RESOURCE GROUP, INC.
Statements
of Operations
(Unaudited)
Nine
Months Ended
March
31, 2010
|
Nine
Months Ended
March
31, 2009
|
|||||||
Revenues
|
$
|
9,309
|
$
|
41,861
|
||||
Operating
Expenses:
|
||||||||
Compensation
|
4,500
|
13,500
|
||||||
Professional
fees
|
18,370
|
8,913
|
||||||
Office
and subcontractor costs
|
7,612
|
45,122
|
||||||
Total
operating expenses
|
30,482
|
67,535
|
||||||
Loss
before income taxes
|
(21,173
|
)
|
(25,674
|
)
|
||||
Provision
for income taxes
|
-
|
-
|
||||||
Net
Loss
|
$
|
(21,173
|
)
|
$
|
(25,674
|
)
|
||
Net
loss per common share – basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||
Weighted
average number of common shares outstanding - basic and
diluted
|
11,320,000
|
11,320,000
|
See
accompanying notes to the financial statements.
-4-
LADYBUG
RESOURCE GROUP, INC.
Statements
of Operations
(Unaudited)
Three
Months Ended
March
31, 2010
|
Three
Months Ended
March
31, 2009
|
|||||||
Revenues
|
$
|
3,000
|
$
|
2,904
|
||||
Operating
Expenses:
|
||||||||
Compensation
|
-
|
4,500
|
||||||
Professional
fees
|
3,000
|
1,413
|
||||||
Office
and subcontractor costs
|
517
|
6,561
|
||||||
Total
operating expenses
|
3,517
|
12,474
|
||||||
Loss
before income taxes
|
(517
|
)
|
(9,570
|
)
|
||||
Provision
for income taxes
|
-
|
-
|
||||||
Net
Loss
|
$
|
(517
|
)
|
$
|
(9,570
|
)
|
||
Net
loss per common share – basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||
Weighted
average number of common shares outstanding - basic and
diluted
|
11,320,000
|
11,320,000
|
See
accompanying notes to the financial statements.
-5-
LADYBUG
RESOURCE GROUP, INC.
Statements
of Cash Flows
(Unaudited)
Nine
Months Ended
March
31, 2010
|
Nine
Months Ended
March 31, 2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$
|
(21,173
|
)
|
$
|
(25,674
|
)
|
||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
|
1,275
|
1,500
|
||||||
Contribution
of services
|
4,500
|
13,500
|
||||||
Changes
in operating assets and liabilities
|
||||||||
(Increase)
decrease in accounts receivable
|
850
|
(1,200
|
)
|
|||||
Increase
in accrued expenses
|
8,649
|
123
|
||||||
Net
Cash Used in Operating Activities
|
(5,899
|
)
|
(11,751
|
)
|
||||
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
||||||||
Purchase
of equipment
|
-
|
(4,093
|
)
|
|||||
NET
CASH USED IN INVESTING ACTIVITIES
|
-
|
(4,093
|
)
|
|||||
NET
CHANGE IN CASH
|
(5,899
|
)
|
(15,844
|
)
|
||||
CASH
AT BEGINNING OF PERIOD
|
8,213
|
25,181
|
||||||
CASH
AT END OF PERIOD
|
$
|
2,314
|
$
|
9,337
|
||||
SUPPLEMENTAL
SCHEDULE OF CASH FLOW ACTIVITIES
|
||||||||
Cash
Paid For:
|
||||||||
Interest
|
$
|
-
|
$
|
-
|
||||
Income
taxes
|
$
|
-
|
$
|
-
|
See
accompanying notes to the financial statements.
-6-
LADYBUG
RESOURCE GROUP, INC.
Notes
to Interim Financial Statements
(Unaudited)
NOTE 1 -
ORGANIZATION
Ladybug
Resource Group, Inc. (the “Company”) was incorporated in the State of Nevada on
November 27, 2007. Its business purpose is to assist in the design of websites
and website components that use specific marketing messages or themes to reach
target audiences. Its initial marketing focus is the websites of the funeral
industry in the Seattle, Washington area.
As part
of the Company’s plan to augment its financial resources and consider attractive
business opportunities, the Company’s principal stockholders have entered into
discussions with an unaffiliated third party with respect to a potential merger
transaction which could result in the discontinuance of current operations,
change of control/ownership and new management. There can be no assurance that a
merger or other significant transaction will be consummated with the third party
or, if consummated, that the Company or its stockholders would realize any
benefits from it.
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying interim financial statements for the three and nine-months ended
March 31, 2010 and 2009 are unaudited and have been prepared in accordance with
accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and with the instructions to Form 10-Q
and Article 8 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The results of operations realized during an interim period are not
necessarily indicative of results to be expected for a full year. These
financial statements should be read in conjunction with the financial statements
of the Company for the fiscal year ended June 30, 2009 and notes thereto filed
as part of the Company’s Annual Report on Form 10-K filed with the SEC on
September 28, 2009.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fiscal
year-end
The
Company elected June 30 as its fiscal year-end.
Cash
Equivalents
The
Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
-7-
Computer
equipment
Computer
equipment is stated at cost less accumulated depreciation. Depreciation is
provided on the straight-line basis over an estimated useful life of three (3)
years.
Impairment
of long-lived assets
The
Company follows section 360-10-05-4 of the FASB Accounting Standards
Codification for its long-lived assets. The Company’s reviews it
long-lived assets, which includes computer equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
The
Company assesses the recoverability of its long-lived assets by comparing the
projected undiscounted net cash flows associated with the related long-lived
asset or group of long-lived assets over their remaining estimated useful lives
against their respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those
assets. Fair value is generally determined using the asset’s expected
future discounted cash flows or market value, if readily
determinable. If long-lived assets are determined to be recoverable,
but the newly determined remaining estimated useful lives are shorter than
originally estimated, the net book values of the long-lived assets are
depreciated or amortized over the newly determined remaining estimated useful
lives. The Company determined that there were no impairments of
long-lived assets as of March 31, 2010 and 2009.
Fair
value of financial instruments
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph
820-10-35-37”) to measure the fair value of its financial instruments. Paragraph
820-10-35-37 establishes a framework for measuring fair value in accounting
principles generally accepted in the United States of America (U.S. GAAP), and
expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements and related
disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels. The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs. The three
levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
Level
1
|
Quoted
market prices available in active markets for identical assets or
liabilities as of the reporting date.
|
||
Level
2
|
Pricing
inputs other than quoted prices in active markets included in Level 1,
which are either directly or indirectly observable as of the reporting
date.
|
||
Level
3
|
Pricing
inputs that are generally observable inputs and not corroborated by market
data.
|
The
carrying amounts of the Company’s financial assets and liabilities, such as
cash, accounts payable and accrued professional fees, approximate their
fair values because of the short maturity of these instruments.
The
Company does not have any assets or liabilities measured at fair value on a
recurring or a non-recurring basis, consequently, the Company did not have any
fair value adjustments for assets and liabilities measured at fair value at
March 31, 2010 or 2009, nor gains or losses are reported in the statement of
operations that are attributable to the change in unrealized gains or losses
relating to those assets and liabilities still held at the reporting date for
the interim period ended March 31, 2010 or 2009.
-8-
Revenue
Recognition
The
Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue
when it is realized or realizable and earned. The Company considers
revenue realized or realizable and earned when all of the following criteria are
met: (i) persuasive evidence of an arrangement exists, (ii) the services have
been rendered to the customer, (iii) the sales price is fixed or determinable,
and (iv) collectability is reasonably assured.
Income
Taxes
The
Company accounts for income taxes under Section 740-10-30 of the FASB Accounting
Standards Codification. Deferred income tax assets and liabilities
are determined based upon differences between the financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. Deferred tax assets are reduced by a valuation allowance to
the extent management concludes it is more likely than not that the assets will
not be realized. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the statements of operations in the period that includes the
enactment date.
The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification
(“Section 740-10-25”). Section 740-10-25 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should
be recorded in the financial statements. Under Section 740-10-25, the
Company may recognize the tax benefit from an uncertain tax position only if it
is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent (50%) likelihood of being realized upon ultimate
settlement. Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures. The
Company had no material adjustments to its liabilities for unrecognized income
tax benefits according to the provisions of Section 740-10-25.
Net
Loss per Common Share
Net loss
per common share is computed pursuant to section 260-10-45 of the FASB
Accounting Standards Codification. Basic net loss per share is
computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period. Diluted net loss per share is
computed by dividing net loss by the weighted average number of shares of common
stock and potentially outstanding shares of common stock during each
period. There were no potentially dilutive shares outstanding as of
March 31, 2010 or 2009.
Recently
Issued Accounting Standards
The
Securities and Exchange Commission has adopted final rules under Section 404 of
the Sarbanes-Oxley Act of 2002, as amended by SEC Release No. 33-9072 on October
19, 2009. Commencing with the Company’s Annual Report for the fiscal year ended
June 30, 2010, the Company is required to include a report of management on the
Company’s internal control over financial reporting. The internal control report
must include a statement of management’s responsibility for establishing and
maintaining adequate internal control over financial reporting for the Company;
of management’s assessment of the effectiveness of the Company’s internal
control over financial reporting as of year-end; of the framework used by
management to evaluate the effectiveness of the Company’s internal control over
financial reporting; and beginning with its Annual Report for the fiscal year
ended June 30, 2011, the Company is required to include a statement that the
Company’s independent accounting firm has issued an attestation report on
management’s assessment of the Company’s internal control over financial
reporting, which report is also required to be filed as part of the Annual
Report on Form 10-K for the year ended June 30, 2011.
In
June 2009, the FASB approved the “FASB Accounting Standards Codification”
(the “Codification”) as the single source of authoritative nongovernmental U.S.
GAAP which went in effect on July 1, 2009. The Codification does
not change current U.S. GAAP, but is intended to simplify user access to all
authoritative U.S. GAAP by providing all the authoritative literature related to
a particular topic in one place. All existing accounting standard
documents will be superseded and all other accounting literature not included in
the Codification will be considered non-authoritative. The Codification is
effective for interim and annual periods ending after September 15,
2009. The adoption did not have a material impact on the Company’s
financial position, results of operations or cash flows.
-9-
In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-04, Accounting for
Redeemable Equity Instruments - Amendment to Section 480-10-S99, which
represents an update to section 480-10-S99, distinguishing liabilities from
equity, per EITF Topic D-98, Classification and Measurement of
Redeemable Securities. The Company does not expect the
adoption of this update to have a material impact on its consolidated financial
position, results of operations or cash flows.
In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-05, Fair Value
Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair
Value, which provides amendments to subtopic 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities. This Update provides clarification that in circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: 1. A valuation technique that uses: a. The
quoted price of the identical liability when traded as an asset b. Quoted prices
for similar liabilities or similar liabilities when traded as assets. 2. Another
valuation technique that is consistent with the principles of topic 820; two
examples would be an income approach, such as a present value technique, or a
market approach, such as a technique that is based on the amount at the
measurement date that the reporting entity would pay to transfer the identical
liability or would receive to enter into the identical liability. The amendments
in this Update also clarify that when estimating the fair value of a liability,
a reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability. The amendments in this Update also clarify that both
a quoted price in an active market for the identical liability when traded as an
asset in an active market when no adjustments to the quoted price of the asset
are required are Level 1 fair value measurements. The Company does
not expect the adoption of this update to have a material impact on its
consolidated financial position, results of operations or cash
flows.
In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-08, Earnings Per Share –
Amendments to Section 260-10-S99, which represents technical corrections
to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share
for a Period that includes a Redemption or an Induced Conversion of a Portion of
a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of
Earnings per Share for the Redemption or Induced Conversion of Preferred
Stock. The Company does not expect the adoption of this update to have a
material impact on its consolidated financial position, results of operations or
cash flows.
In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-09, Accounting for
Investments-Equity Method and Joint Ventures and Accounting for Equity-Based
Payments to Non-Employees. This Update represents a correction
to Section 323-10-S99-4, Accounting by an Investor for
Stock-Based Compensation Granted to Employees of an Equity Method
Investee. Additionally, it adds observer comment Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees
to the Codification. The Company does not expect the adoption to have a material
impact on its consolidated financial position, results of operations or cash
flows.
In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-12, Fair Value
Measurements and Disclosures Topic 820 – Investment in Certain Entities That
Calculate Net Assets Value Per Share (or Its Equivalent), which provides
amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall,
for the fair value measurement of investments in certain entities that calculate
net asset value per share (or its equivalent). The amendments in this Update
permit, as a practical expedient, a reporting entity to measure the fair value
of an investment that is within the scope of the amendments in this Update on
the basis of the net asset value per share of the investment (or its equivalent)
if the net asset value of the investment (or its equivalent) is calculated in a
manner consistent with the measurement principles of Topic 946 as of the
reporting entity’s measurement date, including measurement of all or
substantially all of the underlying investments of the investee in accordance
with Topic 820. The amendments in this Update also require disclosures by major
category of investment about the attributes of investments within the scope of
the amendments in this Update, such as the nature of any restrictions on the
investor’s ability to redeem its investments a the measurement date, any
unfunded commitments (for example, a contractual commitment by the investor to
invest a specified amount of additional capital at a future date to fund
investments that will be make by the investee), and the investment strategies of
the investees. The major category of investment is required to be determined on
the basis of the nature and risks of the investment in a manner consistent with
the guidance for major security types in U.S. GAAP on investments in debt and
equity securities in paragraph 320-10-50-1B. The disclosures are required for
all investments within the scope of the amendments in this Update regardless of
whether the fair value of the investment is measured using the practical
expedient. The Company does not expect the adoption to have a material impact on
its consolidated financial position, results of operations or cash
flows.
-10-
In January 2010, the FASB issued
the FASB Accounting Standards Update No. 2010-01 Equity Topic 505 – Accounting for
Distributions to Shareholders with Components of Stock and Cash, which
clarify that the stock portion of a distribution to shareholders that allows
them to elect to receive cash or stock with a potential limitation on the total
amount of cash that all shareholders can elect to receive in the aggregate is
considered a share issuance that is reflected in EPS prospectively and is not a
stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings
Per Share (“EPS”)). Those distributions should be accounted for and
included in EPS calculations in accordance with paragraphs 480-10-25- 14 and
260-10-45-45 through 45-47 of the FASB Accounting Standards
codification. The amendments in this Update also provide a technical
correction to the Accounting Standards Codification. The correction
moves guidance that was previously included in the Overview and Background
Section to the definition of a stock dividend in the Master
Glossary. That guidance indicates that a stock dividend takes nothing
from the property of the corporation and adds nothing to the interests of the
stockholders. It also indicates that the proportional interest of
each shareholder remains the same, and is a key factor to consider in
determining whether a distribution is a stock dividend.
In January 2010, the FASB issued
the FASB Accounting Standards Update No. 2010-02 Consolidation Topic 810 – Accounting
and Reporting for Decreases in Ownership of a Subsidiary – a Scope
Clarification, which provides amendments to Subtopic 810-10 and related
guidance within U.S. GAAP to clarify that the scope of the decrease in ownership
provisions of the Subtopic and related guidance applies to the
following:
1
|
A
subsidiary or group of assets that is a business or nonprofit
activity;
|
2
|
A
subsidiary that is a business or nonprofit activity that is transferred to
an equity method investee or joint venture; and
|
3
|
An
exchange of a group of assets that constitutes a business or nonprofit
activity for a noncontrolling interest in an entity (including an equity
method investee or joint venture).
|
The amendments in this Update also
clarify that the decrease in ownership guidance in Subtopic 810-10 does not
apply to the following transactions even if they involve
businesses:
1
|
Sales
of in substance real estate. Entities should apply the sale of
real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment)
and 976-605 (Retail/Land) to such transactions.
|
2
|
Conveyances
of oil and gas mineral rights. Entities should apply the
mineral property conveyance and related transactions guidance in Subtopic
932-360 (Oil and Gas-Property, Plant, and Equipment) to such
transactions.
|
If a decrease in ownership occurs in a
subsidiary that is not a business or nonprofit activity, an entity first needs
to consider whether the substance of the transaction causing the decrease in
ownership is addressed in other U.S. GAAP, such as transfers of financial
assets, revenue recognition, exchanges of nonmonetary assets, sales of in
substance real estate, or conveyances of oil and gas mineral rights, and apply
that guidance as applicable. If no other guidance exists, an entity should apply
the guidance in Subtopic 810-10.
-11-
Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.
NOTE 3 -
GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As reflected in the accompanying
financial statements, the Company had an accumulated deficit of $135,294 at
March 31, 2010, a net loss from operations of $21,173, and net cash used in
operations of $5,899, respectively, for the nine months ended March 31,
2010.
While the
Company is attempting to generate sufficient revenues, the Company’s cash
position may not be enough to support the Company’s daily
operations. The Company intends to seek business aggressively through
the business contacts of its management and investors. While the Company
believes in the viability of its strategy to increase revenues and in its
ability to raise funds if necessary, there can be no assurances to that effect.
The ability of the Company to continue as a going concern is dependent upon the
Company’s ability to generate increased levels of revenues.
The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
NOTE 4 -
RELATED PARTY TRANSACTIONS
The
Company’s former President, who resigned in October 2009 because of health
issues, performed work and permitted the Company to use facilities and equipment
owned by her without charge. The estimated cost of this service ($4,500 for the
nine months ended March 31, 2010 and $13,500 for the nine months ended March 31,
2009) was recorded as an expense and as a contribution to
paid-in-capital.
NOTE 5 -
SUBSEQUENT EVENTS
The
Company has evaluated all events that occurred after the balance sheet date of
March 31, 2010 through April 3, 2010, the date these financial statements were
issued. The Management of the Company determined that there were no
reportable events that occurred during that subsequent period to be disclosed or
recorded.
-12-
ITEM
2
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
Information
set forth herein contains "forward-looking statements" which can be identified
by the use of forward-looking terminology such as "believes," "expects," "may,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. No assurance can be given
that the future results covered by the forward-looking statements will be
achieved. Ladybug Resource Group, Inc. (sometimes referred to herein as
“Ladybug,” the “Company,” “we,” or “us”) cautions readers that important factors
may affect the Company’s actual results and could cause such results to differ
materially from forward-looking statements made by or on behalf of the Company.
These factors include the Company’s lack of historically profitable operations,
dependence on key personnel, the success of the Company’s business, ability to
manage anticipated growth and other factors identified in the Company's filings
with the Securities and Exchange Commission, press releases and/or other public
communications.
The
following discussion and analysis provides information which the Company’s
management believes to be relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read together with the Company's financial statements and the notes to
financial statements, which are included in this report.
This
management's discussion and analysis or plan of operation should be read in
conjunction with the financial statements and notes thereto of the Company for
the three and nine months ended March 31, 2010. The reported results may not
necessarily reflect the future.
BUSINESS
Ladybug
Resource Group, Inc. was incorporated in the State of Nevada on November 27,
2007 by Molly S. Ramage, our former President and Director. Ms. Ramage resigned
from us in October 2009 because of health reasons; however, she will be
available to consult with us on a limited basis moving forward. Our business
purpose is to assist in the design of websites and website components that use
specific marketing messages or themes to reach target audiences. Our initial
marketing focus is the websites of the funeral industry in the Seattle,
Washington area.
Ladybug
has extremely limited financial resources and has not established a source of
equity or debt financing.
As part
of the Company’s plan to augment its financial resources and consider attractive
business opportunities, the Company’s principal stockholders have entered into
discussions with an unaffiliated third party with respect to a potential merger
transaction which could result in the discontinuance of our current operations,
change of control/ownership and new management. There can be no assurance that a
merger or other significant transaction will be consummated with the third party
or, if consummated, that the Company or its stockholders would realize any
benefits from it.
Operations
Ladybug
designs the message or marketing theme included on Internet Websites. We will
accept engagements for the development of entire Websites in which case we will
work with other contractors to code complex portions of the project and design
portions that are not theme or marketing related.
-13-
We refer
to our approach as “Smart Design” which is about carefully planning the work
that needs to be done before starting the project. We make sure a customer’s
website is a good fit for its business and customers. We design our websites
based on what it means for the customer.
We will
also resell Website hosting space for the Websites of customers. In this case,
the Website is hosted on the server of a Website hosting company, but we manage
all changes to the Website.
Marketing
Ladybug
obtains customer leads from the business and personal contacts of investors in
the Company, Molly S. Ramage, our former President and Director, and by word of
mouth. We work with each customer to understand the nature of the business and
the theme that the customer wants to convey. We then work with subcontractors to
develop the image and written portion of the theme. In most cases, we code the
HyperText Markup Language portions of the package to be placed on the customer’s
Website. In certain cases, we will engage the assistance of independent
subcontractors to assist us with complex coding requirements.
Ladybug
bills for engagements after the work has been completed and accepted by the
customer.
Competition
The Web
applications markets are highly competitive and have low barriers of entry,
which could hinder our ability to successfully market our products and services.
We may not have the resources, expertise or other competitive factors to compete
successfully in the future. Because there are few substantial barriers to entry,
we expect that we will face additional competition from existing competitors and
new market entrants in the future. Some of these competitors are part-time
contractors willing to provide services at low rates to enter the industry or
earn extra money. On the other hand, many of our current and potential
competitors have greater name recognition and more established relationships in
the industry and greater resources. As a result, these competitors may be able
to:
·
|
Develop
and expand their network infrastructures and service offerings more
rapidly;
|
·
|
Adapt
to new or emerging technologies and changes in customer requirements more
quickly; and
|
·
|
Devote
greater resources to the marketing and sale of their services and adopt
more aggressive pricing policies than we
can.
|
Current
and potential competitors in the market include Web hosting service providers,
applications hosting providers, Internet service providers, telecommunications
companies, large information technology firms and computer hardware
suppliers.
Our
ability to compete is based on our ability to meet customers through our other
contacts and to convince those prospective customers that we provide quality
personalized services at very competitive prices. We cannot provide assurances
that our strategy will succeed.
Operations
The
Company was incorporated on November 27, 2007 and began operating activities in
early 2008. It has very limited financial resources and no committed sources of
debt or equity financing.
Results
of Operations for the Three Months Ended March 31, 2010 and 2009
-14-
Operations
for the three months ended March 31, 2010 and 2009 consisted of the following
(changes between the periods on a dollar and percentage basis are also provided
below):
2010
|
2009
|
Change
($)
|
Change
(%)
|
||||||||||
Revenue
|
$
|
3,000
|
$
|
2,904
|
$
|
96
|
3.3
|
||||||
Expenses:
|
|||||||||||||
Compensation
|
- |
4,500
|
(4,500
|
)
|
(100
|
)
|
|||||||
Professional
fees
|
3,000
|
1,413
|
1,587
|
112.3
|
|||||||||
Office
and subcontractor costs
|
517
|
6,561
|
(6,044
|
)
|
(92.1
|
)
|
|||||||
Total
Expenses
|
3,517
|
12,474
|
(8,957)
|
(71.8)
|
|||||||||
Net
Loss
|
$
|
(517
|
)
|
$
|
(9,570
|
)
|
$
|
(9,053)
|
(94.6
|
)
|
Substantially
all the revenue in both periods was referred by or related to a Director or
major shareholder. Our revenue during the three months ended March 31, 2009 was
adversely impacted by health issues affecting our former President, Molly
Ramage, which reduced the number of hours that she was able to work each week
and ultimately caused her to resign in October 2009 because of health
issues. The Company’s revenues were also impacted by the overall economic
recession and the fact that fewer customers are willing to spend funds on
advertising expenses, such as the creation of websites. These factors,
particularly the loss of Ms. Ramage, has caused the Company to undertake a
project to consider the likelihood of being able to achieve its business plan
without her and to determine other options available to it, if any.
Molly S.
Ramage, our former President, performed work for us and permitted us to use
facilities and equipment owned by her without charge to us during the three
months ended March 31, 2009. The estimated cost of this service, $4,500, was
recorded as an expense and as a contribution to paid-in-capital in each
period.
Professional
fees increased for the three months ended March 31, 2010 compared to the three
months ended March 31, 2009 principally because of fees relating to being a
public company.
Office
and subcontractor costs decreased for the three months ended March 31, 2010,
compared to the three months ended March 31, 2009, mainly because more work was
performed in-house.
Our net
loss decreased for the three months ended March 31, 2010, compared to the three
months ended March 31, 2009, mainly due to the $4,500 reduction in compensation
and the $6,044 reduction in office and subcontractor costs.
Other - As a corporate
policy, we will not incur any cash obligations that we cannot satisfy with known
resources, of which there are currently none except as described in “Liquidity”
below.
Results
of Operations for the Nine Months Ended March 31, 2010 and 2009
Operations
for the nine months ended March 31, 2010 and 2009 consisted of the following
(changes between the periods on a dollar and percentage basis are also provided
below):
2010
|
2009
|
Change
($)
|
Change
(%)
|
||||||||||
Revenue
|
$
|
9,309
|
$
|
41,861
|
$
|
(32,522
|
)
|
(77.8
|
)
|
||||
Expenses:
|
|||||||||||||
Compensation
|
4,500
|
13,500
|
(9,000
|
)
|
(66.7
|
)
|
|||||||
Professional
fees
|
18,370
|
8,913
|
9,457
|
1,06.1
|
|||||||||
Office
and subcontractor costs
|
7,612
|
45,122
|
(37,510
|
)
|
(83.1
|
)
|
|||||||
Total
Expenses
|
30,482
|
67,535
|
(37,053)
|
(54.9)
|
|||||||||
Net
Loss
|
$
|
(21,173
|
)
|
$
|
(25,674
|
)
|
$
|
(4,501
|
)
|
(17.5
|
)
|
-15-
Substantially
all the revenue in both periods was referred by or related to a Director or
major shareholder. Our revenue during the nine months ended March 31, 2010 was
adversely impacted by health issues affecting our former President, Molly
Ramage, which reduced the number of hours that she was able to work each week
and ultimately caused her to resign in October 2009 because of health
issues. The Company’s revenues were also impacted by the overall economic
recession and the fact that fewer customers are willing to spend funds on
advertising expenses, such as the creation of websites. These factors,
particularly the loss of Ms. Ramage, has caused the Company to undertake a
project to consider the likelihood of being able to achieve its business plan
without her and to determine other options available to it, if any.
Molly S.
Ramage, our former President, performed work for us and permitted us to use
facilities and equipment owned by her without charge to us during the three
months ended September 30, 2009 (prior to her resignation) and the nine months
ended March 31, 2009. The estimated cost of this service, $4,500 in 2010 and
$13,500 in 2009, was recorded as an expense and as a contribution to
paid-in-capital in each period.
Professional
fees increased for the nine months ended March 31, 2010 compared to the nine
months ended March 31, 2009 principally because of fees relating to being a
public company.
Office
and subcontractor costs decreased for the nine months ended March 31, 2010,
compared to the nine months ended March 31, 2009, mainly as a result of the
decrease in revenues for the same period. The Company previously
subcontracted out the majority of its work to third parties.
Our net
loss decreased for the nine months ended March 31, 2010, compared to the nine
months ended March 31, 2009, mainly due to the decrease in revenue and the
decrease in office and subcontractor costs.
Other - As a corporate
policy, we will not incur any cash obligations that we cannot satisfy with known
resources, of which there are currently none except as described in “Liquidity”
below.
Liquidity
Ladybug
had $4,425 in total assets as of March 31, 2010, consisting of $2,314 in cash
and $2,111 of long-term assets consisting of computer equipment, net of
accumulated depreciation.
-16-
Ladybug
had total liabilities of $83,579 as of March 31, 2010 consisting principally of
accrued professional fees.
Ladybug
had negative working capital of $81,265 and an accumulated deficit of $135,294
as of March 31, 2010.
Ladybug
had net cash used in operating activities of $5,899 for the nine months ended
March 31, 2010, consisting of net loss of $21,173, offset by $4,500 of
contributed services, $1,275 of depreciation, $850 decrease in accounts
receivable and the $8,649 increase in accounts payable and accrued professional
fees.
Ladybug
does not have any credit facilities or other commitments for debt or equity
financing. No assurances can be given that advances when needed will be
available. We do not believe that we need funding to cover current operations
because we do not have a capital intensive business plan and can also use
independent contractors to assist in many projects. We will use funding, if
obtained, to cover the salary of our President and to pay for marketing
materials and proposal efforts. We currently have no formal salary arrangements
with our President. While no annual salary or length of employment has been
determined to date, we anticipate providing an annual salary not to exceed
$100,000 commencing after the successful completion of several engagements. The
salary will be paid out of revenues, if any, or accrued if sufficient cash is
not available to make payments. The accrual will begin
after we generate annual revenue of at least $100,000 per year.
We may
seek private capital at some time in the future. Such funding, which we
anticipate would not exceed $100,000, will, if obtained, be used to pay salaries
and for the production of marketing materials. However, we will conduct
operations and seek client engagements even if no funding is obtained. The
private capital will be sought from former business associates of our President
or private investors referred to us by those associates. If a market for our
shares ever develops, of which there can be no assurances and which is unlikely
in the foreseeable future, we will use shares to compensate
employees/consultants wherever possible. To date, we have not sought any funding
source and have not authorized any person or entity to seek out funding on our
behalf.
We are
subject to the periodic reporting requirements of the Securities Exchange Act of
1934, as amended and as such will incur ongoing expenses associated with
professional fees for accounting, legal and a host of other expenses for annual
reports and proxy statements. We estimate that these costs may range up to
$50,000 per year for the next few years and will be higher if our business
volume and activity increases but lower during the first year of being public
because our overall business volume will be lower, and we will not yet be
subject to the requirements of Section 404 of the Sarbanes-Oxley Act of
2002. These obligations will reduce our ability and resources to fund other
aspects of our business. We hope to be able to use our status as a public
company to increase our ability to use noncash means of settling obligations and
compensating independent contractors who provide services for us, although there
can be no assurances that we will be successful in any of those efforts. We will
reduce the compensation levels paid to management if there is insufficient cash
generated from operations to satisfy these costs.
To meet
commitments that become due more than 12 months in the future, we will have to
obtain engagements in sufficient number and at sufficient levels of
profitability, of which there can be no assurance. There does not currently
appear to be any other viable source of long-term financing except that
management may consider various sources of debt and/or equity financing if the
same financing can be obtained on terms deemed reasonable to
management.
Recently
Issued Accounting Pronouncements
The SEC
has adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002.
Commencing with our annual report for the year ended June 30, 2010, we will be
required to include a report of management on our internal control over
financial reporting. The internal control report must include a
statement.
|
§
|
of
management’s responsibility for establishing and maintaining adequate
internal control over our financial
reporting;
|
|
§
|
of
management’s assessment of the effectiveness of our internal control over
financial reporting as of year end;
and
|
|
§
|
of
the framework used by management to evaluate the effectiveness of our
internal control over financial
reporting.
|
-17-
In
June 2009, the FASB approved the FASB Accounting Standards
Codification (the “Codification”) as the single source of authoritative
nongovernmental U.S. GAAP went into effect on July 1, 2009. The
Codification does not change current U.S. GAAP, but is intended to simplify user
access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. All existing
accounting standard documents will be superseded and all other accounting
literature not included in the Codification will be considered
non-authoritative. The Codification is effective for interim and annual periods
ending after September 15, 2009. The adoption did not have a
material impact on the Company’s financial position, results of operations or
cash flows.
In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-04, Accounting for
Redeemable Equity Instruments - Amendment to Section 480-10-S99 which
represents an update to section 480-10-S99, distinguishing liabilities from
equity, per EITF Topic D-98, Classification and Measurement of
Redeemable Securities. The Company does not expect the
adoption of this update to have a material impact on its consolidated financial
position, results of operations or cash flows.
In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-05, Fair Value
Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair
Value, which provides amendments to subtopic 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities. This Update provides clarification that in circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques:
1. A valuation technique that
uses:
a. The quoted price of the identical
liability when traded as an asset; and
b. Quoted prices for similar
liabilities or similar liabilities when traded as assets; and/or
|
2.
Another valuation technique that is consistent with the principles of
topic 820; two examples would be an income approach, such as a present
value technique, or a market approach, such as a technique that is based
on the amount at the measurement date that the reporting entity would pay
to transfer the identical liability or would receive to enter into the
identical liability.
|
The amendments in this Update also
clarify that when estimating the fair value of a liability, a reporting entity
is not required to include a separate input or adjustment to other inputs
relating to the existence of a restriction that prevents the transfer of the
liability. The amendments in this Update also clarify that both a quoted price
in an active market for the identical liability when traded as an asset in an
active market when no adjustments to the quoted price of the asset are required
are Level 1 fair value measurements. The Company does not expect the
adoption of this update to have a material impact on its consolidated financial
position, results of operations or cash flows.
In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-08, Earnings Per Share –
Amendments to Section 260-10-S99, which represents technical corrections
to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share
for a Period that includes a Redemption or an Induced Conversion of a Portion of
a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of
Earnings per Share for the Redemption or Induced Conversion of Preferred
Stock. The Company does not expect the adoption of this update to have a
material impact on its consolidated financial position, results of operations or
cash flows.
-18-
In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-09, Accounting for
Investments-Equity Method and Joint Ventures and Accounting for Equity-Based
Payments to Non-Employees. This Update represents a correction
to Section 323-10-S99-4, Accounting by an Investor for
Stock-Based Compensation Granted to Employees of an Equity Method
Investee. Additionally, it adds observer comment Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees
to the Codification. The Company does not expect the adoption to have a material
impact on its consolidated financial position, results of operations or cash
flows.
In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-12, Fair Value
Measurements and Disclosures Topic 820 – Investment in Certain Entities That
Calculate Net Assets Value Per Share (or Its Equivalent), which provides
amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall,
for the fair value measurement of investments in certain entities that calculate
net asset value per share (or its equivalent). The amendments in this Update
permit, as a practical expedient, a reporting entity to measure the fair value
of an investment that is within the scope of the amendments in this Update on
the basis of the net asset value per share of the investment (or its equivalent)
if the net asset value of the investment (or its equivalent) is calculated in a
manner consistent with the measurement principles of Topic 946 as of the
reporting entity’s measurement date, including measurement of all or
substantially all of the underlying investments of the investee in accordance
with Topic 820. The amendments in this Update also require disclosures by major
category of investment about the attributes of investments within the scope of
the amendments in this Update, such as the nature of any restrictions on the
investor’s ability to redeem its investments at the measurement date, any
unfunded commitments (for example, a contractual commitment by the investor to
invest a specified amount of additional capital at a future date to fund
investments that will be made by the investee), and the investment strategies of
the investees. The major category of investment is required to be determined on
the basis of the nature and risks of the investment in a manner consistent with
the guidance for major security types in U.S. GAAP on investments in debt and
equity securities in paragraph 320-10-50-1B. The disclosures are required for
all investments within the scope of the amendments in this Update regardless of
whether the fair value of the investment is measured using the practical
expedient. The Company does not expect the adoption to have a material impact on
its consolidated financial position, results of operations or cash
flows.
In January 2010, the FASB issued
the FASB Accounting Standards Update No. 2010-01 Equity Topic 505 – Accounting for
Distributions to Shareholders with Components of Stock and Cash, which
clarify that the stock portion of a distribution to shareholders that allows
them to elect to receive cash or stock with a potential limitation on the total
amount of cash that all shareholders can elect to receive in the aggregate is
considered a share issuance that is reflected in EPS prospectively and is not a
stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings
Per Share (“EPS”)). Those distributions should be accounted for and
included in EPS calculations in accordance with paragraphs 480-10-25- 14 and
260-10-45-45 through 45-47 of the FASB Accounting Standards
codification. The amendments in this Update also provide a technical
correction to the Accounting Standards Codification. The correction
moves guidance that was previously included in the Overview and Background
Section to the definition of a stock dividend in the Master
Glossary. That guidance indicates that a stock dividend takes nothing
from the property of the corporation and adds nothing to the interests of the
stockholders. It also indicates that the proportional interest of
each shareholder remains the same, and is a key factor to consider in
determining whether a distribution is a stock dividend.
In January 2010, the FASB issued
the FASB Accounting Standards Update No. 2010-02 Consolidation Topic 810 – Accounting
and Reporting for Decreases in Ownership of a Subsidiary – a Scope
Clarification, which provides amendments to Subtopic 810-10 and related
guidance within U.S. GAAP to clarify that the scope of the decrease in ownership
provisions of the Subtopic and related guidance applies to the
following:
1
|
A
subsidiary or group of assets that is a business or nonprofit
activity
|
2
|
A
subsidiary that is a business or nonprofit activity that is transferred to
an equity method investee or joint venture
|
3
|
An
exchange of a group of assets that constitutes a business or nonprofit
activity for a noncontrolling interest in an entity (including an equity
method investee or joint venture).
|
-19-
The
amendments in this Update also clarify that the decrease in ownership guidance
in Subtopic 810-10 does not apply to the following transactions even if they
involve businesses:
1
|
Sales
of in substance real estate. Entities should apply the sale of
real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment)
and 976-605 (Retail/Land) to such transactions.
|
2
|
Conveyances
of oil and gas mineral rights. Entities should apply the
mineral property conveyance and related transactions guidance in Subtopic
932-360 (Oil and Gas-Property, Plant, and Equipment) to such
transactions.
|
If a
decrease in ownership occurs in a subsidiary that is not a business or nonprofit
activity, an entity first needs to consider whether the substance of the
transaction causing the decrease in ownership is addressed in other U.S. GAAP,
such as transfers of financial assets, revenue recognition, exchanges of
nonmonetary assets, sales of in substance real estate, or conveyances of oil and
gas mineral rights, and apply that guidance as applicable. If no other guidance
exists, an entity should apply the guidance in Subtopic 810-10.
Management does not believe that any
other recently issued, but not yet effective accounting pronouncements, if
adopted, would have a material effect on the accompanying consolidated financial
statements.
Critical
Accounting Policies
The
preparation of financial statements and related notes requires us to make
judgments, estimates, and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities.
An
accounting policy is considered to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the financial
statements.
Financial
Reporting Release No. 60 requires all companies to include a discussion of
critical accounting policies or methods used in the preparation of financial
statements. There are no critical policies or decisions that rely on judgments
that are based on assumptions about matters that are highly uncertain at the
time the estimate is made. Note 2 to the financial statements, included in our
Annual Report filed with the Securities and Exchange Commission on Form 10-K for
the fiscal year ended June 30, 2009, includes a summary of the significant
accounting policies and methods used in the preparation of our financial
statements.
Seasonality
We do not
yet have a basis to determine whether our business will be
seasonal.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of
Regulation S-K, obligations under any guarantee contracts or contingent
obligations. We also have no other commitments, other than the costs of being a
public company that will increase our operating costs or cash requirements in
the future.
-20-
ITEM
3
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to
provide the information required by this Item because it is a “smaller reporting
company,” as defined by Rule 229.10(f)(1).
ITEM
4
CONTROLS
AND PROCEDURES
(a)
|
Evaluation
of Disclosure Controls and
Procedures.
|
An
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO") (in this case the same person), of the
effectiveness of the Company's disclosure controls and procedures as of March
31, 2010. Based on that evaluation, the CEO/CFO has concluded that the Company's
disclosure controls and procedures are effective to provide reasonable assurance
that:
|
(i)
|
information
required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934 is accumulated and
communicated to the Company's management, including the CEO/CFO, as
appropriate to allow timely decisions regarding required disclosure by the
Company; and
|
|
(ii)
|
information
required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and
forms.
|
(b) Changes
in Internal Controls.
During
the quarter ended March 31, 2010, there were no changes in the Company's
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, its internal control over financial
reporting.
-21-
PART
II—OTHER INFORMATION
ITEM
1
LEGAL
PROCEEDINGS
From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.
ITEM
1A
RISK
FACTORS
You
should be aware that there are various risks to an investment in our common
stock. You should carefully consider these risk factors, together with all of
the other information included in this Report, before you decide to invest in
shares of our common stock.
If any of
the following risks develop into actual events, then our business, financial
condition, results of operations and/or prospects could be materially adversely
affected. If that happens, the market price of our common stock, if any, could
decline, and investors may lose all or part of their investment.
Risks
Related to the Business
Ladybug’s
founder and former President resigned in October 2009 because of health issues.
It is unclear whether our current officers and Directors can implement
successfully the business plan that she created.
Ladybug’s
current business strategy was developed and dependent upon the knowledge,
reputation and business contacts of Molly S. Ramage, its founder and former
President, who resigned in October 2009 because of health issues. She will be
available to us on a limited consulting basis moving forward. We can provide no
assurances that Ms. Ramage’s successors will be able to implement her business
plan successfully. If they are unable to successfully implement her
business plan, we may be forced to scale back our business plan and/or seek
additional funding, which may have a materially adverse effect on the value of
our common stock.
As part
of the Company’s plan to augment its financial resources and consider attractive
business opportunities, the Company’s principal stockholders have entered into
discussions with an unaffiliated third party with respect to a potential merger
transaction which could result in the discontinuance of our current operations,
change of control/ownership and new management. There can be no assurance that a
merger or other significant transaction will be consummated with the third party
or, if consummated, that the Company or its stockholders would realize any
benefits from it.
We
have been contacted in connection with various merger and acquisition
opportunities and may choose to enter into a merger and/or acquisition
transaction in the future.
We have
been contacted by parties seeking to merge and/or acquire us. While we have not
entered into any definitive agreements or understandings to merge with or
acquire any entity, in the event that we do enter into a merger and/or
acquisition with a separate company in the future, our majority shareholders
will likely change and new shares of common stock could be issued resulting in
substantial dilution to our then current shareholders. As a result, our new
majority shareholders will likely change the composition of our Board of
Directors and replace our current management. The new management will likely
change our business focus and we can make no assurances that our new management
will be able to properly manage our direction or that this change in our
business focus will be successful. If we do enter into a merger or acquisition,
and our new management fails to properly manage and direct our operations, we
may be forced to scale back or abandon our operations, which will cause the
value of our common stock to decline or become worthless. We have not entered
into any merger or acquisition agreements as of the date of this
filing.
-22-
Ladybug
has a very limited operating history and anticipates generating losses for the
foreseeable future.
Ladybug
was formed in November 2007. Therefore, we have insufficient operating history
upon which an evaluation of our future performance and prospects can be made.
Ladybug’s future prospects must be considered in light of the risks, expenses,
delays, problems and difficulties frequently encountered in the establishment of
a new business. An investor in our common stock must consider the risks and
difficulties frequently encountered by early stage companies operating in new
and competitive markets such as ours. These risks include:
·
|
competition
from entities that are much more established and have greater financial
and technical resources than do we;
|
·
|
the
need to develop corporate
infrastructure;
|
·
|
the
ability to access and obtain capital when required;
and
|
·
|
the
dependence upon key personnel.
|
Ladybug
cannot be certain that its business strategy will be successful or that it will
ever have profitable business activities or generate sustainable revenues.
Furthermore, Ladybug believes that it is probable that it will incur operating
losses and negative cash flow for the foreseeable future.
Ladybug has limited financial
resources, and its independent registered auditors’ report includes an
explanatory paragraph stating that there is substantial doubt about its ability
to continue as a going concern.
Ladybug
has very limited financial resources and had negative working capital of $81,265
and an accumulated deficit of $135,294 at March 31, 2010. Our independent
registered auditors included an explanatory paragraph in their opinion on
Ladybug’s financial statements as of June 30, 2009 that states that this lack of
resources causes substantial doubt about our ability to continue as a going
concern. No assurances can be given that we will generate sufficient revenue or
obtain necessary financing to continue as a going concern.
Ladybug
is and will continue to be significantly dependent on the services of its
President, Mitchell Trace, and its Secretary, Patricia Barton, the loss of whose
services would likely cause its business operations to cease.
Ladybug’s
current business strategy is completely dependent upon the knowledge, reputation
and business contacts of Mitchell Trace, its President, and Patricia Barton, its
Secretary. If we were to lose the services of either one or both for any reason,
it is unlikely that we would be able to continue conducting our business plan
even if financing is obtained.
Our
President, Mitchell Trace and our Secretary Patricia Barton, are principally
responsible for the execution of our business. They are under no contractual
obligation to remain employed by us. If they should choose to leave us for any
reason before we have hired qualified additional personnel, our operations are
likely to fail. Even if we are able to find additional personnel, it is
uncertain whether we could find someone who could develop our business along the
lines with our business plan.
We
depend on a very limited number of customers.
During
the nine months ended March 31, 2010, all revenue was derived from five entities
related to our Secretary and Director, Patricia Barton. During the fiscal year
ended June 30, 2009, the Company derived 34% of its revenues from
two companies, VOF (23.95%) and Seattle Cremations (10.45%). The work done
for VOF related to politically oriented websites and is not expected to result
in recurring engagements. We do not have long-term agreements with any customer
and cannot predict the likelihood of getting additional engagements from
them.
-23-
We
operate in a highly competitive industry with low barriers to entry, and we may
be unable to compete successfully against existing or new
competitors.
The Web
applications markets are highly competitive and have low barriers of entry,
which could hinder our ability to successfully market our products and services.
We may not have the resources, expertise or other competitive factors to compete
successfully in the future. Because there are few substantial barriers to entry,
we expect that we will face additional competition from existing competitors and
new market entrants in the future. Some of these competitors are part-time
contractors willing to provide services at low rates to enter the industry or
earn extra money. On the other hand, many of our current and potential
competitors have greater name recognition and more established relationships in
the industry and greater resources. As a result, these competitors may be able
to:
·
|
Develop
and expand their network infrastructures and service offerings more
rapidly;
|
·
|
Adapt
to new or emerging technologies and changes in customer requirements more
quickly; and
|
·
|
Devote
greater resources to the marketing and sale of their services and adopt
more aggressive pricing policies than we
can.
|
Current
and potential competitors in the market include Web hosting service providers,
applications hosting providers, Internet service providers, telecommunications
companies, large information technology firms and computer hardware
suppliers.
Our
success depends on our ability to maintain our professional reputation and name.
If we are unable to do so, our business would be significantly and negatively
impacted.
We depend
on our overall reputation and name recognition to secure new engagements. We
expect to obtain and are likely to continue obtaining many of our new
engagements from existing clients or from referrals by those clients. A client
who is dissatisfied with our work can adversely affect our ability to secure new
engagements. If any factor hurts our reputation, including poor performance, we
may experience difficulties in competing successfully for new engagements.
Failure to maintain our professional reputation and brand name could seriously
harm our business, financial condition and results of operations.
We
currently are likely to complete a limited number of engagements in a year. Our
revenues and operating results will fluctuate significantly from quarter to
quarter, which may cause our stock price, if one exists, to
decline.
Our
current limited sources of resources permit us to perform a limited number of
engagements in any one financial reporting period. Performance of a small number
of engagements in any one financial reporting quarter compared with the number
of engagements performed in other surrounding periods will have a significant
percentage impact on that quarter compared to the other quarters. As a result of
these and other factors, we believe that period-to-period comparisons of our
operating results will not be meaningful in the short term and that you should
not rely upon our performance in a particular period as an indication of our
performance in any future period.
We
are subject to the periodic reporting requirements of the Securities Exchange
Act of 1934, as amended, and will incur audit fees and legal fees in connection
with the preparation of such reports. These additional costs could reduce or
eliminate our ability to earn a profit.
We are
required to file periodic reports with the Securities and Exchange Commission
(the “SEC”) pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder. In order to comply with these
requirements, our independent registered public accounting firm has to review
our financial statements on a quarterly basis and audit our financial statements
on an annual basis. Moreover, our legal counsel has to review and assist in the
preparation of such reports. The costs charged by these professionals for such
services cannot be accurately predicted because factors such as the number and
type of transactions that we engage in and the complexity of our reports cannot
be determined at this time and will have a major affect on the amount of time to
be spent by our auditors and attorneys. However, the incurrence of such costs
will obviously be an expense to our operations and thus have a negative effect
on our ability to meet our overhead requirements and earn a profit. We may be
exposed to potential risks resulting from new requirements under
Section 404 of the Sarbanes-Oxley Act of 2002. If we cannot provide
reliable financial reports or prevent fraud, our business and operating results
could be harmed, investors could lose confidence in our reported financial
information, and the trading price of our common stock, if a market ever
develops, could drop significantly.
-24-
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we will be required,
beginning with our fiscal year ending June 30, 2010, to include in our annual
report our assessment of the effectiveness of our internal control over
financial reporting as of the end of the fiscal year ended June 30, 2010.
Furthermore, in the following fiscal year, our independent registered public
accounting firm will be required to report separately on whether it believes
that we have maintained, in all material respects, effective internal control
over financial reporting. We have not yet completed our assessment of the
effectiveness of our internal control over financial reporting. We expect to
incur additional expenses and diversion of management’s time as a result of
performing the system and process evaluation, testing and remediation required
in order to comply with the management certification and auditor attestation
requirements.
We
currently have only one employee. We may be unable to afford the cost of
increasing our staff or engaging outside consultants or professionals to
overcome our lack of employees. During the course of our testing, we may
identify other deficiencies that we may not be able to remediate in time to meet
the deadline imposed by the Sarbanes-Oxley Act for compliance with the
requirements of Section 404. In addition, if we fail to achieve and maintain
adequate internal controls, as such standards are modified, supplemented or
amended from time to time, we may not be able to ensure that we can conclude on
an ongoing basis that we have effective internal controls over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover,
effective internal controls, particularly those related to revenue recognition,
are necessary for us to produce reliable financial reports and are important to
help prevent financial fraud. If we cannot provide reliable financial reports or
prevent fraud, our business and operating results could be harmed, investors
could lose confidence in our reported financial information, and the trading
price of our common stock, if a market ever develops, could drop
significantly.
Mitchell
Trace, our Chief Executive Officer and Chief Financial Officer, has no
meaningful accounting or financial reporting education or experience and,
accordingly, our ability to meet Exchange Act reporting requirements on a timely
basis will be dependent to a significant degree upon others.
Mitchell
Trace, our Chief Executive Officer and Chief Accounting Officer, has no
meaningful financial reporting education or experience. He is heavily dependent
on advisors and consultants. As such, there is risk about our ability to comply
with all financial reporting requirements accurately and on a timely
basis.
Our
internal controls may be inadequate, which could cause our financial reporting
to be unreliable and lead to misinformation being disseminated to the
public.
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. As defined in the Securities Exchange Act of
1934, as amended, Rule 13a-15(f), internal control over financial reporting is a
process designed by, or under the supervision of, the principal executive and
principal financial officer and effected by the board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
·
|
pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company
are being made only in accordance with authorizations of management and/or
directors of the Company; and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the financial
statements.
|
-25-
Our internal controls may be inadequate
or ineffective, which could cause our financial reporting to be unreliable and
lead to misinformation being disseminated to the public. Investors relying upon
this misinformation may make an uninformed investment decision.
Having only two Directors limits our ability to establish effective independent
corporate governance procedures and increases the control of our
President/Director.
We have
only two Directors, one of whom is also our Chief Executive Officer.
Accordingly, we cannot establish Board committees comprised of independent
members to oversee functions like compensation or audit issues.
Until we
have a larger Board of Directors that would include some independent members, if
ever, there will be limited oversight of our President’s decisions and
activities and little ability for minority shareholders to challenge or reverse
those activities and decisions, even if they are not in the best interests of
minority shareholders.
Risks
Related to Our Common Stock
Shareholders
may be diluted significantly through our efforts to obtain financing and satisfy
obligations through the issuance of additional shares of our common
stock.
We have
no committed source of financing. Wherever possible, our Board of Directors will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of restricted shares of
our common stock. Our Board of Directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued common
shares. We have authorized 300,000,000 shares of common stock, and as of April
2, 2010, 288,680,000 shares remain unissued. In addition, if a trading market
develops for our common stock, we may attempt to raise capital by selling shares
of our common stock, possibly at a discount to market. These actions will result
in dilution of the ownership interests of existing shareholders, may further
dilute common stock book value, and that dilution may be material. Such
issuances may also serve to enhance existing management’s ability to maintain
control of Ladybug because the shares may be issued to parties or entities
committed to supporting existing management.
Nevada
law and our Articles of Incorporation authorize us to issue shares of stock,
which shares may cause substantial dilution to our existing
shareholders.
We have
authorized capital stock consisting of 300,000,000 shares of common stock,
$0.001 par value per share and 20,000,000 shares of preferred stock, $0.001 par
value per share (“Preferred Stock”). As of the date of this report, we have
11,320,000 shares of common stock issued and outstanding and no shares of
Preferred Stock issued and outstanding. As a result, our Board of
Directors has the ability to issue a large number of additional shares of common
stock without shareholder approval, which if issued could cause substantial
dilution to our then shareholders. Additionally, shares of Preferred
Stock may be issued by our Board of Directors without shareholder approval with
voting powers, and such preferences and relative, participating, optional or
other special rights and powers as determined by our Board of Directors, which
may be greater than the shares of common stock currently
outstanding. As a result, shares of Preferred Stock may be issued by
our Board of Directors which cause the holders to have super majority voting
power over our shares, provide the holders of the Preferred Stock the right to
convert the shares of Preferred Stock they hold into shares of our common stock,
which may cause substantial dilution to our then common stock shareholders
and/or have other rights and preferences greater than those of our common stock
shareholders. Investors should keep in mind that the Board of Directors has the
authority to issue additional shares of common stock and Preferred Stock, which
could cause substantial dilution to our existing
shareholders. Additionally, the dilutive effect of any Preferred
Stock, which we may issue may be exacerbated given the fact that such Preferred
Stock may have super majority voting rights and/or other rights or preferences
which could provide the preferred shareholders with voting control over us
subsequent to this offering and/or give those holders the power to prevent or
cause a change in control. As a result, the issuance of shares of
common stock and/or Preferred Stock may cause the value of our securities to
decrease and/or become worthless.
-26-
Our Articles of Incorporation
provide for indemnification of officers and Directors at our expense and limit
their liability. These provisions may result in a major cost to us and hurt the
interests of our shareholders because corporate resources may be expended for
the benefit of officers and/or Directors.
Our
Articles of Incorporation and applicable Nevada law provide for the
indemnification of our Directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on our behalf. We will also bear the expenses of such litigation
for any of our Directors, officers, employees, or agents, upon such person's
written promise to repay us even if it is ultimately determined that any such
person shall not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by us that we may be unable to
recoup.
We have
been advised that, in the opinion of the SEC, indemnification for liabilities
arising under federal securities laws is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification for liabilities arising under federal
securities laws, other than the payment by us of expenses incurred or paid by a
Director, officer or controlling person in the successful defense of any action,
suit or proceeding, is asserted by a Director, officer or controlling person in
connection with the securities being registered, we will (unless in the opinion
of our counsel, the matter has been settled by controlling precedent) submit to
a court of appropriate jurisdiction, the question whether indemnification by us
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue. The legal process relating to this
matter if it were to occur is likely to be very costly and may result in us
receiving negative publicity, either of which factors is
likely to materially reduce the market and price for our shares, if such a
market ever develops.
Currently,
there is no established public market for our securities, and there can be no
assurances that any established public market will ever develop or that our
common stock will be quoted for trading, and even if quoted, it is likely to be
subject to significant price fluctuations.
There has
not been any established trading market for our common stock. The Financial
Industry Regulatory Authority ("FINRA") has assigned us a trading symbol
(“LBRG”) which enables a market maker to quote the shares of our common stock on
the OTCBB maintained by FINRA. There can be no assurances as to
whether:
1.
|
any
market for our shares will ever
develop;
|
2.
|
the
prices at which our common stock will trade;
or
|
3.
|
the
extent to which investor interest in us will lead to the development of an
active, liquid trading market. Active trading markets generally
result in lower price volatility and more efficient execution of buy and
sell orders for investors.
|
In
addition, in the event a market develops, our common stock is unlikely to be
followed by any market analysts, and there may be few institutions acting as
market makers for our common stock. Either of these factors could adversely
affect the liquidity and trading price of our common stock. Until an orderly
market develops in our common stock, if ever, the price at which it trades is
likely to fluctuate significantly. Prices for our common stock will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for shares of our common stock,
developments affecting our business, including the impact of the factors
referred to elsewhere in these Risk Factors, investor perception of us and
general economic and market conditions. No assurances can be given that an
orderly or liquid market will ever develop for the shares of our common
stock.
-27-
Because
of the anticipated low price of the securities being registered, many brokerage
firms may not be willing to effect transactions in these securities. Purchasers
of our securities should be aware that any market that develops in our stock
will be subject to the penny stock restrictions.
Any
market that develops in shares of our common stock will be subject to the penny
stock regulations and restrictions pertaining to low priced stocks that will
create a lack of liquidity and make trading difficult or
impossible.
The
trading of our securities, if any, will likely be on the OTCBB as maintained by
FINRA. As a result, an investor may find it difficult to dispose of, or to
obtain accurate quotations as to the price of our securities.
Rule
3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a
"penny stock," for purposes relevant to us, as any equity security that has a
minimum bid price of less than $4.00 per share or with an exercise price of less
than $4.00 per share, subject to a limited number of exceptions which are not
available to us. It is likely that our shares will be considered to be penny
stocks for the immediately foreseeable future. This classification severely and
adversely affects any market liquidity for our common stock.
For any
transaction involving a penny stock, unless exempt, the penny stock rules
require that a broker or dealer approve a person's account for transactions in
penny stocks and the broker or dealer receive from the investor a written
agreement to the transaction setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must obtain financial
information and investment experience and objectives of the person and make a
reasonable determination that the transactions in penny stocks are suitable for
that person and that that person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in penny
stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the SEC relating to the penny stock market,
which, in highlight form, sets forth:
·
|
the
basis on which the broker or dealer made the suitability determination,
and
|
·
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Disclosure
also has to be made about the risks of investing in penny stock in both public
offerings and in secondary trading and commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
Because
of these regulations, broker-dealers may not wish to engage in the
above-referenced necessary paperwork and disclosures and/or may encounter
difficulties in their attempt to sell shares of our common stock, which may
affect the ability of selling shareholders or other holders to sell their shares
in any secondary market. Our common stock’s penny stock status may also have the
effect of reducing the level of trading activity in any secondary market. These
additional sales practice and disclosure requirements could impede the sale of
our securities, if and when our securities become publicly traded. In addition,
the liquidity for our securities may decrease, with a corresponding decrease in
the price of our securities. Our shares, in all probability, if they trade at
all, will be subject to such penny stock rules for the foreseeable future, and
our shareholders will, in all likelihood, find it difficult to sell their
securities.
The
market for penny stocks has experienced numerous frauds and abuses that could
adversely impact investors in our stock.
Company
management believes that the market for penny stocks has suffered from patterns
of fraud and abuse. Such patterns include:
·
|
Control
of the market for the security by one or a few broker-dealers that are
often related to the promoter or
issuer;
|
-28-
·
|
Manipulation
of prices through prearranged matching of purchases and sales and false
and misleading press releases;
|
·
|
"Boiler
room" practices involving high pressure sales tactics and unrealistic
price projections by sales persons;
|
·
|
Excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
|
·
|
Wholesale
dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor
losses.
|
State
securities laws may limit secondary trading, which may restrict the states in
which and conditions under which you can sell shares.
Secondary
trading in our common stock will not be possible in any state until the common
stock is qualified for sale under the applicable securities laws of the state or
there is confirmation that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. If we fail
to register or qualify, or to obtain or verify an exemption for the secondary
trading of, the common stock in any particular state, the common stock could not
be offered or sold to, or purchased by, a resident of that state. In the event
that a significant number of states refuse to permit secondary trading in our
common stock, the liquidity for the common stock could be significantly
impacted.
The
ability of our majority shareholder to control our business may limit or
eliminate minority shareholders’ ability to influence corporate
affairs.
Our
largest shareholder, Patricia Barton, also our Secretary and Director,
beneficially owns 66.3% of our outstanding common stock. Because of this level
of beneficial stock ownership, she is and will be in a position to continue to
elect our Board of Directors, decide all matters requiring stockholder approval
and determine our policies. Her interests may differ from the interests of other
shareholders with respect to the issuance of shares, business transactions with
or sales to other companies, selection of officers and Directors and other
business decisions. The minority shareholders would have no way of overriding
decisions made by such principal shareholder. This level of control may also
have an adverse impact on the market value of our shares because she may
institute or undertake transactions, policies or programs that result in losses,
may not take any steps to increase our visibility in the financial community
and/or may sell
sufficient numbers of shares to significantly decrease our price per
share.
Future
sales of common stock by our existing shareholders could adversely affect our
stock price.
As of
April 2, 2010, Ladybug has 11,320,000 issued and outstanding shares of common
stock. Sales of substantial amounts of common stock in the public market, or the
perception that such sales will occur, could have a materially negative effect
on the market price of our common stock if a market ever develops. This problem
would be exacerbated if we issue common stock in exchange for services or in
connection with fund raising transactions.
We
do not expect to pay cash dividends in the foreseeable future
We have
never paid cash dividends on our common stock. We do not expect to pay cash
dividends on our common stock at any time in the foreseeable future. The future
payment of dividends directly depends upon our future earnings, capital
requirements, financial requirements and other factors that our Board of
Directors will consider. Since we do not anticipate paying cash dividends on our
common stock, return on your investment, if any, will depend solely on an
increase, if any, in the market value of our common stock.
-29-
Because
we are not subject to compliance with rules requiring the adoption of certain
corporate governance measures, our stockholders have limited protections against
interested director transactions, conflicts of interest and similar
matters.
The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the
SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a
result of Sarbanes-Oxley, require the implementation of various measures
relating to corporate governance. These measures are designed to enhance the
integrity of corporate management and the securities markets and apply to
securities that are listed on those exchanges or the Nasdaq Stock Market.
Because we are not presently required to comply with many of the corporate
governance provisions and because we chose to avoid incurring the substantial
additional costs associated with such compliance any sooner than legally
required, we have not yet adopted these measures.
Because
our Directors are not independent directors, we do not currently have
independent audit or compensation committees. As a result, our Directors have
the ability to, among other things, determine their own level of compensation.
Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate
governance may leave our stockholders without protections against interested
director transactions, conflicts of interest, if any, and similar matters and
any potential investors may be reluctant to provide us with funds necessary to
expand our operations.
We intend
to comply with all corporate governance measures relating to director
independence as and when required. However, we may find it very difficult or be
unable to attract and retain qualified officers, Directors and members of board
committees required to provide for our effective management as a result of the
Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has
resulted in a series of rules and regulations by the SEC that increase
responsibilities and liabilities of directors and executive officers. The
perceived increased personal risk associated with these recent changes may make
it more costly or deter qualified individuals from accepting these
roles.
We
are required to remain current in our filings with the SEC and our securities
will not be eligible for quotation if we are not current in our filings with the
SEC.
As our
shares are currently quoted on the OTCBB, we are required to remain current
in our filings with the SEC in order for shares of our common stock to remain
eligible for quotation on the OTCBB. In the event that we become delinquent in
our required quarterly and annual filings with the SEC, quotation of our common
stock will be terminated following a 30 day grace period if we do not make our
required filing during that time. If our shares are not eligible for quotation
on the OTCBB, investors in our common stock may find it difficult to sell their
shares.
Additionally,
pursuant to OTCBB rules relating to the timely filing of periodic reports with
the SEC, any OTCBB issuer which fails to file a periodic report (Form 10-Q's or
10-K's) by the due date of such report (not withstanding any extension granted
to the issuer by the filing of a Form 12b-25), three times during any 24 month
period is automatically de-listed from the OTCBB. Such removed issuer would not
be re-eligible to be listed on the OTCBB for a period of one-year, during which
time any subsequent late filing would reset the one-year period of de-listing.
Furthermore, any issuer delisted from the OTCBB more than one (1) time in any 24
month period for failure to file a periodic report would be ineligible to be
re-listed for a period of one-year, during which time any subsequent late filing
would reset the one-year period of de-listing. As such, if we are late in
our filings three times in any 24 month period and are de-listed from the OTCBB,
or if our securities are de-listed from the OTCBB two times in any 24 month
period for failure to file a periodic report, our securities may become
worthless and we may be forced to curtail or abandon our business
plan.
You
may have limited access to information regarding our business because our
obligations to file periodic reports with the SEC could be automatically
suspended under certain circumstances.
As of the
effectiveness date of our Registration Statement, September 19, 2008, we were
required to file periodic reports with the SEC which are immediately available
to the public for inspection and copying. Except during the year following the
date on which our Registration Statement became effective, these reporting
obligations may (in our discretion) be automatically suspended under Section
15(d) of the Securities Exchange Act of 1934 if we have less than 300
shareholders. If this condition is present (as it was at March 31, 2010), we
will no longer be obligated to file periodic reports with the SEC and your
access to our business information would then be even more restricted. Although
we are currently required to deliver periodic reports to security holders, we
will not be required to furnish proxy statements to security holders and our
Directors, officers and principal beneficial owners will not be required to
report their beneficial ownership of securities to the SEC pursuant to Section
16 of the Securities Exchange Act of 1934, as amended, until we have both 500 or
more security holders and greater than $10 million in assets. This means that
your access to information regarding our business will be limited.
For
all of the foregoing reasons and others set forth herein, an investment in our
securities involves a high degree of risk.
-30-
ITEM
2
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3
DEFAULTS
UPON SENIOR SECURITIES
None.
ITEM
4
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5
OTHER
INFORMATION
None.
ITEM
6
EXHIBITS
(a) Exhibits
Exhibit
Number
|
Description
|
31*
|
Section
302 Certification Of Chief Executive And Chief Financial
Officer
|
32*
|
Certification
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of
The Sarbanes-Oxley Act Of 2002 – Chief Executive And Chief Financial
Officer
|
* Filed
herewith.
-31-
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Ladybug Resource Group,
Inc.
|
|
(Registrant)
|
|
/s/ Mitchell Trace
|
|
Mitchell
Trace
|
|
Title:
|
President
(Principal Executive Officer) and
|
Chief
Financial Officer
|
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
Date:
|
April
5, 2010
|
-32-