Attached files
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EX-32.1 - NanoTech Entertainment, Inc. | v186455_ex32-1.htm |
EX-31.1 - NanoTech Entertainment, Inc. | v186455_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
x
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
fiscal year ended June 30, 2009
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For the
transition period from _________________ to _________________
Commission
file number 333-149184
NANOTECH
ENTERTAINMENT, INC.
|
|
(Exact
name of registrant as specified in its charter)
|
|
Nevada
|
20-1379559
|
(State
or jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
No.)
|
3887
Pacific Street
|
Las
Vegas, Nevada 89121
|
(Address
of principal executive offices)
|
702
518 7410
|
(Issuer's
telephone number)
|
Aldar
Group, Inc.
7230
Indian Creek Lane, Suite 201, Las Vegas, NV 89149
|
(Former name, former address and former fiscal year, if changed since last report)
|
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Exchange Act: Common Stock, Par Value
$0.001
Indicate
by check mark if the registrant is a well-season issuer, as defined in Rule 405
of the Securities Act. ¨
Yes x No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
x Yes ¨ No
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to the reporting requirements
for the past 90 days. ¨ Yes x No
Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this Form 10-K/A. x
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 a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. ¨ Yes x No
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.
Note – If
a determination as to whether a particular person or entity is an affiliate
cannot be made without involving unreasonable effort and expense, the aggregate
market value of the common stock held by non-affiliates may be calculated on the
basis of assumptions reasonable under the circumstances, provided that the
assumptions are set forth in this Form.
The
aggregate market value of the voting and non-voting common stock of the issuer
held by non-affiliates as of February 26, 2010 (last trade date) was
approximately $848,210 based upon the closing price of the common stock as
quoted by NASDAQ OTC Bulletin Board on such date.
State the
number of shares outstanding of each of the Issuer’s classes of common equity,
as of the last practicable date:
·
|
14,437,000
|
June
30, 2009
|
·
|
15,346,000
|
September
30, 2009
|
·
|
15,550,000
|
December
31, 2009
|
·
|
15,910,000
|
May
24, 2010
|
DOCUMENTS
INCORPORATED BY REFERENCE
List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K/A (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980). None.
1
TABLE
OF CONTENTS
PART I
|
|||
Item
1
|
Business
|
4
|
|
Item
1A
|
Risk
Factors
|
6
|
|
Item
1B
|
Unresolved
Staff Comments
|
6
|
|
Item
2
|
Properties
|
6
|
|
Item
3
|
Legal
Proceedings
|
6
|
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
6
|
|
PART II
|
|||
Item
5
|
Market
for Registrant’s Common Equity, Related Stockholder Matters
and
|
|
|
Issuer
Purchases of Equity Securities
|
7
|
||
Item
6
|
Selected
Financial Data
|
|
|
Item
7
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
|
Results
of Operations
|
10
|
||
Item
8
|
Financial
Statements and Supplementary Data
|
|
|
Item
9
|
Changes
in and Disagreements With Accountants and Accounting and
|
|
|
Financial
Disclosure
|
30
|
||
Item
9A
|
Controls
and Procedures
|
30
|
|
Item
9B
|
Other
Information
|
31
|
|
PART III
|
|||
Item
10
|
Directors,
Executive Officers and Corporate Governance
|
32
|
|
Item
11
|
Executive
Compensation
|
34
|
|
Item
12
|
Security
Ownership of Certain Beneficial Owners and Management
|
|
|
and
Related Stockholder Matters
|
35
|
||
Item
13
|
Certain
Relationships and Related Transactions and Director
Independence
|
36
|
|
Item
14
|
Principal
Accounting Fees and Service
|
37
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|
PART IV
|
|||
Item
15
|
Exhibits,
Financial Statement Schedules
|
38
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|
SIGNATURES
|
39
|
2
CAUTIONARY
STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
All
readers of this document and any document incorporated by reference herein are
advised that this document and documents incorporated by reference into this
document contain forward-looking statements and statements of historical facts.
Forward-looking statements are subject to certain risks and uncertainties, which
could cause actual results to differ materially for those indicated by the
forward-looking statements. Examples of forward-looking statements include, but
are not limited to (i) revenue projections, income (loss), earnings (loss) per
share, capital expenditures, dividends, capital structure and other financial
items, (ii) statements of the plans and objectives of the Company or its
management or Board of Directors, including the introduction of new products, or
estimates or predictions with regards to customers, suppliers, competitors or
regulatory authorities, (iii) statements of future performance, and (iv)
statements of assumptions underlying other statements about the Company or its
business.
This
document and all documents incorporated herein by reference also identify
factors which could cause actual results to differ materially from those
indicated by the forward-looking statements. Please refer to
“Management's Discussion and Analysis of Financial Condition and Results of
Operations” and “Risk Factors.”
The
cautions outlined made in this statement and elsewhere in this document should
not be construed as complete or exhaustive. In many cases, we cannot
predict factors which could cause results to differ materially from those
indicated by the forward-looking statements. Additionally, many items
or factors that could cause actual results to differ materially from
forward-looking statements are beyond our ability to control. The
Company will not undertake an obligation to further update or change any
forward-looking statement, whether as a result of new information, future
developments, or otherwise.
3
PART
I
ITEM 1.
BUSINESS
General
NanoTech
Entertainment, Inc. (the “Company” or “We” or “NanoTech”) was originally
organized as a Nevada Corporation on July 15, 2004 under the name Aldar Group,
Inc. (“AGI”) for the purpose of acquiring, selling and breeding thoroughbred
horses.
On April
30, 2009, the Company entered into a Sale and Acquisition Agreement (the
“Agreement”) with NanoTech Entertainment, Inc. (“NEI”), a Nevada corporation,
wherein the Company acquired 100% of NEI’s issued and outstanding common stock
through the exchange of 6,480,000 common shares. As a result of the
Agreement, the Company changed its name to NanoTech Entertainment, Inc. (“NTI”)
to better reflect the direction of the newly formed entity.
For
accounting purposes, the share exchange transaction was treated as a capital
transaction where AGI, as the shell-corporation and legal acquirer, issued stock
for the net monetary assets of NEI, the accounting acquirer, accompanied by a
recapitalization. The accounting is similar in form to a reverse acquisition,
except that goodwill or other intangibles are not
recorded.
The
Company now operates as a virtual manufacturer, developing technology and games,
and then licensing such products to third parties for manufacturing and ultimate
distribution. The Company’s business model supports relatively low
overhead costs and efficiencies in operations in the new global manufacturing
economy.
Company
Overview
NanoTech
Entertainment, Inc. is a provider of gaming technology for the coin-op arcade,
casino gaming, and consumer gaming markets. Headquartered in Las Vegas,
Nevada, we operate as a virtual manufacturer, developing technology and
games, and then licensing them to third parties for manufacturing and
distribution.
With an
ever-expanding lineup of technology and products, NanoTech is redefining the
role of developers and manufacturers in the gaming market. NanoTech's team is
compromised of industry veterans of the gaming industry and have collectively
been responsible for dozens of award winning products and multi-million copy
selling video games and technology.
Market
and Industry
We have
experience and products for all aspects of the various gaming industries.
By traversing the market from consumer to coin-op to casino, the Company may be
able to take advantage of all three growth & profitable industries and
balance out the seasonal patterns of each.
Even in
the unsteady economic climate, the gaming market continues to flourish and
expand. In 2008, the arcade industry saw $7.2 billion in revenue, and the
consumer market saw $58 billion with a growth of 19% in 2008. The following are
excerpts from other sources:
|
·
|
“As
people cut back on travel and going out, they are turning more to home
entertainment, providing a boost to the video game industry.” Reuters,
April 2, 2009
|
|
·
|
“The
video game business continues to enjoy robust growth, making it the
fastest growing of the many consumer goods categories.” Market
Watch, Feb 18, 2009
|
4
The
NanoTech team has won numerous awards in recent years including innovative
product of the year in 2005 and 2006 in the arcade industry and innovative
product of the year in 2007 in the casino market.
Products
Below is
a list of the Company’s current product line with detailed descriptions. For
more information on the Company’s products and services you can view our web
site at www.NanoTechEnt.com.
MultiPin™
- There is currently only one Pinball manufacturer left in the world, Stern
Pinball. While they supply over 10,000 machines per year to the market,
there is a huge demand for new and innovative pinball. MultiPin™
represents the next generation in pinball. By replacing the mechanical
parts of a pinball machine with state of the art electronics, MultiPin™ solves
two major problems seen by operators of Pinball machines. First, it
eliminates any mechanical failures, which are common amongst pinball
machines. Secondly, it provides a multi-game platform that can be
constantly updated with new games without having to swap out the machine.
Our proprietary physics engine and motion sensors allow MultiPin™ to accurately
recreate the experience of a mechanical pinball machine, while providing players
with a variety of classic and modern pinball games to choose from.
Xtreme
Rally Racing™ - An Xtreme Off-Road Racing Experience with no boundaries. Xtreme
Rally Racing is an innovative new driving machine that features three modes of
game play:
Xtreme
Off-Road - Race head-to-head against other players and the computer to
checkpoints while driving anywhere on the map with no preset
course.
Timed
Rally Stages - Classic Rally Racing on real world courses. Players will be able
to race in five different countries on real world rally courses.
Xtreme
Stadium Racing - Custom Stadiums designed for Xtreme racing, including a
figure-8 multi-lap course with huge jumps.
NanoNET
Online System - Local and worldwide head-to-head competition in real time
against machines located around the world. Remote operator control of your
machines including diagnostics, accounting reports, and automatic software
updates and enhancements downloaded over the net. Link up to four cabinets
for local multiplayer action.
Pinball
Wizard ™ - Consumer Pinball enthusiasts have been growing with the advent of
Visual Pinball and now Future Pinball. The official Visual Pinball forum
boasts over 155,000 members, and the free version Future Pinball has been
downloaded over 1 million times in the past six months, and over 500,000 copies
in April 2009. We have created the only input device designed to give
these players a way to experience real pinball controls on their personal
computer. Based on the technology developed for the MultiPin™
product we have built a controller that lets people play pinball using
traditional controls and the ability to “shake” and “nudge” the
table.
Mot-Ion™
Adapter - The Mot-Ion adapter is a USB adapter that allows do-it-yourself
Pinball enthusiasts to build their own cabinet using real pinball controls
providing analog inputs for nudging and bumping. This kit includes everything
needed to connect a pinball cabinet to a PC (I/O Board, Digital Plunger, Wiring
Harness).
Opti-Gun™
Adapter - The OptiGun adapter is a USB adapter that allows players to connect
Arcade Light Guns to any USB based system. This universal adapter provides a
complete solution to implement an arcade game including gun inputs, force
feedback outputs, digital inputs, and built-in audio amplifiers. The adapter can
also be used with PC based emulators such as M.A.M.E. to connect arcade light
guns on your home system.
5
Retr-IO™
Adapter - The Retr-IO adapter provides a standard JAMMA interface for USB based
systems. This universal adapter provides a complete solution to implement an
arcade game using joysticks, trackballs, spinners, and buttons, and features
digital outputs and built-in audio and video amplifiers.
The board
works with any PC based system including M.A.M.E and other emulation products.
It provides an all-in-one solution to hooking up traditional arcade controls to
your PC, or any USB system. All digital inputs and outputs are interfaced via
standard keyboard commands, and appear as mapped keys to your games. The default
key mappings match those of many popular PC emulation products. Two trackballs
and two spinners are supported and mapped to the system as mice. The board
supports four player standard configurations or two player four-way joystick and
six-button configurations.
Competition
The
Company will compete against established companies with significantly greater
financial, marketing, research and development, personnel, and other resources
than the Company. Such competition could have a material adverse effect on the
Company's profitability.
Government
Regulation
There are
no government regulations regulating the development and sale of gaming products
for coin-operated machines.
ITEM 1A. RISK
FACTORS
Not
applicable.
ITEM 1B. UNRESOLVED
STAFF COMMENTS
Not
applicable.
ITEM 2.
PROPERTIES
Our
principal Nevada executive offices are located at 3887 Pacific Street, Las
Vegas, NV 89121and our phone number is 702-518-7410.
ITEM 3. LEGAL
PROCEEDINGS
We are
not currently involved in any legal proceedings nor do we have any knowledge of
any threatened litigation.
ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITIES HOLDERS
No
matters were submitted to a vote of security holders during the fiscal year
ended June 30, 2009.
6
PART
II
ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our
common stock is currently quoted on the Pink OTC Markets Inc., more commonly
referred to as the Pink Sheets (the “Pink Sheets”) under the symbol
“NTEK.”
There has
been limited trading of our common stock since our initial listing on the
OTCBB® on
September 22, 2008 under the ticker symbol ALDJ. On June 10, 2009, pursuant to a
corporate name change and a change in control of the Company, the ticker was
changed to NTEK. On October 2, 2009, our symbol was changed to NTEKE for failure
to be current in our reporting obligations with the Securities and Exchange
Commission. On November 3, 2009, our ticker symbol was returned to NTEK and we
were delisted to the Pink Sheets. Below is a table listing the high and low
trading price by quarter for the fiscal year end June 30, 2009.
Quarter Ended
|
High
|
Low
|
||||||
September
30, 2008
|
NA
|
NA
|
||||||
December
31, 2008
|
NA
|
NA
|
||||||
March
31, 2009
|
$ | 0.25 | $ | 0.10 | ||||
June
30, 2009
|
$ | 0.35 | $ | 0.22 |
It is our
plan that upon becoming current with all our required filings pursuant to the
Securities Exchange Act of 1934, as amended, we plan on filing a new Form
15c2-11 application with FINRA for re-listing on the OTCBB®.
Holders
As of
June 30, 2009, we had 14,437,000 shares of common stock, par value $0.001,
issued and outstanding. As of September 30, 2009 15,346,000 shares, December 31,
2009 15,550,000 shares and March 31, 2010, the Company had 15,910,000 shares of
common stock, par value $0.001, issued and outstanding. The stock transfer agent
for our securities is Stalt, Inc., 671 Oak Grove Avenue, Suite C, Menlo Park, CA
94025.
Dividends
There are
no restrictions in our Articles of Incorporation or Bylaws that prevent us from
declaring dividends. The Nevada Revised Statutes, however, do prohibit us from
declaring dividends where, after giving effect to the distribution of the
dividend:
|
1.
|
We
would not be able to pay our debts as they become due in the usual course
of business; or
|
|
2.
|
Our
total assets would be less than the sum of the total liabilities plus the
amount that would be needed to satisfy the rights of stockholders who have
preferential rights superior to those receiving the
distribution.
|
Recent Sales of Unregistered
Securities
The
Company has authorized 75,000,000 shares of common stock with a par value of
$.001, and no preferred stock. Upon inception on November 13, 2007,
the Company had 6,480,000 shares issued and outstanding, which represents the
number of shares issued by Aldar Group, Inc. in the recapitalization
retroactively reflected to have occurred at inception. The
recapitalization also included an effective share issuance of 4,533,000, which
represents the number of AGI shares issued and outstanding at June 30, 2008 (the
most recent fiscal year prior to the recapitalization). Additional
share issuances occurring during the year ended June 30, 2009 to arrive at the
total shares issued and outstanding of 14,437,000 are as follows:
7
During
the period of January through June 2009, the following shares were issued for
cash in accordance with private offerings to unrelated individuals (of which
1,670,000 shares were issued and $87,000 cash received subsequent to the reverse
recapitalization):
Number
|
Stock
|
Cash
|
||||||||||
Date
|
of Shares
|
Price
|
Received
|
|||||||||
1/16/2009
|
100,000 | $ | 0.10 | $ | 10,000 | |||||||
2/19/2009
|
96,000 | $ | 0.05 | $ | 4,800 | |||||||
5/15/2009
|
100,000 | $ | 0.05 | $ | 5,000 | |||||||
5/29/2009
|
20,000 | $ | 0.10 | $ | 2,000 | |||||||
6/14/2009
|
1,500,000 | $ | 0.05 | $ | 75,000 | |||||||
6/23/2009
|
50,000 | $ | 0.10 | $ | 5,000 | |||||||
Totals
|
1,866,000 | $ | 101,800 |
On
January 30, 2009, the Company issued 10,000 shares at $.10 per share to a vendor
to settle a $1,000 debt.
During
March through May 2009, several convertible debenture holders converted their
debentures resulting in the issuance of 400,000 shares of common stock at $.10
for total value of $40,000.
On April
30, 2009 and in connection with the reverse recapitalization between NEI and
AGI, the Company issued 648,000 shares to an unaffiliated entity as a finders’
fee. The shares were valued at $.25 per share, resulting in total
expense of $162,000. As a term of the recapitalization, the Company also issued
500,000 shares at $.001 to an affiliated entity in settlement of $500 in
debt. This issuance resulted in recognition of $124,500 in additional
interest expense.
SUBSEQUENT
ISSUANCES OF EQUITY SECURITIES
On July
1, 2009, the Company issued to an independent investor 200,000 shares of common
stock at $.10 per share for total proceeds of $20,000.
On
September 11, 2009, the Company issued to an independent investor 560,000 shares
of common stock at $.10 per share for total proceeds of $56,000.
On July
24, 2009, the Company entered into a consulting agreement with an unaffiliated
entity whereby the consultant would provide various promotional, strategic
business planning, and acquisition analysis services for the Company in exchange
for 125,000 shares of common stock at $.10 per share for total compensation of
$12,500. The shares were issued upon the execution of the agreement,
which is effective August 1, 2009 through July 31, 2010. The
consultant will also receive $25,000 for every $1,000,000 in funding raised by
the consultant.
On June
19, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 26-week period. The
consultant was to receive cash compensation of $36,400 over the term of the
contract, and 104,000 shares of common stock upon the contract’s
completion. The shares were valued at $.10 per share, for total stock
compensation of $10,400 to be expensed ratably over the contract’s
term. The Company recorded 15 weeks, or $27,000, of consulting
expense during the three months ended September 30, 2009, of which $21,000 was
paid in cash and $6,000 of stock compensation was accrued and reported as the
current liability, stock payable. The shares were subsequently issued
upon the contract’s completion in December 2009.
8
On August
5, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 6-week period. The consultant
was to receive cash compensation of $6,000 over the term of the contract, and
24,000 shares of common stock upon the contract’s completion. The
shares were valued at $.10 per share, for total stock compensation of $2,400 to
be expensed ratably over the contract’s term. The Company recorded 6
weeks, or $8,400, of consulting expense during the three months ended September
30, 2009, of which $6,000 was paid in cash. The 24,000 shares of
common stock were issued upon the contract’s completion on September 16,
2009.
On
October 23, 2009, the Company issued 100,000 shares of common stock at $.05 per
share for $5,000 to an unrelated individual.
On March
30, 2010, the Company issued to an independent investor 50,000 shares of common
stock at $.10 per share for total proceeds of $5,000.
All of
these offerings were undertaken pursuant to the limited offering exemption from
registration under the Securities Act of 1933 as provided in Rule 504 under
Regulation D as promulgated by the U.S. Securities and Exchange Commission.
These offerings met the requirements of Rule 504 in that: (a) the total of funds
raised in the five offerings does not exceed $1,000,000; and (b) the offer and
sale of the Shares was not accomplished by means of any general advertising or
general solicitation.
The class
of persons to whom these offerings were made was "sophisticated investors." As a
result, offers were made only to persons that the Company believed, and had
reasonable grounds to believe, either (a) have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the proposed investment, or (b) can bear the economic risks of the
proposed investment (that is, at the time of investment, could afford a complete
loss). Additionally, sales were made only to persons whom the Company believed,
and had reasonable grounds to believe immediately prior to such sale and upon
making reasonable inquiry, (a) are capable of bearing the economic risk of the
investment, and (b) either personally possess the requisite knowledge and
experience, or, together with their offeree's representative, have such
knowledge and experience.
Securities Authorized for
Issuance under Equity Compensation Plans
We do not
have any equity compensation plans and accordingly we have no securities
authorized for issuance thereunder.
Purchases of Equity
Securities by the Registrant and Affiliated Purchasers
We did
not purchase any of our shares of common stock or other securities during the
year ended June 30, 2009.
[Balance
of Page Intentionally Left Blank]
9
ITEM 6. SELECTED
FINANCIAL DATA
The
following table includes select data extracted from, and should be examined in
conjunction with, the audited financial statements and footnotes for the year
ended June 30, 2009, the period of November 13, 2007 (inception) to June 30,
2008, and the period of November 13, 2007 (inception) to June 30, 2009, as found
under Item 8 of this annual report.
From
|
From
|
|||||||||||
Inception
|
Inception
|
|||||||||||
(November 13,
|
(November 13,
|
|||||||||||
Year Ended
|
2007) to
|
2007) to
|
||||||||||
June 30,
|
June 30,
|
June 30,
|
||||||||||
2009
|
2008
|
2009
|
||||||||||
Gross
sales
|
$ | 28,098 | $ | 27,753 | $ | 55,851 | ||||||
Gross
profit
|
17,768 | 27,753 | 45,521 | |||||||||
Net
loss from continuing and discontinued operations
|
1,299,953 | 475,552 | 1,775,505 | |||||||||
Net
cash provided by financing activities
|
165,774 | 322,500 | 488,274 | |||||||||
Net
cash used in operating activities
|
203,808 | 277,628 | 481,436 | |||||||||
Cash
on hand
|
35,536 | 41,801 | 35,536 | |||||||||
Net
loss per basic and diluted shares
|
.17 | 0.07 | N/A | |||||||||
Weighted
average number of common shares outstanding:
|
7,673,058
(Basic)
|
6,480,000 | N/A | |||||||||
Basic
and Diluted
|
7,975,058
(Diluted)
|
|||||||||||
Cash
dividends declared per common share
|
- | - | - | |||||||||
Property
and equipment, net
|
1,547 | 2,571 | 1,547 | |||||||||
Stockholders’
deficit
|
$ | 1,400,566 | $ | 435,552 | $ | 1,400,566 |
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following plan of operation should be read in conjunction with our financial
statements and the notes thereto included elsewhere in this annual report.
Statements contained herein which are not historical facts are forward-looking
statements, as that term is defined by the Private Securities Litigation Reform
Act of 1995, including statements relating to our plans, objectives,
expectations and intentions. Although we believe that the expectations reflected
in such forward-looking statements are reasonable, forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
from those projected. We caution investors that any forward-looking statements
made by us are not guarantees of future performance and that actual result may
differ materially from those in the forward-looking statements. Such risks and
uncertainties include, without limitation: established competitors who have
substantially greater financial resources and operating histories, regulatory
delays or denials, ability to compete as a start-up company in a highly
competitive market, and access to sources of capital.
10
Results of
Operations
We have
generated revenues from operations of $55,851 since inception and have incurred
$1,806,414 in expenses through June 30, 2009, as well as $10,330 of costs of
goods sold.
The
following table provides selected financial data about our company for the year
ended June 30, 2009 and period of November 13, 2007 (inception) through 2008,
respectively.
Balance Sheet Data
|
June 30, 2009
|
June 30, 2008
|
||||||
Cash
|
$ | 35,536 | $ | 41,801 | ||||
Total
Current Assets
|
$ | 101,836 | $ | 114,377 | ||||
Total
Assets
|
$ | 103,383 | $ | 116,948 | ||||
Total
Liabilities
|
$ | 1,503,949 | $ | 552,500 | ||||
Stockholders'
Deficit
|
$ | 1,400,566 | $ | 435,552 |
Plan of
Operation
We have
developed a plan of operation reflecting our objectives and anticipated growth
for the next 12 months and beyond. In our plan, we identify our cash
requirements, our new product development, and our required staffing and
additional funding requirements to fulfill our business objectives.
Cash
Requirements
We
estimate that we require a minimum of approximately $250,000 and a maximum of
approximately $5,000,000 to operate for the next 12 months from the date of
this annual report. The minimum of $250,000 is required for operating expenses
and general operational overhead. The maximum will be required to fully
implement our business plan which will include the following:
|
·
|
Product
Development – This will include programming, engineering, and prototype
building.
|
|
·
|
Trade
Shows – We plan to exhibit our existing products and roll out new product
development through several trade shows during calendar year
2010.
|
|
·
|
Prototype
Engineering – This will include research and development of new technology
to our existing products and any new products to be
developed.
|
|
·
|
U.S
Patent Filings
|
11
To the
extent we are unable to meet our operating expenses, we may borrow funds from
our current management or other affiliates, or we may attempt to raise capital
from private individuals or institutional investment equity funds. Any funds
generated from product sales if any, in our company that exceeds our operating
expenses and debt repayments will be used to expand our operations.
Revenues
The
Company has recorded $55,851 in revenues from operations from inception on
November 13, 2007 through June 30, 2009, which was generated from product
licensing fees and other related business. These revenues have come mainly from
the sale of prototype kits to OEM customers for the MultiPin and XRR
games. These sales were for test units while the products are completing
the development cycle. We have produced additional revenue from consumer level
products that we sell on our web store.
We
currently have a purchase order with Cosmic Video in the amount of $85,000 USD
for our newly developed product named Xtreme Rally Racing. The purchase order is
for fifty (50) units and is conditional on game completion and field
tests.
Operating
and General & Administrative Expenses
Operating
expenses consisting of office rent, administrative staff, salaries, and other
general administrative expenses totaled $1,098,937 and $495,083 for the year
ended June 30, 2009 and the period of November 13, 2007 (inception) through June
30, 2008, respectively. Since inception through June 30, 2009, we have
incurred operating expenses totaling $1,594,020.
Income
Taxes
The
Company does not anticipate having to pay income taxes in the upcoming years due
to our absence of net profits.
Capital
and Liquidity
As of
June 30, 2009 and 2008, we had total current assets of $101,836 and $114,377,
and total current liabilities of $1,253,949 and $302,500, respectively.
During
the year ended June 30, 2009 and period of November 13, 2007 (inception) through
June 30, 2008, the Company received $87,000 and $20,000, respectively, in cash
from the sale of its common stock, and $107,000 since inception through June 30,
2009. These proceeds are being used for operating and general and
administrative expenses to sustain the Company through its development stage
until it establishes profitable operations or receives cash from the issuance of
additional common stock.
We had
cash on hand of $35,536 and $41,801 as of June 30, 2009 and 2008, respectively.
We do not have sufficient cash to meet our short-term expansion needs over the
next 12 months, which are to sell our existing products, expand our product
development, costs of research and development, trade show presentations,
financing of product inventory, development of prototypes, and protection of our
intellectual capital through the applications for U.S. patents.
[Balance
of Page Intentionally Left Blank]
12
ITEM
8 Financial Statements and Supplementary Data
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Consolidated
Financial Statements
For the
Period of November 13, 2007 (Inception)
through
June 30, 2009
13
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Index to
Consolidated Financial Statements
For the
Period of November 13, 2007 (Inception)
through
June 30, 2009
Report
of Independent Registered Public Accounting Firm
|
15
|
Consolidated
Balance Sheets
|
16
|
Consolidated
Statements of Operations
|
17
|
Consolidated
Statement of Changes in Stockholders’ Deficit
|
18
|
Consolidated
Statements of Cash Flows
|
19
|
Notes
to Consolidated Financial Statements
|
21
|
14
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
The Board of Directors and Stockholders
NanoTech
Entertainment, Inc.
Las
Vegas, NV
We
have audited the accompanying consolidated balance sheets of NanoTech
Entertainment, Inc. (a development stage company) (the “Company”) as of
June 30, 2009 and 2008, and the related consolidated statements of
operations, changes in stockholders' deficit, and cash flows for the year
ended June 30, 2009, the period of November 13, 2007 (inception) through
June 30, 2008, and for the period of November 13, 2007 (inception) through
June 30, 2009. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of June
30, 2009 and 2008, and the results of its operations and cash flows for
the year ended June 30, 2009, the period of November 13, 2007 (inception)
through June 30, 2008, and for the period of November 13, 2007 (inception)
through December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note J to the
financial statements, the Company has generated minimal revenues from
operations and has incurred net losses since inception. This raises
substantial doubt about the Company's ability to meet its obligations and
to continue as a going concern. Management's plans in regard to this
matter are described in Note J. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
/s/ Child, Van Wagoner
& Bradshaw, PLLC
Child,
Van Wagoner & Bradshaw, PLLC
Salt
Lake City, UT
May
24, 2010
|
15
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Consolidated
Balance Sheets
June 30,
|
June 30,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 35,536 | $ | 41,801 | ||||
Inventory
(Note B)
|
8,800 | - | ||||||
Prepaid
expenses
|
2,500 | - | ||||||
Prepaid
expenses – related party (Note C)
|
- | 57,576 | ||||||
Prepaid
royalties (Note K)
|
55,000 | 15,000 | ||||||
Total
current assets
|
101,836 | 114,377 | ||||||
Property
and equipment (Note B)
|
3,071 | 3,071 | ||||||
Less:
accumulated depreciation
|
(1,524 | ) | (500 | ) | ||||
Net
property and equipment
|
1,547 | 2,571 | ||||||
Total
assets
|
$ | 103,383 | $ | 116,948 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
LIABILITIES
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 81,553 | $ | - | ||||
Cash
drawn in excess of bank balance
|
5,174 | - | ||||||
Accrued
liabilities – related party (Note C)
|
981,906 | 250,000 | ||||||
Royalties
payable (Note K)
|
31,771 | - | ||||||
Accrued
interest, convertible debentures (Note F)
|
458 | - | ||||||
Accrued
interest, notes payable (Note D)
|
17,586 | - | ||||||
Accrued
interest, notes payable – related party (Note C)
|
9,223 | - | ||||||
Convertible
debentures, net (Note F)
|
15,778 | - | ||||||
Notes
payable – current (Note D)
|
30,000 | - | ||||||
Notes
payable – current portion, related party (Note C)
|
80,500 | 52,500 | ||||||
Total
current liabilities
|
1,253,949 | 302,500 | ||||||
Long-Term
Liabilities
|
||||||||
Notes
payable – noncurrent portion (Note D)
|
250,000 | 250,000 | ||||||
Total
liabilities
|
1,503,949 | 552,500 | ||||||
STOCKHOLDERS’
DEFICIT (Note E)
|
||||||||
Common
stock, $.001 par value, 75,000,000 shares authorized, 14,437,000 and
6,480,000 shares issued and outstanding as of June 30, 2009 and June 30,
2008, respectively
|
14,437 | 6,480 | ||||||
Additional
paid-in capital
|
360,502 | 33,520 | ||||||
Deficit
accumulated during the development stage
|
(1,775,505 | ) | (475,552 | ) | ||||
Total
stockholders’ deficit
|
(1,400,566 | ) | (435,552 | ) | ||||
Total
liabilities and stockholders’ deficit
|
$ | 103,383 | $ | 116,948 |
The
accompanying notes are an integral part of these consolidated financial
statements.
16
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Consolidated
Statements of Operations
From Nov. 13,
|
From Nov. 13,
|
|||||||||||
For the Year
|
2007 (Inception)
|
2007 (Inception)
|
||||||||||
Ended June 30,
|
through June 30,
|
through June 30,
|
||||||||||
2009
|
2008
|
2009
|
||||||||||
Revenues:
|
||||||||||||
Sales,
net
|
$ | 28,098 | $ | 27,753 | $ | 55,851 | ||||||
Less:
costs of goods sold
|
(10,330 | ) | - | (10,330 | ) | |||||||
Gross
profit
|
17,768 | 27,753 | 45,521 | |||||||||
Operating
Expenses:
|
||||||||||||
Selling,
general and administrative
|
1,098,937 | 495,083 | 1,594,020 | |||||||||
Other
Income (Expenses)
|
||||||||||||
Interest
expense
|
(204,172 | ) | (8,222 | ) | (212,394 | ) | ||||||
Net
loss before income taxes
|
(1,285,341 | ) | (475,552 | ) | (1,760,893 | ) | ||||||
Provision
for income taxes
|
- | - | - | |||||||||
Net
loss before discontinued operations
|
(1,285,341 | ) | (475,552 | ) | (1,760,893 | ) | ||||||
Discontinued
operations:
|
||||||||||||
Loss
from discontinued operations, net of provision for income taxes of
$0
|
(14,612 | ) | - | (14,612 | ) | |||||||
Net
loss available to common stockholders
|
$ | (1,299,953 | ) | $ | (475,552 | ) | $ | (1,775,505 | ) | |||
Continuing
operations
|
||||||||||||
Basic
|
$ | (.17 | ) | $ | (.07 | ) | ||||||
Diluted
|
$ | (.16 | ) | $ | (.07 | ) | ||||||
Discontinued
operations
|
||||||||||||
Basic
|
$ | (.00 | ) | $ | (.00 | ) | ||||||
Diluted
|
$ | (.00 | ) | $ | (.00 | ) | ||||||
Total
net loss per share
|
||||||||||||
Basic
|
$ | (.17 | ) | $ | (.07 | ) | ||||||
Diluted
|
$ | (.16 | ) | $ | (.07 | ) | ||||||
Weighted
average shares outstanding
|
||||||||||||
Basic
|
7,673,058 | 6,480,000 | ||||||||||
Diluted
|
7,975,058 | 6,480,000 |
The
accompanying notes are an integral part of these consolidated financial
statements.
17
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Consolidated
Statement of Changes in Stockholders’ Deficit
Deficit Accumulated
|
||||||||||||||||||||
During the
|
||||||||||||||||||||
Common Stock
|
Additional
|
Development
|
Total
|
|||||||||||||||||
Shares
|
Amount
|
Paid-In Capital
|
Stage
|
Stockholders’ Deficit
|
||||||||||||||||
Balance,
Nov. 13, 2007 (Inception)
|
6,480,000 | $ | 6,480 | $ | 33,520 | $ | - | $ | 40,000 | |||||||||||
Net
loss
|
- | - | - | (475,552 | ) | (475,552 | ) | |||||||||||||
Balance,
June 30, 2008
|
6,480,000 | 6,480 | 33,520 | (475,552 | ) | (435,552 | ) | |||||||||||||
Effective
share issuance in
|
||||||||||||||||||||
recapitalization
on 04/30/2009
|
4,533,000 | 4,533 | (145,194 | ) | - | (140,661 | ) | |||||||||||||
Conversion
of debentures, $.10/share
|
400,000 | 400 | 39,600 | - | 40,000 | |||||||||||||||
Conversion
of loan, $.25/share
|
500,000 | 500 | 124,500 | - | 125,000 | |||||||||||||||
Settlement
of vendor debt, $.10/share
|
10,000 | 10 | 990 | - | 1,000 | |||||||||||||||
Shares
issued as finder fee, $.25/share
|
648,000 | 648 | 161,352 | - | 162,000 | |||||||||||||||
Shares
issued in private placement,
|
||||||||||||||||||||
$.10/share
|
170,000 | 170 | 16,830 | - | 17,000 | |||||||||||||||
Shares
issued in private placement,
|
||||||||||||||||||||
$.05/share
|
1,696,000 | 1,696 | 83,104 | - | 84,800 | |||||||||||||||
Beneficial
conversion feature on
|
||||||||||||||||||||
convertible
debentures
|
- | - | 45,800 | - | 45,800 | |||||||||||||||
Net
loss
|
- | - | - | (1,299,953 | ) | (1,299,953 | ) | |||||||||||||
Balance,
June 30, 2009
|
14,437,000 | $ | 14,437 | $ | 360,502 | $ | (1,775,505 | ) | $ | (1,400,566 | ) |
The
accompanying notes are an integral part of these consolidated financial
statements.
18
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows
From Nov. 13,
|
From Nov. 13,
|
|||||||||||
For the Year
|
2007 (Inception)
|
2007 (Inception)
|
||||||||||
Ended June 30,
|
through June 30,
|
through June 30,
|
||||||||||
2009
|
2008
|
2009
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
loss
|
$ | (1,299,953 | ) | $ | (475,552 | ) | $ | (1,775,505 | ) | |||
Adjustments
to reconcile net loss to
|
||||||||||||
net
cash used in operating activities:
|
||||||||||||
Depreciation
expense
|
1,727 | 500 | 2,227 | |||||||||
Common
stock issued for finder fees
|
162,000 | - | 162,000 | |||||||||
Common
stock issued for services
|
- | 20,000 | 20,000 | |||||||||
Amortization
of debt discount
|
31,378 | - | 31,378 | |||||||||
Interest
on debt converted to common stock
|
124,500 | - | 124,500 | |||||||||
Loss
on disposal of fixed assets
|
10,373 | - | 10,373 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Decrease
in accounts receivable
|
572 | - | 572 | |||||||||
Increase
in inventory
|
(8,800 | ) | - | (8,800 | ) | |||||||
Increase
in prepaid expenses
|
(2,500 | ) | - | (2,500 | ) | |||||||
(Increase)
decrease in
|
||||||||||||
prepaid
expenses – related party
|
57,576 | (57,576 | ) | - | ||||||||
Increase
in prepaid royalties
|
(40,000 | ) | (15,000 | ) | (55,000 | ) | ||||||
Increase
in accounts payable
|
43,274 | - | 43,274 | |||||||||
Increase
in accrued liabilities – related party
|
659,015 | 250,000 | 909,015 | |||||||||
Increase
in accrued interest,
|
||||||||||||
convertible
debentures
|
307 | - | 307 | |||||||||
Increase
in accrued interest, notes payable
|
17,586 | - | 17,586 | |||||||||
Increase
in accrued interest, notes
|
||||||||||||
payable
– related party
|
7,366 | - | 7,366 | |||||||||
Increase
in royalties payable
|
31,771 | - | 31,771 | |||||||||
Net
cash used in operating activities
|
(203,808 | ) | (277,628 | ) | (481,436 | ) | ||||||
Cash
flows from investing activities:
|
||||||||||||
Net
cash received in reverse recapitalization
|
31,769 | - | 31,769 | |||||||||
Purchase
of property and equipment
|
- | (3,071 | ) | (3,071 | ) | |||||||
Cash
flows provided by (used in)
|
||||||||||||
investing
activities
|
31,769 | (3,071 | ) | 28,698 | ||||||||
Cash
flows from financing activities:
|
||||||||||||
Cash
drawn in excess of bank balance
|
5,174 | - | 5,174 | |||||||||
Proceeds
from notes payable – related party
|
25,000 | 52,500 | 77,500 | |||||||||
Repayment
of notes payable – related party
|
(2,700 | ) | - | (2,700 | ) | |||||||
Proceeds
from notes payable
|
30,000 | 250,000 | 280,000 | |||||||||
Proceeds
from issuance of common stock
|
87,000 | 20,000 | 107,000 | |||||||||
Proceeds
from issuance of convertible debentures
|
21,300 | - | 21,300 | |||||||||
Net
cash provided by financing activities
|
165,774 | 322,500 | 488,274 | |||||||||
Increase
(decrease) in cash
|
(6,265 | ) | 41,801 | 35,536 | ||||||||
Cash,
beginning of period
|
41,801 | - | - | |||||||||
Cash,
end of period
|
$ | 35,536 | $ | 41,801 | $ | 35,536 |
(continued)
19
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows (cont’d)
From Nov. 13,
|
From Nov. 13,
|
|||||||||||
For the Year
|
2007 (Inception)
|
2007 (Inception)
|
||||||||||
Ended June 30,
|
through June 30,
|
through June 30,
|
||||||||||
2009
|
2008
|
2009
|
||||||||||
Non-cash
investing and financing activities
|
||||||||||||
Issuance
of common stock upon conversion
|
||||||||||||
of
debentures
|
$ | 40,000 | $ | - | $ | 40,000 | ||||||
Issuance
of common stock upon conversion
|
||||||||||||
of
loan
|
$ | 500 | $ | - | $ | 500 | ||||||
Issuance
of common stock in settlement of
|
||||||||||||
vendor
debt
|
$ | 1,000 | $ | - | $ | 1,000 | ||||||
Conversion
of notes payable to convertible
|
||||||||||||
debentures
|
$ | 21,400 | $ | - | $ | 21,400 | ||||||
Supplemental
cash flow information:
|
||||||||||||
Interest
paid in cash
|
$ | 21,835 | $ | 8,222 | $ | 30,057 | ||||||
Income
taxes paid in cash
|
$ | - | $ | - | $ | - |
The
accompanying notes are an integral part of these consolidated financial
statements.
20
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
A.
|
ORGANIZATION
|
NanoTech
Entertainment, Inc. (“NEI”) was incorporated under the laws of the state of
Nevada on November 13, 2007. On April 30, 2009, NEI entered into a
Sale and Acquisition Agreement (the “Agreement”) with Aldar Group, Inc. (“AGI”),
a Nevada corporation, wherein AGI acquired 100% of NEI’s issued and outstanding
common stock through the issuance of 6,480,000 common shares. As a
result of the Agreement, AGI changed its name to NanoTech Entertainment, Inc.
(“NTI”) to better reflect the direction of the newly formed
entity. For accounting purposes, the share exchange transaction was
treated as a capital transaction where AGI, as the shell corporation and legal
acquirer, issued stock for the net monetary assets of NEI, the accounting
acquirer, accompanied by a recapitalization. The accounting is similar in form
to a reverse acquisition, except that goodwill or other intangibles are not
recorded. All references to NTI’s common stock have been restated to
reflect the equivalent numbers of AGI’s common shares (Note I).
The
accompanying consolidated financial statements include those of NEI for the
period of inception on November 13, 2007 through June 30, 2009, with those of
AGI consolidated from the date of the Agreement forward. NEI and AGI
for these periods are collectively referred to as “the Company,” and all
significant intercompany balances and transactions have been eliminated in
consolidation.
The
Company operates as a virtual manufacturer, developing technology and games, and
then licensing such products to third parties for manufacturing and ultimate
distribution. AGI was initially formed on July 15, 2004 for the
purpose of operating in the horse racing, selling, and breeding
industry. Due to the Agreement, these operations have been
discontinued (Note H).
DEVELOPMENT STAGE COMPANY
The
Company is considered to be in the development stage as defined in Statement of
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic No. 915. The Company’s efforts have been devoted
primarily to raising capital, borrowing funds and attempting to implement its
planned, principal activities.
B.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
USE OF ESTIMATES
The
preparation of the Company’s financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. The Company’s periodic filings with the Securities and
Exchange Commission include, where applicable, disclosures of estimates,
assumptions, uncertainties and markets that could affect the financial
statements and future operations of the Company.
CASH
AND CASH EQUIVALENTS
Cash and
cash equivalents include cash in banks, money market funds, and certificates of
term deposits with maturities of less than three months from inception, which
are readily convertible to known amounts of cash and which, in the opinion of
management, are subject to an insignificant risk of loss in
value. The Company’s cash balances totaled $35,536 and $41,801 as of
June 30, 2009 and 2008, respectively.
21
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
B.
|
SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
|
INVENTORY
The
Company’s inventory is stated at the lower of cost or market using the FIFO
costing method. Inventory on hand totaled $8,800 at June 30, 2009 and
consisted entirely of finished goods gaming equipment available and ready for
sale.
PROPERTY
AND EQUIPMENT
The
Company’s property and equipment is comprised of office and computer equipment,
which are stated at cost. Depreciation is calculated over the
estimated useful lives ranging from 3 to 7 years using the straight – line
method. The Company is in the development stage and has only acquired
$3,071 in fixed assets since inception, which had accumulated depreciation of
$1,524 and $500 at June 30, 2009 and 2008, respectively.
REVENUE
RECOGNITION
Revenues
for gaming equipment sales are recognized when risks associated with ownership
have passed to unaffiliated customers, and when all criteria of ASB Topic No.
605 (SAB Topic 13) have been met. Typically, this occurs when
finished products are shipped.
NET
INCOME (LOSS) PER SHARE OF COMMON STOCK
ASC Topic
No. 260 requires presentation of basic and diluted EPS on the face of the
statement of operations for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. In the accompanying financial statements, basic loss per
share is computed by dividing net loss by the weighted average number of shares
of common stock outstanding during the period, while diluted loss per share
takes into consideration the convertible bonds (Note F) and their related
interest and debt discount. The potential conversion of the bonds
would result in an antidilutive effect, primarily due to the Company’s
continuing losses. The Company has no other potentially dilutive
securities, such as options or warrants, currently issued and
outstanding. Loss from discontinued operations was not segregated in
the below computation because it had no impact due to
immateriality.
Year Ended June 30
|
||||||||
2009
|
2008
|
|||||||
BASIC
|
||||||||
Net
loss
|
$ | (1,299,953 | ) | $ | (475,552 | ) | ||
Weighted
average common shares outstanding
|
7,673,058 | 6,480,000 | ||||||
Net
loss per share (Basic)
|
$ | (0.17 | ) | $ | (0.07 | ) | ||
DILUTED
|
||||||||
Net
loss (Basic)
|
$ | (1,299,953 | ) | $ | (475,552 | ) | ||
Convertible
bond interest expense
|
31,685 | - | ||||||
Unamortized
convertible bond issuance costs
|
(14,222 | ) | - | |||||
Net
loss (Diluted)
|
$ | (1,282,490 | ) | $ | (475,552 | ) | ||
Weighted
average common shares outstanding (Basic)
|
7,673,058 | 6,480,000 | ||||||
Convertible
preferred shares
|
- | - | ||||||
Convertible
bonds and notes
|
302,000 | - | ||||||
Warrants
and options
|
- | - | ||||||
Weighted
average common shares outstanding (Diluted)
|
7,975,058 | 6,480,000 | ||||||
Net
loss per share (Diluted)
|
$ | (0.16 | ) | $ | (0.07 | ) |
22
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
B.
|
SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
|
RECENTLY-ISSUED ACCOUNTING
PRONOUNCEMENTS
In June
2009 the FASB established the Accounting Standards Codification ("Codification"
or "ASC") as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the preparation of financial
statements in accordance with generally accepted accounting principles in the
United States ("GAAP"). Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") issued under authority of federal securities laws
are also sources of GAAP for SEC registrants. Existing GAAP was not intended to
be changed as a result of the Codification, and accordingly the change did not
impact our financial statements. The ASC does change the way the guidance is
organized and presented.
Statement
of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic 855), "Subsequent Events," SFAS No.
166 (ASC Topic 810), "Accounting for Transfers of
Financial Assets-an Amendment of FASB Statement No. 140," SFAS No. 167
(ASC Topic 810), "Amendments
to FASB Interpretation No. 46(R)," and SFAS No. 168 (ASC Topic 105),
"The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles-a
replacement of FASB Statement No. 162," were recently issued. SFAS No.
165, 166, 167, and 168 have no current applicability to the Company or their
effect on the financial statements would not have been significant.
Accounting
Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair
Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605),
Multiple-Deliverable Revenue
Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that
include Software Elements, and various other ASU's No. 2009-2 through ASU
No. 2010-18 which contain technical corrections to existing guidance or affect
guidance to specialized industries or entities were recently issued. These
updates have no current applicability to the Company or their effect on the
financial statements would not have been significant.
SEGMENT
INFORMATION
ASC Topic
No. 280 requires public enterprises to report certain information about
operating segments, including products and services, geographic areas of
operations, and major customers. NTI is considered a separately reportable
business segment that meets the ‘Single Industry Dominance’ test, which
eliminates the segment disclosure requirements if the segment accounts for 90%
or more of the combined revenue, reported profit, and assets. The revenues,
profits, and assets reported in the consolidated financial statements are
primarily those of NTI. ADI does not qualify as a separately reportable business
segment; certain operations of ADI for the period of May 1, 2009 (the day
following the Agreement date) through June 30, 2009 have been reported as
discontinued operations in the statements of operations (Note H).
C.
|
RELATED
PARTY TRANSACTIONS
|
The
Company pays rent expense to two officers pursuant to long-term rent agreements
(see Note N) for the use of property for business purposes. The
amounts incurred by the Company and paid to the officers for rent for the
periods ended June 30, 2009 and 2008 totaled $197,860 and $115,547,
respectively. These amounts have been recorded in selling, general
and administrative expenses for the same periods.
23
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
C.
|
RELATED
PARTY TRANSACTIONS (CONT’D)
|
Several
of the Company’s current and former officers and their affiliates have provided
funding in the form of notes payable, totaling $80,500 and $52,500 as of June
30, 2009 and 2008, respectively. The notes carry interest rates
ranging from 14% to 20%, resulting in interest expense of $11,458 and $3,675 for
the years ended June 30, 2009 and 2008, and accrued interest of $9,223 and $0 as
of June 30, 2009 and 2008, respectively. The notes are due on demand
and therefore classified as current liabilities. Interest has not
been imputed due to its immaterial impact on the financial
statements.
The
Company has employment agreements with two of its officers whereby the officers
are entitled to the annual salaries payable as follows:
Salary for the Year Ended June
30,
|
||||||||||||||||||||
2008
|
2009
|
2010
|
2011
|
Total
|
||||||||||||||||
1)
|
$ | 175,000 | $ | 400,000 | $ | 500,000 | $ | 275,000 | $ | 1,350,000 | ||||||||||
2)
|
75,000 | 162,500 | 192,500 | 105,000 | 535,000 | |||||||||||||||
Total
|
$ | 250,000 | $ | 562,500 | $ | 692,500 | $ | 380,000 | $ | 1,885,000 |
The June
2009 and 2008 salaries have been accrued and will be paid as cash flows
allow. The Company also reimburses its officers for expenses they
incur in the Company’s behalf. Amounts owed to officers totaled
$109,222 and $0 at June 30, 2009 and 2008, respectively. Interest has
not been imputed due to its immaterial impact on the financial
statements.
The
Company has incurred liabilities in the ordinary course of business with several
individuals and entities affiliated with the Company. These amounts
totaled $60,184 and $0 at June 30, 2009 and 2008,
respectively. Interest has not been imputed due to its immaterial
impact on the financial statements.
During
the year ended June 30, 2008, the Company made advances to officers and
directors for travel and other budgeted costs. These amounts totaled
$0 and $57,576 at June 30, 2009 and 2008, respectively.
D.
|
NOTES
PAYABLE
|
The
Company has originated the following notes payable with unaffiliated entities
and individuals:
Principal Balance
June 30,
|
Accrued Interest
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Note
1, 10% interest, due April 30, 2011
|
$ | 250,000 | $ | 250,000 | $ | 16,668 | $ | - | ||||||||
Note
2, 20% interest, due on demand
|
25,000 | - | 835 | - | ||||||||||||
Note
3, 20% interest, due on demand
|
5,000 | - | 83 | - | ||||||||||||
Totals
|
280,000 | - | $ | 17,586 | $ | - | ||||||||||
Less
current portion (Notes 2 & 3)
|
(30,000 | ) | - | |||||||||||||
Noncurrent
portion (Note 1)
|
$ | 250,000 | $ | 250,000 |
The notes
are interest payments only, with principal and accrued interest payable upon
maturity or demand, as indicated above.
24
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
E.
|
STOCKHOLDERS’
DEFICIT
|
The
Company has authorized 75,000,000 shares of common stock with a par value of
$.001, and no preferred stock. Upon inception on November 13, 2007,
the Company had 6,480,000 shares issued and outstanding, which represents the
number of shares issued by ADI in the recapitalization retroactively reflected
to have occurred at inception. The recapitalization also included an
effective share issuance of 4,533,000, which represents the number of ADI shares
issued and outstanding at June 30, 2008 (the most recent fiscal year prior to
the recapitalization). Additional share issuances occurring during
the year ended June 30, 2009 to arrive at the total shares issued and
outstanding of 14,437,000 are as follows:
During
the period of January through June 2009, the following shares were issued for
cash in accordance with private offerings (of which 1,670,000 shares were issued
and $87,000 cash received subsequent to the reverse
recapitalization):
Number
|
Stock
|
Cash
|
||||||||||
Date
|
of Shares
|
Price
|
Received
|
|||||||||
1/16/2009
|
100,000 | $ | 0.10 | $ | 10,000 | |||||||
2/19/2009
|
96,000 | 0.05 | 4,800 | |||||||||
5/15/2009
|
100,000 | 0.05 | 5,000 | |||||||||
5/29/2009
|
20,000 | 0.10 | 2,000 | |||||||||
6/14/2009
|
1,500,000 | 0.05 | 75,000 | |||||||||
6/23/2009
|
50,000 | 0.10 | 5,000 | |||||||||
Totals
|
1,866,000 | $ | 101,800 |
On
January 30, 2009, the Company issued 10,000 shares at $.10 per share to a vendor
to settle a $1,000 debt.
During
March through May 2009, several convertible debenture holders converted their
debentures resulting in the issuance of 400,000 shares of common stock at $.10
for total cash of $40,000 (Note F).
On April
30, 2009 and in connection with the reverse recapitalization between NEI and
AGI, the Company issued 648,000 shares to an unaffiliated entity as a finders’
fee. The shares were valued at $.25 per share, resulting in total
expense of $162,000. As a term of the recapitalization, the Company also issued
500,000 shares at $.001 to an affiliated entity in settlement of $500 in debt
(Note H). This issuance resulted in recognition of $124,500 in
additional interest expense.
F.
|
CONVERTIBLE
DEBENTURES
|
During
March through May 2009, the Company issued convertible debentures bearing
interest at 6% with a term of two years. The debenture principle and
accrued interest may be converted into shares of the Company’s common stock in
the first year at a conversion price of $0.10 or in the second year at a price
which is 80% of the three lowest closing bid prices during the ten days prior to
conversion. During the year ended June 30, 2009, the Company issued
debentures totaling $70,200 (convertible into potentially 702,000 shares of
common stock based on a $.10 conversion rate), which amount includes cash
received of $48,800 (of which $21,300 was received after the reverse
recapitalization) and $21,400 in notes payable converted to convertible
debentures on March 12, 2009. The fair market value of the
stock on the convertible debenture issuance dates ranged from $.10 to $.25,
resulting in a beneficial conversion feature of $45,800, of which $31,378 was
amortized during the year ended June 30, 2009.
25
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
F.
|
CONVERTIBLE
DEBENTURES (CONT’D)
|
The
following debentures were converted during the year ended June 30,
2009:
Conversion
|
Number
|
Conversion
|
||||||||||
Date
|
of Shares
|
Price
|
Total
|
|||||||||
3/13/2009
|
107,000 | $ | 0.10 | $ | 10,700 | |||||||
3/27/2009
|
50,000 | 0.10 | 5,000 | |||||||||
3/31/2009
|
10,000 | 0.10 | 1,000 | |||||||||
4/3/2009
|
20,000 | 0.10 | 2,000 | |||||||||
5/4/2009
|
80,000 | 0.10 | 8,000 | |||||||||
5/7/2009
|
50,000 | 0.10 | 5,000 | |||||||||
5/29/2009
|
83,000 | 0.10 | 8,300 | |||||||||
Total
|
400,000 | $ | 40,000 |
At June
30, 2009, the Company’s unconverted debentures totaled $15,778 ($30,200
principal netted with $14,422 unamortized debt discount), while the potential
number of shares into which the debentures could be converted was 302,000 based
on a $.10 conversion rate. Accrued interest on the bonds totaled $458
at June 30, 2009.
G.
|
INCOME
TAXES
|
The
Company recognizes the tax effects of transactions in the year in which such
transactions enter into the determination of net income, regardless of when
reported for tax purposes. Deferred taxes are provided in the financial
statements under ASC Topic No. 740 to give effect to the resulting temporary
differences which may arise from differences in the bases of fixed assets,
depreciation methods, allowances, and start-up costs based on the income taxes
expected to be payable in future years.
Deferred
compensation in the amount of $812,500 has been expensed per the financial
statements but is not deducted for tax purposes in the current
year. This results in a deferred tax asset of $284,375 which would
reduce tax payments in the future as the compensation is subsequently recognized
for tax purposes. This deferred tax asset however is offset in its
entirety by a valuation allowance of the same amount due to doubts concerning
NanoTech’s ability to utilize the deferred tax asset in future years. The tax
effect of a permanent difference affecting tax vs. book operating loss
carryforwards is $115,640.
Operating
loss carryforwards of $1,333,316 (including permanent differences of $370,311
attributed to AGI’s accumulated losses on the reverse recapitalization date)
generated since inception through June 30, 2009 will begin to expire in
2027. Accordingly, deferred tax assets of approximately $466,661 were
completely offset by a valuation allowance, which increased by approximately
$300,218 and $166,443 during the year ended June 30, 2009 and the period of
November 13, 2007 (inception) through June 30, 2008,
respectively. This deferred tax asset was also offset due to a lack
of evidence that suggests that NanoTech would likely be able to utilize the
asset to offset tax payments in future years.
H.
|
DISCONTINUED
OPERATIONS
|
Due to
the reverse recapitalization (Note I) effective April 30, 2009 between AGI and
NEI, the Company elected to discontinue its horse selling, racing, and breeding
operations. Losses from the discontinued operations of AGI from the
period of May 1, 2009 through June 30, 2009 totaling $14,612 are reported in the
statement of operations and consist primarily of a $10,373 loss on the disposal
of the horses and syndicates, as well as minimal jockey, breeding, and boarding
fees, and depreciation and amortization on the horses and
syndicates. The effects of losses from discontinued operations on
basic and diluted loss per share are negligible.
26
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
I.
|
REVERSE
RECAPITALIZATION
|
On April
30, 2009, NanoTech Entertainment, Inc. (“NEI”) entered into a Share Exchange
Agreement (the “Agreement”) with Aldar Group, Inc. (“AGI”), wherein AGI acquired
100% of NEI’s issued and outstanding common stock through the issuance of
6,480,000 common shares. As a result of the Agreement, AGI changed
its name to NanoTech Entertainment, Inc.(“NTI”) to better reflect the direction
of the newly formed entity. The transaction was a one-for-one stock
exchange wherein each of the companies’ shares were valued at $.25 for a total
purchase price of $1,620,000. In connection with the reverse
recapitalization, the Company issued 648,000 shares to an unaffiliated entity as
a finders’ fee. The shares were also valued at $.25 per share,
resulting in total expense of $162,000. As a term of the recapitalization, the
Company also issued 500,000 shares valued at $.25 to an affiliated entity in
settlement of $500 in debt, which resulted in $124,500 in additional interest
expense.
J.
|
GOING
CONCERN CONSIDERATIONS
|
The
Company’s financial statements have been prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. During the year ended June 30,
2009 and the period from November 13, 2007 (inception) to June 30, 2008, the
Company incurred net losses totaling $1,299,953 and $475,552, respectively,
resulting in an accumulated deficit of $1,775,505 at June 30,
2009. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying financial statements do
not include any adjustments that might result from the outcome of this
uncertainty. The Company's ability to meet its ongoing financial requirements is
dependent on management being able to obtain additional equity and/or debt
financing, the realization of which is not assured.
K.
|
ROYALTIES
|
The
Company has entered into several licensing agreements whereby the Company
licenses certain gaming software from various developers. The Company
is responsible for paying royalties to the developers based on product
sales. In the event that no product is sold, the Company is also
required to pay a minimum royalty in order to maintain exclusivity (i.e., the
developer cannot license the same software to the Company's
competitors). Certain developers also require prepayment of royalties
that are either offset by future sales, or expire at the end of a calendar year
- at which point they are expensed. The Company had prepaid $55,000
and $15,000 in royalties at June 30, 2009 and 2008, respectively. No
sales of the licensed products had occurred during the period of inception on
November 13, 2007 through June 30, 2009, so only exclusivity minimums of $31,771
and $0 have been accrued at June 30, 2009 and 2008, respectively.
L.
|
SUBSEQUENT
EVENTS
|
On July
1, 2009, the Company issued to an independent investor 200,000 shares of common
stock at $.10 per share for total proceeds of $20,000. On September
11, 2009, the Company issued to an independent investor 560,000 shares of common
stock at $.10 per share for total proceeds of $56,000.
On July
24, 2009, the Company entered into a consulting agreement with an unaffiliated
entity whereby the consultant would provide various promotional, strategic
business planning, and acquisition analysis services for the Company in exchange
for 125,000 shares of common stock at $.10 per share for total compensation of
$12,500. The shares were issued upon the execution of the agreement,
which is effective August 1, 2009 through July 31, 2010. The
consultant will also receive $25,000 for every $1,000,000 in funding raised by
the consultant.
On August
5, 2009, the Company entered into an agreement with an unaffiliated individual
who rendered consulting services for a 6-week period. The consultant
received cash compensation of $6,000 over the term of the contract, and 24,000
shares of common stock upon the contract’s completion on September 16,
2009. The shares were valued at $.10 per share, for total stock
compensation of $2,400.
On
October 23, 2009, the Company issued 100,000 shares of common stock at $.05 per
share for $5,000 to an unrelated individual. On that same date, the
Company received $2,500 pursuant to a non-interest bearing promissory note with
an unrelated individual.
27
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
M.
|
SUBSEQUENT
EVENTS (CONT’D)
|
Pursuant
to an agreement entered into on June 19, 2009, an unaffiliated individual
rendered consulting services for a 26-week period. The Company paid
cash compensation of $36,400 over the term of the agreement, and issued 104,000
shares of common stock upon its completion on December 18, 2009. The
shares were valued at $.10 per share, for total stock compensation of
$10,400.
On
December 1, 2009 upon Kenneth Liebscher’s resignation from his positions with
the Company, Ted Campbell was appointed as Chief Compliance Officer and Chief
Financial Officer. On that same date, the Company executed an
employment agreement whereby Mr. Campbell will be compensated with a base salary
as follows:
|
Months
1 – 6:
|
$1,750
in cash per month plus common stock equal to $3,250 based on the average
trading price over the previous 30
days.
|
|
Months
7 – 24:
|
$2,500
in cash per month plus common stock equal to $3,500 based on the average
trading price over the previous 30
days.
|
Mr.
Campbell is also eligible for an incentive bonus at the end of each year in an
amount between 10% and 100% of the base salary. The incentive bonus
will be determined by the Board of Directors and will be based on the Company’s
operating results.
On
December 1, 2009, the Company executed an agreement with a company affiliated
with the Company’s CFO (“the Affiliate”) that is to perform services including
the compilation and coordination of corporate documentation, as well as filing
services to facilitate the Company’s public listing on the OTCBB. The
Affiliate was compensated with a non-refundable $7,500 cash retainer payment and
50,000 shares of common stock upon the agreement’s execution, and an additional
$7,500 cash payment is due upon the completion of a Form S-1 to be filed with
the SEC. The stock was valued at $.05 per share for total compensation of
$2,500.
On March
16, 2010, the Company received a $10,000 loan from a stockholder pursuant to a
promissory note carrying a 10% interest rate. The loan and $167 in
accrued interest were payable on May 16, 2010, but had not yet been repaid as of
the date of this report.
On March
30, 2010, the Company issued to an independent investor 50,000 shares of common
stock at $.10 per share for total proceeds of $5,000.
On April
1, 2010, the Company issued $5,000 in convertible debentures bearing interest at
6% with a maturity date of March 30, 2010. The debenture principle
and accrued interest may be converted into shares of the Company’s common stock
in the first year at a conversion price of $0.10 or in the second year at a
price which is 80% of the three lowest closing bid prices during the ten days
prior to conversion.
The
Company has evaluated events from June 30, 2009, through the date whereupon the
financial statements were issued and has determined that there are no additional
items to disclose.
28
NanoTech
Entertainment, Inc.
(A
Development Stage Company)
Notes
to Consolidated Financial Statements
For
the Period of November 13, 2007 (Inception) through June 30, 2009
N.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company has entered into rental contracts (the Contracts) with two officers (the
Officers) for use of the Officers’ storage facilities, offices, development
labs, and utilities for the Company’s operations, production, research and
development, sales, and marketing. The Contracts require $16,400 in
monthly payments (plus other related minimal costs) to the Officers over the
Contracts’ term of December 1, 2007 through November 30, 2011. The
Contracts are cancellable by either the Company or the Officers with a 15-day
advance notice only if all security interest given by the Officers for the
Company has been removed and there are no liens on the Officers’ properties for
loans to the Company in effect. The amounts incurred by the Company and
paid to the Officers for rent for the periods ended June 30, 2009 and 2008
totaled $197,860 and $115,547, respectively. These amounts have been
recorded in selling, general and administrative expenses for the same periods
(see Note C). Future minimum rental payments for the remaining life
of the Contracts are as follow:
Year Ended June 30,
|
||||
2010
|
$ | 196,800 | ||
2011
|
196,800 | |||
2012
|
82,000 | |||
Total
|
$ | 475,600 |
29
Item 9 Changes In and
Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item 9A. –Controls and
Procedures
Disclosure Controls and
Procedures
Under the
supervision and with the participation of our management, including our
principal executive officer and the principal financial officer, we have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as of the end of the period covered
by this report. Based on this evaluation, Robert DeKett and Ted Campbell, our
CEO and CCO, respectively, concluded as of the evaluation date that
our disclosure controls and procedures were not effective such that the material
information required to be included in our Securities and Exchange Commission
reports is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms relating to our company, and was made
known to us by others within those entities, particularly during the period when
this report was being prepared. We have since been delisted to the Pink Sheets
due to our inability to timely file our reports under the Securities Exchange
Act of 1934, we have replaced certain officers of the Company which were
responsible for our filings, and have hired the appropriate staff and outside
consultants that will enable us to meet future filing requirements.
Management’s Annual Report
on Internal Control Over Financial Reporting.
The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. The internal control process
has been designed, under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the
Company’s financial statements for external reporting purposes in accordance
with accounting principles generally accepted in the United States of
America.
Management
conducted an assessment of the effectiveness of the Company’s internal control
over financial reporting as of June 30, 2009, including (i) the control
environment, (ii) risk assessment, (iii) control activities, (iv) information
and communication, and (v) monitoring, based on the framework in Internal Control –
Integrated Framework, issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”). As of June 30, 2009, management has
determined that the Company’s internal control over financial reporting as of
June 30, 2009 was not effective. We are in the process
of developing new policies and procedures with regards to internal control over
financial reporting.
Our
internal control over financial reporting includes policies and procedures that
pertain to the maintenance of records that accurately and fairly reflect, in
reasonable detail, transactions and dispositions of assets; and provide
reasonable assurances that: (1) transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States; (2) receipts and expenditures are being
made only in accordance with authorizations of management and the directors of
the Company; and (3) unauthorized acquisitions, use, or disposition of the
Company’s assets that could have a material affect on the Company’s financial
statements are prevented or timely detected.
All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparations and presentations. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Changes in Internal Control
Over Financial Reporting.
There
were no significant changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the evaluation
date.
30
Item 9B. Other
Information
No items
required to be reported on Form 8-K during the fourth quarter of the year
covered by this report were not previously reported on Form
8-K.
31
PART
III
Item 10. Directors,
Executive Officers, and Corporate Governance.
Set forth
below is the name and age of each individual who was a director or executive
officer of NanoTech Entertainment, Inc. as of June 30, 2009, together with all
positions and offices of the Company held by each and the term of office and the
period during which each has served:
NAME
|
AGE
|
POSITION
|
DATES SERVED
|
|||
Robert
DeKett
|
55
|
President,
Treasurer, Secretary and Director
|
May
2009 to Present
|
|||
David
R. Foley
|
44
|
Chief
Technical Officer
|
May
2009 to December 2009
|
|||
Ken
Liebscher
|
69
|
Chief
Financial Officer
|
November
2008 to December
2009
|
Biographical
Information
The
following paragraphs set forth brief biographical information for the
aforementioned director and executive officer:
Robert DeKett - President, Secretary,
Treasurer, and Director - In 1980, Mr.
DeKett began his career at Merit Industries, the leading manufacturer of video
games, countertop games, and electronic dart games for the coin-op arcade
industry and in 1985 designed the first touch-screen countertop game which
revolutionized the industry. In 1997, he joined Quantum3D as Worldwide Business
Development Director - Out-of-Home Entertainment (OHE) to advance their newly
created 3Dfx based technology and establish distributorships worldwide. In 2002,
he joined his colleague David R. Foley (founder, UltraCade Technologies) as VP
of Business Development at UltraCade Technologies where he was responsible for
all licensing and negotiations. Mr. DeKett procured licenses from many major
Japanese, European, and US video game publishers including an exclusive
worldwide license with the NTRA for the Breeders’ Cup, with development deals
both in the Video Game and Casino Gaming industries. UltraCade also won the
coveted Video Game Innovative Product of the Year for its Breeder Cup Arcade
game. Mr. DeKett attended St. Vincent College and earned degrees in English BA
& Philosophy BA - Summa Cum Laude.
David R. Foley – Former Chief Technical Officer &
Director - David R. Foley is an entrepreneur with an extensive background
in software and hardware development. He has designed and
patented several award-winning games and innovative technology in the past 20
years. David began his career in software development where he modernized
the front office of the Boston Celtics, designing and building automated systems
for all facets of the team’s operations from Press Management to Scouting, as
well as helping implement a digital scoring system. Software
that he and a college friend had developed was sold to Ashton Tate to
become a core part of dBase IV. He built Foley Hi-Tech Systems, a
video game development studio that developed games for the Sega Genesis and
Super Nintendo and delivered multi-million dollar selling games including hits
like SpiderMan vs. Kingpin, Taz-Mania and Urban Strike to publishers including
Sega and Electronic Arts. Foley also founded HyperWare, and built a
product line of hardware and software products for the Arcade
Industry. Foley was asked to speak at several trade shows on
behalf of Intel to help push the ArcadePC initiative, for which Foley had
developed several key pieces of technology. Foley also designed and
built the Sega Tournament Network connecting players from around the world to
compete on the Sega hit arcade game, Daytona 2. Foley became the VP of
Engineering at Quantum3D, and helped grow the Arcade Division to several
million dollars in sales. Foley designed the patented Quicksilver II
and Graphite systems which were used by major arcade industry companies
including Atari, Midway and Sega. Foley invented the UltraCade
multi-game system, acquired the rights to the IP and founded UltraCade
Technologies. UltraCade Technologies released a home version of its
flagship product, branded as Arcade Legends and sold through retail outlets such
as Hammacher Schlemmer, Costco and SkyMall catalog. Foley's
innovative designs won him two consecutive industries awards for Innovation of
the Year in 2005 and 2006. In 2005 Foley was named #48 in the Entrepreneur
Magazines Hot 100 issue. Foley branched into the casino gaming market
creating, designing, developing and licensing unique game concepts to Bally
Technologies and others. His first casino gaming design, Peek-A-Boo
video poker, won the 2007 Most Innovative Game award from Bally
Technologies. David has been interviewed on several national media
outlets including NBC & ESPN. He continues to design and patent
ground breaking games and technology leading NanoTech's development
staff.
32
Kenneth B. Liebscher - Former CFO - Ken Liebscher is a
seasoned international businessman with over 35 years of securities and
executive management experience. Mr. Liebscher is a graduate of St. George's
School, Vancouver, British Columbia and also attended the University of British
Columbia. Mr. Liebscher held executive level positions while at the world's
largest dental products manufacturer, Dentsply International Inc., where he
spent over 22 years in positions culminating as the Manager of their West Coast
Division, headquartered in San Francisco, California. Mr. Liebscher was
recruited by a major Europe based competitor, Ivoclar Liechtenstein, to lead
their entry into the North American market and, within two years, became
Executive Vice President of Sales and Marketing and helped expand this company's
sales to $300M US. Mr. Liebscher became a director of a publicly held
company called E.T.C. Industries Ltd. in 1992 and became President of its
wholly-owned subsidiary, THE ELECTRIC CAR COMPANY and, in 1994, led a team that
developed the MI 6 prototype electric car from the ground up. Mr.
Liebscher serves on the Board of Directors of several leading companies,
including Belmont Resources Inc., listed on the TSX Venture Exchange (BEA.V) and
also on UTEC, Inc. (UTEI.PK).
Involvement
in Certain Legal Proceedings
To our
knowledge, during the past five years, with the single exception listed below,
no present or former director or executive officer of our company: (1) filed a
petition under the federal bankruptcy laws or any state insolvency law, nor had
a receiver, fiscal agent or similar officer appointed by a court for the
business or present of such a person, or any partnership in which he was a
general partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer within
two years before the time of such filing; (2) was convicted in a criminal
proceeding or named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses); (3) was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from or
otherwise limiting the following activities: (i) acting as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, associated person of any
of the foregoing, or as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director of any investment company, or
engaging in or continuing any conduct or practice in connection with such
activity; (ii) engaging in any type of business practice; (iii) engaging in any
activity in connection with the purchase or sale of any security or commodity or
in connection with any violation of federal or state securities laws or federal
commodity laws; (4) was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described above under this Item, or to be
associated with persons engaged in any such activity; (5) was found by a court
of competent jurisdiction in a civil action or by the Securities and Exchange
Commission to have violated any federal or state securities law and the judgment
has not been subsequently reversed, suspended or vacated; (6) was found by a
court of competent jurisdiction in a civil action or by the Commodity Futures
Trading Commission to have violated any federal commodities law, and the
judgment in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
33
On
September 12, 2008, David R. Foley, former CTO & Director filed for Chapter
11 Reorganization. The plan approving the 100% repayment of all
creditors was ratified on April 2, 2010.
Compliance
with Section 16(a) of the Exchange Act
Because
we do not have a class of equity securities registered pursuant to Section 12 of
the Exchange Act, our executive officers, directors and persons who beneficially
own more than 10% of our common stock are not required to file initial reports
of ownership and reports of changes in ownership with the SEC under Section
16(a) of the Exchange Act.
Audit
Committee and Audit Committee Financial Expert Disclosure
The
Company’s Board of Directors does not have a separately designated audit
committee or an “audit committee financial expert.” Audit committee functions
are performed by our Board of Directors. None of our directors is deemed
independent. All directors also hold positions as our officers. Our audit
committee is responsible for: (1) selection and oversight of our independent
accountant; (2) establishing procedures for the receipt, retention and treatment
of complaints regarding accounting, internal controls, and auditing matters; (3)
establishing procedures for the confidential, anonymous submission by our
employees of concerns regarding accounting and auditing matters; (4) engaging
outside advisors; and, (5) funding for the outside auditory and any outside
advisors engagement by the audit committee.
The Board
of Directors does not have an audit committee financial expert at this time due
to the fact that the Company has only limited operations and no revenues.
We believe the cost related to retaining a financial expert at this time
is prohibitive. Further, because of our limited operations, we believe the
services of a financial expert are not warranted.
Code
of Ethics
We have
adopted a corporate code of ethics. We believe our code of ethics is reasonably
designed to deter wrongdoing and promote honest and ethical conduct; provide
full, fair, accurate, timely and understandable disclosure in public reports;
comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code.
Item 11. Executive
Compensation
(a) A
majority of the Intellectual Property was acquired by the Company in the form of
an employment agreement whereby one of the original founders, David R. Foley,
assigned the rights to his substantial intellectual property portfolio in return
for the compensation outlined in his employment agreement. To date, Mr.
Foley has not been compensated under the terms of his agreement. The
Company intends on offering stock in lieu of the past due compensation, and
paying the compensation moving forward. There is currently accrued compensation
due as of June 30, 2009 totaling $812,500 payable to Robert DeKett (Current
Officer and Director) and David Foley (current Chief Architect, Former Officer
and Director).
(b) There
are no annuity, pension, or retirement benefits proposed to be paid to officers,
directors, or employees of the Corporation in the event of retirement at normal
retirement date pursuant to any presently existing plan provided or contributed
to by the Corporation.
(c) The
currently are employment agreements with two officers and directors of the
Company. The terms of these employment agreements are as follows:
|
·
|
Robert
Dekett (President, Treasurer, and Secretary) – Mr. DeKett’s current
compensation through calendar year-end 2010 is $175,000 USD per annum with
an increase to $210,000 USD for calendar year 2011. Currently, Mr.
DeKett’s salary is accruing on a monthly
basis.
|
34
|
·
|
Ted
D. Campbell II (Chief Compliance Officer) - Mr. Campbell’s current
compensation through fiscal year end 2010 is $75,000 USD per annum with an
increase to $108,000 USD for fiscal year 2011. Currently, Mr. Campbell’s
compensation is accruing on a monthly
basis.
|
Director
Compensation
The
Directors of the Company do not receive compensation at this time.
Item 12 - Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters
The
following table sets forth the beneficial ownership of the Company's officers,
directors, and persons who own more than five percent of the Company's common
stock as of March 31, 2010. Under relevant provisions of the Exchange Act, a
person is deemed to be a "beneficial owner" of a security if he or she has or
shares the power to vote or direct the voting of the security or the power to
dispose or direct the disposition of the security. A person is also deemed to be
a beneficial owner of any securities of which that person has the right to
acquire beneficial ownership in 60 days. More than one person may be deemed to
be a beneficial owner of the same securities. The percentage ownership of each
stockholder is calculated based on 15,600,000 total outstanding shares of our
common stock as of March 31, 2010.
Amount
and Nature of Beneficial Ownership as of March 31, 2010:
Name of Individual
|
# Shares Beneficially Owned
|
# of Class of Common
Stock (1)
|
||||||
Robert
Dekett
President,
Treasurer, Secretary and Director
PO
Box 50729
Henderson,
Nevada 89016
|
3,000,000 | 19.23 | % | |||||
Ted
D. Campbell II
Chief
Compliance Officer
PO
Box 240
Jenks,
Oklahoma 74037
|
0 | 0.00 | % | |||||
David
R. Foley
311
Santa Rosa Drive
Los
Gatos, California 95032
|
3,000,000 | 19.23 | % | |||||
Greenleaf
Forum Investments
Kevin
Murphy, President
1174
Manitou Drive NW
Fox
Island, WA 98333
|
1,300,000 | 8.33 | % | |||||
Takashi and Keiko
Yoshida
59
Preston Road
Woodside,
CA 94062
|
1,000,000 | 6.41 | % | |||||
Alan
Tolson
Skiddaw
View Sandale
Bolton
Gate, Cumbria CA5 1DE
UK
|
1,500,000 | 9.61 | % | |||||
All
Officers and Directors as a Group
(2
Persons)
|
3,000,000 | 19.23 | % |
35
Item 13 – Certain
Relationships and Related Transactions, Director
Independence
The
Company pays rent expense to two shareholders for the use of property for
business purposes. The amounts paid to the Company’s shareholders for
rent for the years ended June 30, 2009 and 2008 totaled $197,860 and $115,547,
respectively. These amounts have been recorded in selling, general
and administrative expenses for the same periods.
Several
of the Company’s current and former officers have provided funding in the form
of notes payable, totaling $80,500 and $52,500 as of June 30, 2009 and 2008,
respectively. The notes carry interest rates ranging from 14% to 20%,
resulting in interest expense of $11,458 and $3,675 for the years ended June 30,
2009 and 2008, and accrued interest of $9,223 and $0 as of June 30, 2009 and
2008, respectively. The notes are due on demand and therefore
classified as current liabilities.
The June
2009 and 2008 salaries have been accrued and will be paid as cash flows
allow. The Company also reimburses its officers for expenses they
incur in the Company’s behalf. Amounts owed to officers totaled
$109,222 and $0 at June 30, 2009 and 2008, respectively. Interest has
not been imputed due to its immaterial impact on the financial
statements.
The
Company has incurred liabilities in the ordinary course of business with several
individuals and entities affiliated with the Company. These amounts
totaled $60,184 and $0 at June 30, 2009 and 2008,
respectively. Interest has not been imputed due to its immaterial
impact on the financial statements.
During
the year ended June 30, 2008, the Company made advances to officers and
directors for travel and other budgeted costs. These amounts totaled
$0 and $57,576 at June 30, 2009 and 2008, respectively.
36
Item 14 – Principal
Accountant Fees and Services
Audit Fees: All fees
billed for each of the last two fiscal years for professional services rendered
by the principal accountant for the audit of the registrant's annual financial
statements and the review of interim financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for those fiscal years.
2009:
$40,000
2008:
$ 8,800
Audit-Related Fees:
All fees billed in each of the last two fiscal years for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit or review of the registrant's financial statements and
are not reported under Item 9(e)(f1) of Schedule 14A.
2009:
$1,750
2008:
$ 0
Tax Fees: The
aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning:
2009:
$ 3,000
2008:
$ 0
All Other
Fees:
2009:
$ 0
2008:
$ 0
(5)
Our audit committee's pre-approval policies and procedures described
in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit
committee pre-approve all accounting related activities prior to the performance
of any services by any accountant or auditor.
(6)
The percentage of hours expended on the principal accountant's
engagement to audit our financial statements for the most recent fiscal year
that were attributed to work performed by persons other than the principal
accountant's full-time, permanent employees was 0%.
37
PART
IV
Item 15 – Exhibits,
Financial Statement Schedules
The
following exhibits are included with this filing:
Exhibit
No.:
|
Description:
|
|
3.1(i)
|
Articles
of Incorporation and amendments thereto (1) and
(2)
|
|
3.1(ii)
|
Bylaws
(1)
|
|
14
|
Code
of Ethics (1)
|
|
31.1
|
Section
302 Certification by Principal Executive Officer and Principal Financial
and Accounting Officer (1)
|
|
32.1
|
Section
906 Certification by Principal Executive Officer and Principal Financial
and Accounting Officer (1)
|
(1)
|
Filed
with the Securities and Exchange Commission on February 12, 2008 as an
exhibit numbered as indicated above, to the Registrant’s registration
statement on Form S-1 (file no. 333-149184 which exhibit is incorporated
herein by reference.
|
(2)
|
Amendment
to the Article of Incorporation filed with the Securities and Exchange
Commission on Form 8-K on May 7, 2009 which exhibit is incorporated herein
by reference.
|
38
Signatures
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
May 24,
2010
NanoTech
Entertainment, Inc.
|
|
By:
|
|
/s/ Robert DeKett
|
|
Robert
Dekett, President (Principal Executive and Accounting
Officer)
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates included.
May 24,
2010
By:
|
|
/s/ Robert DeKett
|
|
Robert
Dekett, President
|
|
Principal
Executive Officer
|
|
Principal
Financial Officer
|
|
Principal
Accounting Officer
|
|
Chairman
of the Board of Directors
|
39