Attached files
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EX-32.2 - Umami Sustainable Seafood Inc. | v190617_ex32-2.htm |
EX-31.2 - Umami Sustainable Seafood Inc. | v190617_ex31-2.htm |
EX-32.1 - Umami Sustainable Seafood Inc. | v190617_ex32-1.htm |
EX-31.1 - Umami Sustainable Seafood Inc. | v190617_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended May 31,
2010
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
file number 000-52401
LIONS GATE LIGHTING
CORP.
|
(Exact
name of registrant as specified in its
charter)
|
Nevada
|
47-0930829
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
405 Lexington Avenue, 26th Floor, Suite 2640, New
York, NY 10174
|
(Address
of principal executive offices) (Zip
code)
|
212-907-6492
|
(Registrant’s
telephone number, including area
code)
|
Not Applicable
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files)
Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer (Do not check if a smaller reporting company)
|
¨
|
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 ¨ No x
APPLICABLE
ONLY TO CORPORATE ISSUERS
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
45,761,000
common shares issued and outstanding as of July 13, 2010.
PART
I - FINANCIAL INFORMATION
Item 1. Financial
Statements.
It is the
opinion of management that the interim consolidated financial statements for the
quarter ended May 31, 2010 include all adjustments necessary in order to ensure
that the interim consolidated financial statements are not
misleading.
2
LIONS
GATE LIGHTING CORP. AND SUBSIDIARY
(A
Development Stage Company)
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
May 31,
2010
(Stated
in US Dollars)
(Unaudited)
3
LIONS
GATE LIGHTING CORP. AND SUBSIDIARY
(A
Development Stage Company)
INTERIM
CONSOLIDATED BALANCE SHEET
May 31,
2010 and February 28, 2010
(Stated
in US Dollars)
(Unaudited)
May 31,
|
February 28,
|
|||||||
2010
|
2010
|
|||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash
|
$ | 3,746 | $ | 14,015 | ||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts
payable
|
$ | 21,191 | $ | 52 | ||||
Due
to related parties – Note 3
|
147,269 | 132,219 | ||||||
Total
current liabilities
|
168,460 | 132,271 | ||||||
STOCKHOLDERS’ DEFICIENCY
|
||||||||
Capital
stock – Note 4
|
||||||||
Authorized:
|
||||||||
100,000,000
common shares, par value $0.001 per share
|
||||||||
Issued
and outstanding:
|
||||||||
7,450,000
common shares
|
7,450 | 7,450 | ||||||
Additional
paid-in capital
|
45,550 | 45,550 | ||||||
Comprehensive
loss
|
(16,327 | ) | (1,890 | ) | ||||
Deficit
|
(201,387 | ) | (169,366 | ) | ||||
Total
stockholders’ deficiency
|
(164,714 | ) | (118,256 | ) | ||||
$ | 3,746 | $ | 14,015 |
Nature
and Continuance of Operations – Note 2
SEE
ACCOMPANYING NOTES
4
LIONS
GATE LIGHTING CORP. AND SUBSIDIARY
(A
Development Stage Company)
INTERIM
CONSOLIDATED STATEMENT OF OPERATIONS
for the
three months ended May 31, 2010 and 2009 and
for the
period September 1, 2007 (Commencement of Development Stage)
to May
31, 2010
(Stated
in US Dollars)
(Unaudited)
September 1,
|
||||||||||||
2007
|
||||||||||||
(Commencement
|
||||||||||||
of
|
||||||||||||
Development
|
||||||||||||
Three months ended
|
Stage) to
|
|||||||||||
May 31,
|
May 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Operating
expenses
|
$ | 32,021 | $ | 17,228 | $ | 97,813 | ||||||
Loss
from operations
|
(32,021 | ) | (17,228 | ) | (97,813 | ) | ||||||
Other:
|
||||||||||||
Foreign
currency translation adjustment
|
(14,437 | ) | (11,824 | ) | (17,380 | ) | ||||||
Net
comprehensive loss for the period
|
$ | (46,458 | ) | $ | (29,052 | ) | $ | (115,193 | ) | |||
Basic
and diluted loss per share
|
$ | (0.00 | ) | $ | (0.00 | ) | ||||||
Weighted
average number of shares outstanding
|
7,450,000 | 7,886,413 |
SEE
ACCOMPANYING NOTES
5
LIONS
GATE LIGHTING CORP. AND SUBSIDIARY
(A
Development Stage Company)
INTERIM
CONSOLIDATED STATEMENT OF CASH FLOWS
for the
three months ended May 31, 2010 and 2009 and
for the
period September 1, 2007 (Commencement of Development Stage)
to May
31, 2010
(Stated
in US Dollars)
(Unaudited)
September 1,
|
||||||||||||
2007
|
||||||||||||
(Commencement
|
||||||||||||
of
|
||||||||||||
Development
|
||||||||||||
Three months ended
|
Stage) to
|
|||||||||||
May 31,
|
May 31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Operating
Activities
|
||||||||||||
Net
loss for the period
|
$ | (32,021 | ) | $ | (17,228 | ) | $ | (97,813 | ) | |||
Changes
in operating working capital item:
|
||||||||||||
Accounts
payable
|
21,139 | 11,450 | 11,514 | |||||||||
(10,882 | ) | (5,778 | ) | (86,299 | ) | |||||||
Financing
Activity
|
||||||||||||
Increase
in due to related parties
|
15,050 | 10,587 | 103,202 | |||||||||
Effect
of foreign exchange on cash
|
(14,437 | ) | (11,824 | ) | (17,380 | ) | ||||||
Decrease
in cash during the period
|
(10,269 | ) | (7,015 | ) | (477 | ) | ||||||
Cash,
beginning of the period
|
14,015 | 7,895 | 4,223 | |||||||||
Cash,
end of the period
|
$ | 3,746 | $ | 880 | $ | 3,746 |
SEE
ACCOMPANYING NOTES
6
LIONS
GATE LIGHTING INC. AND SUBSIDIARY
(A
Development Stage Company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
for the
period May 2, 2005 to May 31, 2010
(Stated in US
Dollars)
(Unaudited)
Common Stock
|
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
During the
|
||||||||||||||||||||||||||||
Paid-in
|
Comprehensive
|
Development
|
|||||||||||||||||||||||||||
Shares
|
Par Value
|
Capital
|
Income (Loss)
|
Deficit
|
Stage
|
Total
|
|||||||||||||||||||||||
Capital
stock issued for cash:
|
|||||||||||||||||||||||||||||
May
2, 2005
|
- at $0.001
|
3,000,000 | $ | 3,000 | $ | - | $ | - | $ | - | $ | - | $ | 3,000 | |||||||||||||||
May
15 to July 15, 2005
|
- at
$0.01
|
5,000,000 | 5,000 | 45,000 | - | - | - | 50,000 | |||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | 3,479 | - | - | 3,479 | ||||||||||||||||||||||
Net
loss for the period
|
- | - | - | - | (35,533 | ) | - | (35,533 | ) | ||||||||||||||||||||
Balance,
February 28, 2006
|
8,000,000 | 8,000 | 45,000 | 3,479 | (35,533 | ) | - | 20,946 | |||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | 689 | - | - | 689 | ||||||||||||||||||||||
Net
loss for the year
|
- | - | - | - | (54,597 | ) | - | (54,597 | ) | ||||||||||||||||||||
Balance,
February 28, 2007
|
8,000,000 | 8,000 | 45,000 | 4,168 | (90,130 | ) | - | (32,962 | ) | ||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | (7,560 | ) | - | - | (7,560 | ) | ||||||||||||||||||||
Net
loss for the year
|
- | - | - | - | (13,444 | ) | (6,389 | ) | (19,833 | ) | |||||||||||||||||||
Balance,
February 29, 2008
|
8,000,000 | 8,000 | 45,000 | (3,392 | ) | (103,574 | ) | (6,389 | ) | (60,355 | ) | ||||||||||||||||||
Foreign
currency transaction adjustment
|
- | - | - | 15,935 | - | - | 15,935 | ||||||||||||||||||||||
Net
loss for the year
|
- | - | - | - | - | (19,814 | ) | (19,814 | ) | ||||||||||||||||||||
Balance,
February 28, 2009
|
8,000,000 | 8,000 | 45,000 | 12,543 | (103,574 | ) | (26,203 | ) | (64,234 | ) | |||||||||||||||||||
Return
to treasury – May 12, 2009
|
- at
$0.01
|
(550,000 | ) | (550 | ) | (4,950 | ) | - | - | - | (5,500 | ) | |||||||||||||||||
Capital
contribution
|
- | - | 5,500 | - | - | - | 5,500 | ||||||||||||||||||||||
Foreign
currency transaction adjustment
|
- | - | - | (14,433 | ) | - | - | (14,433 | ) | ||||||||||||||||||||
Net
loss for the year
|
- | - | - | - | - | (39,589 | ) | (39,589 | ) | ||||||||||||||||||||
Balance,
February 28, 2010
|
7,450,000 | 7,450 | 45,550 | (1,890 | ) | (103,574 | ) | (65,792 | ) | (118,256 | ) | ||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | (14,437 | ) | - | - | (14,437 | ) | ||||||||||||||||||||
Net
loss for the period
|
- | - | - | - | - | (32,021 | ) | (32,021 | ) | ||||||||||||||||||||
Balance,
May 31, 2010
|
7,450,000 | $ | 7,450 | $ | 45,550 | $ | (16,327 | ) | $ | (103,574 | ) | $ | (97,813 | ) | $ | (164,714 | ) |
SEE
ACCOMPANYING NOTES
7
LIONS
GATE LIGHTING CORP. AND SUBSIDIARY
(A
Development Stage Company)
NOTES TO
THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
May 31,
2010
(Stated
in US Dollars)
(Unaudited)
Note
1
|
Interim
Reporting
|
|
While
the information presented in the accompanying interim financial statements
is unaudited, it includes all adjustments, which are, in the opinion of
management, necessary to present fairly the financial position, results of
operations and cash flows for the interim period presented. All
adjustments are of a normal recurring nature. It is suggested
that these interim financial statements be read in conjunction with the
Company’s February 28, 2010 financial
statements.
|
|
The
results of operations for the period ended May 31, 2010 are not
necessarily indicative of the results that can be expected for the year
ended February 28, 2011.
|
Note
2
|
Nature and Continuance
of Operations
|
|
The
Company’s principal business operations as an internet-based distributor
of lighting products ceased September 1, 2007. Consequently,
the Company’s operations are disclosed as being in the development stage
commencing September 1, 2007.
|
|
These
financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which
assumes that the Company will be able to meet its obligations and continue
its operations for its next twelve months. Realization values
may be substantially different from carrying values as shown and these
financial statements do not give effect to adjustments that would be
necessary to the carrying values and classification of assets and
liabilities should the Company be unable to continue as a going
concern. At May 31, 2010, the Company had not yet achieved
profitable operations, has accumulated losses of $201,387 since its
inception and expects to incur further losses in the development of its
business, all of which casts substantial doubt about the Company’s ability
to continue as a going concern. The Company’s ability to
continue as a going concern is dependent upon its ability to generate
future profitable operations and/or to obtain the necessary financing to
meet its obligations and repay its liabilities arising from normal
business operations when they come due. Management has no
formal plan in place to address this concern but considers that the
Company will be able to obtain additional funds by equity financing and/or
related party advances, however there is no assurance of additional
funding being available.
|
Note
3
|
Related Party
Transactions
|
|
As
of May 31, 2010, the Company received loans from directors totalling
$147,269 (February 28, 2010: $132,219). These loans are
unsecured, do not bear interest and are due on
demand.
|
8
Lions
Gate Lighting Corp. and Subsidiary
(A
Development Stage Company)
Notes to
the Interim Consolidated Financial Statements
May 31,
2010
(Stated
in US Dollars)
(Unaudited) – Page
2
Note
4
|
Commitment
|
|
Lions
Gate Lighting Corp has entered into a share exchange agreement (the
“Agreement”) dated May 3, 2010 with Atlantis Group hf. (“Atlantis”), the
sole indirect shareholder of Kali Tuna d.o.o. (“Kali
Tuna”). Pursuant to the terms of the Agreement, Lions Gate has
agreed to acquire Kali Tuna in exchange for the issuance by the Company to
Atlantis of 30,000,000 shares of its common stock, subject to the
satisfaction or waiver of certain conditions precedent as set out in the
Agreement. If the Agreement is successfully completed, Kali
Tuna will become an indirect wholly-owned subsidiary of the
Company.
|
|
Kali
Tuna is a Croatian limited liability company that owns and operates
facilities and equipment in Croatia where it farms Northern Bluefin Tuna
for sale primarily into the Japanese sushi and sashimi
market. If the Agreement is completed, the Company is proposing
to change its name to "Umami Sustainable Seafood Inc." to more accurately
reflect the business of Kali Tuna.
|
Note
5
|
Subsequent
Event
|
|
The
Company has evaluated subsequent events through July 9, 2010, the date on
which the accompanying financial statements were available to be
issued.
|
|
On
June 30, 2010, the Company completed the acquisition of Kali Tuna in
consideration for the issuance of 30,000,000 common
shares. Concurrent with the completion of the acquisition, the
Company issued 7,300,000 units at a price of $1 per unit for gross
proceeds of $7,300,000. Each unit consists of one common share
and a warrant to purchase 0.2 common shares at a price of $2 per whole
share for five years.
|
9
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
FORWARD-LOOKING
STATEMENTS
This
quarterly report contains forward-looking statements as that term is defined in
Section 27A of the United States Securities Act of 1933 and Section 21E of the
United States Securities Exchange Act of 1934. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as “may”, “should”,
“expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential” or “continue” or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled “Risk Factors”, that may cause our or our industry’s actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Financial
information contained in this quarterly report and in our consolidated unaudited
financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting
principles. All references to “common shares” refer to the common
shares in our capital stock. The following discussion should be read
in conjunction with our consolidated unaudited financial statements and the
related notes that appear elsewhere in this quarterly report.
As used
in this quarterly report, and unless otherwise indicated, the terms “we”, “us”,
“our”, “the company” and “Lions Gate Lighting” mean Lions Gate Lighting Corp.
and our wholly-owned subsidiaries, Bluefin Acquisition Group Inc. (“Bluefin”)
and Kali Tuna d.o.o. (“Kali Tuna”).
RESULTS
OF OPERATIONS
Results
of Operations for the Three Months Ended May 31, 2010
We did
not generate any revenues during the three month periods ended May 31, 2010 and
May 31, 2009. On August 31, 2007, our sole supplier agreement with
Sunway Lighting Technology Co., Ltd. terminated. Subsequent to that
date, we were unsuccessful in entering into an agreement with a new supplier in
order to resume our business of selling and marketing lighting technology
products. Consequently, we began pursuing alternate business
opportunities in order to maximize shareholder value.
On May 3,
2010, we entered into a share exchange agreement with Atlantis Group hf.
(“Atlantis”), Bluefin and Kali Tuna. Atlantis was the sole shareholder of
Bluefin and Bluefin is the sole shareholder of Kali Tuna. Bluefin is a holding
company created in March, 2010 solely for the purpose of holding the shares of
Kali Tuna. Kali Tuna is a limited liability company organized under the laws of
the Republic of Croatia. Pursuant to the terms of the share exchange
agreement, we agreed to acquire all of the issued and outstanding common shares
of Bluefin from Atlantis in exchange for the issuance by our company to Atlantis
of 30,000,000 shares of our common stock, subject to the satisfaction or waiver
of certain conditions precedent as set out in the share exchange
agreement. On June 30, 2010, we completed the transactions
contemplated under the share exchange agreement and issued the 30,000,000 shares
to Atlantis.
At the
same time, we divested all of the shares of our wholly-owned subsidiary, LG
Lighting Corp., a British Columbia corporation, to one of our former directors
as consideration for the former director agreeing to assume our obligation to
repay outstanding debts due to our former directors and officers.
As a
result of the closing of the share exchange agreement, we are now, through our
subsidiary Kali Tuna, in the business of owning and operating facilities and
equipment in Croatia for the farming of Northern Bluefin Tuna for sale primarily
into the Japanese sushi and sashimi market. To reflect our new
business, we intend to change our name to “Umami Sustainable Seafood Inc.”,
subject to receipt of regulatory approvals.
10
The
financial results in this Form 10-Q for the period ended May 31, 2010 reflect
our results of operations prior to completion of the share exchange, when we
were primarily focused on seeking out new business opportunities. For accounting
purposes, the share exchange was treated as an acquisition of our company and a
recapitalization of Bluefin. Bluefin is the accounting acquirer and
the results of its operations will be our results of operations going
forward. Audited annual consolidated financial statements for Kali
Tuna for the years ended June 30, 2009 and 2008 and unaudited, interim
consolidated financial statements for the nine months ended March 31, 2010 and
2009, and management’s discussion and analysis related thereto, were filed on a
Form 8-K with the Securities and Exchange Commission on July 7, 2010 and are
available at www.sec.gov. We
plan to change our fiscal year to June 30 to coincide with the fiscal year of
Bluefin.
During
the three months ended May 31, 2010, our operating expenses totalled $32,021,
compared to $17,228 for the three months ended May 31, 2009. We
reported a loss from operations of $32,021 for the three months ended May 31,
2010, compared to a loss from operations of $17,228 for the three months ended
May 31, 2009. The loss from operations for the three months ended May
31, 2010 increased by $14,793 compared to the loss from operations for the three
months ended May 31, 2009 primarily as a result of legal and accounting
expenses.
Liquidity
and Capital Resources
Our cash
on hand as at May 31, 2010 was $3,746. As at May 31, 2010, we had a
working capital deficiency of $164,714. However, concurrently with the closing
of the share exchange agreement with Atlantis on June 30, 2010, we completed a
private placement financing for net proceeds of approximately $7.3
million. Additionally, we have an agreement in principle with
Atlantis providing for a $15 million line of credit. The details of
this line of credit are being negotiated and we expect to enter into a
definitive agreement with Atlantis shortly. We believe that the
proceeds from the financing, the proposed Atlantis line of credit and cash
generated by operations will be sufficient to continue to finance our present
operations through the harvest season and for the remainder of our fiscal year
ending June 30, 2011.
We will
need to obtain additional capital in order to expand operations and remain
profitable. We plan to pursue sources of additional capital by
issuing securities through various financing transactions or arrangements,
including joint venturing of projects, debt financing, equity financing or other
means. We may also consider advance sales of tuna to
customers. Additionally, we are pursuing increases in available bank
lines and borrowings that may be available to us once we have completed this
Offering and/or raised additional capital. There can be no assurance
that any additional financing on commercially reasonable terms or at all will be
available when needed. The inability to obtain additional capital may
reduce our ability to continue to conduct business operations as currently
contemplated. Any additional equity financing may involve substantial
dilution to our then existing stockholders.
Operating
Activities
Operating
activities used cash of $10,882 for the three months ended May 31, 2010,
compared to $5,778 for the three month period ended May 31, 2009. The
increase in cash used in operating activities during the three months ended May
31, 2010 was largely the result of an increase in the net loss in comparison to
the three months ended May 31, 2009.
Financing
Activities
Financing
activities provided cash of $15,050 for the three months ended May 31,
2010. Financing activities provided cash of $10,587 for the three
months ended May 31, 2009. The increase in cash provided from
financing activities was a result of an increase in due to related parties for
the three months ended May 31, 2010.
11
Investing
Activities
We did
not receive or incur any amounts in regards to investing activities during the
three months ended May 31, 2010 and May 31, 2009.
Purchase
or Sale of Equipment
We do not
anticipate that we will expend any significant amount on equipment for our
present or future operations. We may purchase computer hardware and software for
our ongoing operations.
Off-Balance
Sheet Arrangements
Our
company has no outstanding derivative financial instruments, off-balance sheet
guarantees, interest rate swap transactions or foreign currency
contracts. Our company does not engage in trading activities
involving non-exchange traded contracts.
APPLICATION
OF CRITICAL ACCOUNTING POLICIES
Our
financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles used in the United
States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management’s application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our consolidated financial statements is critical
to an understanding of our financials.
Going
Concern
The
audited consolidated financial statements included with our Form 10-K filed with
the Securities and Exchange Commission on April 26, 2010 were prepared on the
going concern basis which assumes that adequate sources of financing will be
obtained as required and that our assets will be realized and liabilities
settled in the ordinary course of business. Accordingly, the audited
financial statements do not include any adjustments related to the
recoverability of assets and classification of assets and liabilities that might
be necessary should we be unable to continue as a going concern.
In order
to continue as a going concern, we require additional
financing. There can be no assurance that additional financing will
be available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to continue as a
going concern, we would likely be unable to realize the carrying value of our
assets reflected in the balances set out in our financial
statements.
NEW
ACCOUNTING POLICIES
As of May
31, 2010, there were no new accounting policies that will materially effect our
company.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
Not
Applicable
Item
4T. Controls and Procedures.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include controls and procedures designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is accumulated and communicated to management to allow timely
decisions regarding required disclosure.
12
As
required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our
management, with the participation of our president (our principal executive
officer) and our chief financial officer (our principal financial officer and
principal accounting officer) evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this annual
report, being May 31, 2010. Our president and our chief financial
officer evaluated our company’s disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of May 31, 2010.
Based on
this evaluation, these officers concluded that, as of May 31, 2010, these
disclosure controls and procedures were not effective to ensure that the
information required to be disclosed by our company in reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities
Exchange Commission. The conclusion that our disclosure controls and
procedures were not effective was due to the presence of material weaknesses in
internal control over financial reporting as identified below under the heading
“Management’s Report on Internal Control Over Financial Reporting.” Management
anticipates that such disclosure controls and procedures will not be effective
until the material weaknesses are remediated.
Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues, if any, within our
company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake.
Management’s Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and
maintaining adequate internal control over financial reporting. The term “internal control over financial
reporting” is defined as a process designed by, or under the supervision of, an
issuer’s principal executive and principal financial officers, or persons
performing similar functions, and effected by the issuer’s board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
|
(1)
|
pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the
issuer;
|
|
(2)
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the issuer
are being made only in accordance with authorizations of management and
directors of the issuer; and
|
|
(3)
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, or use or disposition of the issuer’s assets
that could have a material effect on the financial
statements.
|
Under the
supervision of our president, being our principal executive officer, and our
chief financial officer, being our principal financial officer and principal
accounting officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting as of May 31, 2010 using the criteria
established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). This evaluation
included review of the documentation of controls, evaluation of the design
effectiveness of controls, testing of the operating effectiveness of controls
and a conclusion on this evaluation. Based on this evaluation, our management
concluded our internal control over financial reporting was not effective as at
May 31, 2010.
A
material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our company’s annual or interim financial
statements will not be prevented or detected on a timely basis. In its
assessment of the effectiveness of our internal control over financial reporting
as of May 31, 2010, we determined that there were control deficiencies that
constituted material weaknesses which are indicative of many small companies
with small staff, such as:
|
(1)
|
inadequate
segregation of duties and effective risk
assessment;
|
13
|
(2)
|
insufficient
written policies and procedures for accounting and financial reporting
with respect to the requirements and application of both generally
accepted accounting principles in the United States and guidelines of the
Securities and Exchange Commission;
and
|
|
(3)
|
inadequate
security and restricted access to computers, including insufficient
disaster recovery plans.
|
These
control deficiencies resulted in a reasonable possibility that a material
misstatement of the annual or interim financial statements could not have been
prevented or detected on a timely basis. As a result of the material
weaknesses described above, we concluded that we did not maintain effective
internal control over financial reporting as of May 31, 2010 based on criteria
established in Internal
Control—Integrated Framework issued by COSO. Our management is currently
evaluating remediation plans for the above deficiencies. During
the period covered by this quarterly report on Form 10-Q, we have not been able
to remediate the weaknesses described above. However, we plan
to take steps to enhance and improve the design of our internal control over
financial reporting.
Changes
in Internal Control
There was
no change in our internal control over financial reporting identified in
connection with the evaluation of our internal control over financial reporting
described above that occurred during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
II - OTHER INFORMATION
Item 1. Legal
Proceedings.
As of
July13, 2010, we were not aware of any material, existing or pending legal
proceedings against our company, nor were we involved as a plaintiff in any
material proceeding or pending litigation. There were no proceedings
in which any of our directors, officers or affiliates, or any registered or
beneficial shareholder, was an adverse party or had a material interest adverse
to our interest.
Item
1A. Risk Factors.
Much of
the information included in this quarterly report includes or is based upon
estimates, projections or other forward-looking statements. Such
forward looking statements include any projections or estimates made by us and
our management in connection with our business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein.
Such
estimates, projections or other forward-looking statements involve various risks
and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other
forward-looking statements. Prospective investors should consider
carefully the risk factors set out below.
RISKS
RELATED TO OUR BUSINESS
Proceeds
from our recent $7.3 million financing on June 30, 2010 may not be sufficient to
sustain our operations
We
anticipate, based on currently proposed plans and assumptions relating to our
ability to market and sell our products, that our cash on hand including the
proceeds from the financing and amounts expected to be made available by
Atlantis under a proposed line of credit facility will satisfy our operational
and capital requirements for the next 12 months. However, without
additional capital we will be unable to significantly expand our markets or make
significant acquisitions. Also, if we fail to finalize the agreement
providing for the line of credit with Atlantis, and if we are unable to realize
satisfactory revenue in the near future, we will be required to seek additional
financing to continue our operations beyond that period. There can be no
assurance that any additional financing on commercially reasonable terms will be
available when needed. The inability to obtain additional capital may
reduce our ability to continue to conduct business operations as currently
contemplated. Any additional equity financing may involve substantial
dilution to our then existing stockholders.
14
Regulation
of our industry may have an adverse impact on our business.
For
years, the international community has been aware of and concerned with the
worldwide problem of depletion of natural fish stocks. In the past,
these concerns have resulted in the imposition of quotas that subject individual
countries to strict limitations on the amount of fish they are allowed to
catch. Environmental groups have been lobbying to have additional
limitations on fishing imposed and have even made suggestions that would limit
the activities of fish farms. If international organizations or
national governments were to impose additional limitations on fishing and fish
farm operations, this could have a negative impact on our results of
operations.
Our lack of diversification may
increase the risk of an investment in our company and our financial condition
and results of operations may deteriorate if we fail to
diversify.
Our
business focus is on the farming and processing of Northern Bluefin Tuna in
Croatia. We lack diversification, in terms of both the nature and
geographic scope of our business. As a result, we will likely be
impacted more acutely by factors affecting our industry or the regions in which
we operate than we would if our business were more diversified, enhancing our
risk profile. If we fail to diversify our operations, either through
natural growth or through acquisitions, our financial condition and results of
operations could deteriorate.
Concerns
about the state of the bluefin tuna population may lead some customers to look
for alternatives.
In the
Mediterranean, large quantities of bluefin tuna are taken for on-growing in fish
cages. Statistics for culturing are even less accurate than official catch
statistics. Experts estimated the total Atlantic bluefin aquaculture
production during 2006 as between 20,000 and 30,000 metric tons.
Responding
to fears of a collapse of bluefin tuna stock in the Mediterranean, a number of
tuna buyers have occasionally threatened boycotts unless drastic measures are
taken to protect the threatened tuna stock. In addition, some
restaurants in Europe have stopped buying Mediterranean bluefin tuna and
replaced the bluefin with other tuna species, such as yellowfin, albacore and
bigeye. If these boycotts become more widespread, they may have a
negative impact on our results of operations.
The
growth of our business depends on our ability to secure fishing licenses
directly or through third parties and concessions for our farm
locations.
Fish
farming is a highly regulated industry. Our operations require
licenses, permits and in some cases renewals of licenses and permits, from
various governmental authorities. For example, commercial fishing
operations are subject to government license requirements that permit them to
make their catch. In addition, our offshore farms that harbor the
cages containing our tuna livestock are constructed pursuant to concessions
granted by the local government that has jurisdiction over the waters where our
farms are located. Our ability to obtain, sustain or renew such
licenses and permits on acceptable terms is subject to change in regulations and
policies and to the discretion of the applicable governments, among other
factors. Our inability to obtain, or a loss of or denial of extension to, any of
these licenses or permits could hamper our ability to produce revenues from our
operations.
We
are dependent on an affiliate for our fishing and towing
operations.
A large
portion of our fishing and towing operations is conducted by M.B. Lubin, an
affiliated entity because it is owned by Dino Vidov, our general
manager. M.B. Lubin owns a fleet of seven fishing vessels that catch
fish, typically in the Adriatic, store them in cages and tow those cages back to
our farming locations where they are transferred into permanent holding
pens. We do not have our own fishing vessels and, moreover, do not
possess the requisite licenses to catch our own fish. If for any reason, M.B.
Lubin would be unable or unwilling to continue to provide its services to us,
this would likely lead to a temporary interruption in our supply of fish,
at least until we find another entity that can provide these services to
us. Failure to find a replacement for M.B. Lubin, even on a temporary
basis, may have an adverse effect on our results of operations.
15
Almost
all our products are sold to only three customers.
We have
derived, and over the near term expect to continue to derive, all of our sales
from a small number of customers. All of our products are sold to
only three trading houses for further sale into the Japanese
market. The loss of any of these customers, or non-payment of
outstanding amounts due to us by any of them, could materially and adversely
affect our results of operations, financial position and liquidity.
It
may be difficult to effect service of process and enforcement of legal judgments
upon our company and our officers and directors because some of them reside
outside the United States.
As our
operations are presently based in Croatia and our key directors and officers
reside outside the United States, service of process on our key directors and
officers may be difficult to effect within the United States. Also,
substantially all of our assets are located outside the United States and any
judgment obtained in the United States against us may not be enforceable outside
the United States.
We
may be adversely affected by fluctuations in raw material prices and selling
prices of our products.
The
products and raw materials we use may experience price volatility caused by
events such as market fluctuations, weather conditions or changes in
governmental programs. The market price of these raw materials may also
experience significant upward adjustment, if, for instance, there is a material
under-supply or over-demand in the market. These price changes may
ultimately result in increases in the selling prices of our products and may, in
turn, adversely affect our sales volume, revenue and operating
profits.
We
may not be able to effectively manage our growth, which may harm our
profitability.
Our
strategy envisions expanding our business. If we fail to effectively manage our
growth, our financial results could be adversely affected. Growth may place a
strain on our management systems and resources. We must continue to refine and
expand our business development capabilities, our systems and processes and our
access to financing sources. As we grow, we must continue to hire, train,
supervise and manage new employees. We cannot assure you that we will be
able to:
|
·
|
meet
our capital needs;
|
|
·
|
expand
our systems effectively or efficiently or in a timely
manner;
|
|
·
|
allocate
our human resources optimally;
|
|
·
|
identify
and hire qualified employees or retain valued employees;
or
|
|
·
|
incorporate
effectively the components of any business that we may acquire in our
effort to achieve growth.
|
If we are
unable to manage our growth, our operations and our financial results could be
adversely affected by inefficiency, which could diminish our
profitability.
Loss
of Oli Steindorsson, our Chairman, President and Chief Executive Officer, could
impair our ability to operate.
If we
lose Oli Steindorsson, our business could suffer. Our success is highly
dependent on our ability to attract and retain qualified management
personnel. We have entered into an employment agreement with Mr.
Steindorsson. The loss of Mr. Steindorsson could have some effect on
our operations as we may experience temporary difficulties in competing
effectively, developing our technology and implementing our business
strategies. We do not have key man life insurance in place for any of our key
personnel.
16
Our
business may suffer if we do not attract and retain talented
personnel.
Our
success will depend in large measure on the abilities, expertise, judgment,
discretion, integrity and good faith of our management and other personnel in
conducting our business. We have a small management team, and the loss of a key
individual or inability to attract suitably qualified staff could materially
adversely impact our business.
Our
success depends on the ability of our management and employees to interpret
market and aqua-biological data correctly and to interpret and respond to
economic, market and other conditions in order to locate and adopt appropriate
investment opportunities, monitor such investments, and ultimately, if required,
to successfully divest such investments. Further, no assurance can be given that
our key personnel will continue their association or employment with us or that
replacement personnel with comparable skills can be found. We have sought to,
and will continue to, ensure that management and any key employees are
appropriately compensated, however, their services cannot be guaranteed. If we
are unable to attract and retain key personnel, our business may be adversely
affected.
Our
management team has limited experience in public company matters, which could
impair our ability to comply with legal and regulatory
requirements.
Our
management team has only limited public company management experience or
responsibilities, which could impair our ability to comply with legal and
regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable
federal securities laws including filing required reports and other information
required on a timely basis. There can be no assurance that our management will
be able to implement and effect programs and policies in an effective and timely
manner that adequately responds to increased legal, regulatory compliance and
reporting requirements imposed by such laws and regulations. Our failure to
comply with such laws and regulations could lead to the imposition of fines and
penalties and further result in the deterioration of our business.
Penalties
we may incur could impair our business.
Failure
to comply with government regulations could subject us to civil and criminal
penalties, could require us to forfeit property rights, and may affect the value
of our assets. We may also be required to take corrective actions, such as
installing additional equipment or taking other actions, each of which could
require us to make substantial capital expenditures. We could also be required
to indemnify our employees in connection with any expenses or liabilities that
they may incur individually in connection with regulatory action against
them. As a result, our future business prospects could deteriorate due to
regulatory constraints, and our profitability could be impaired by our
obligation to provide such indemnification to our employees.
Our
insurance may be inadequate to cover liabilities we may incur.
Our
involvement in the fish farming industry may result in our becoming subject to
liability for pollution, property damage, personal injury or other hazards.
Although we will obtain insurance in accordance with industry standards to
address such risks, such insurance has limitations on liability that may not be
sufficient to cover the full extent of such liabilities. In addition, such risks
may not, in all circumstances, be insurable or, in certain circumstances, we may
choose not to obtain insurance to protect against specific risks due to the high
premiums associated with such insurance or for other reasons. The payment of
such uninsured liabilities would reduce the funds available to us. If we suffer
a significant event or occurrence that is not fully insured, or if the insurer
of such event is not solvent, we could be required to divert funds from capital
investment or other uses towards covering our liability for such
events.
Some
consumers may refrain from purchasing tuna because it has been found to contain
mercury,
Research
has shown that tuna contains relatively high levels of mercury, a toxic
substance. Studies have suggested that mercury may cause health
problems, including an increased risk of cardiovascular disease and neurological
symptoms.
The high
mercury concentration in tuna relative to other fish species is due to its large
size and resulting high position in the food chain and the subsequent
accumulation of heavy metals from its diet. As awareness of the real
or perceived risks associated with the consumption of a fish that contains this
substance spreads, increasing numbers of people may refrain from consuming
tuna. If this were to occur, this will have an adverse impact on our
business.
17
Fluctuations
in foreign exchange rates could have an adverse effect on our results of
operations.
Our
operations through our subsidiary are conducted in foreign currencies. For
example, most of our sales are paid for in Japanese Yen while most of our
expenses are paid for in Croatian Kuna and Euros. The value of these
currencies fluctuate relative to the U.S. dollar. As a result, we are
exposed to exchange rate fluctuations, which could have an adverse effect on our
results of operations in a given period.
RISKS RELATED TO OUR COMMON
STOCK
There
has been a limited trading market for our common stock and there is no market
for our outstanding warrants.
It is
anticipated that there will be a limited trading market for our common stock on
the Over-the-Counter Bulletin Board. The lack of an active market may
impair your ability to sell your shares at the time you wish to sell them or at
a price that you consider reasonable. The lack of an active market may also
reduce the fair market value of your shares. An inactive market may also
impair our ability to raise capital by selling shares of capital stock and may
impair our ability to acquire other companies or technologies by using common
stock as consideration.
You
may have difficulty trading and obtaining quotations for our common
stock.
Our
common stock may not be actively traded, and the bid and asked prices for our
common stock on the Over-the-Counter Bulletin Board may fluctuate widely. As a
result, investors may find it difficult to dispose of, or to obtain accurate
quotations of the price of, our securities. This severely limits the liquidity
of our common stock, and would likely reduce the market price of our common
stock and hamper our ability to raise additional capital.
The
market price of our common stock may be, and is likely to continue to be,
highly volatile and subject to wide fluctuations.
The
market price of our common stock is likely to be highly volatile and could be
subject to wide fluctuations in response to a number of factors that are beyond
our control, including:
|
·
|
dilution
caused by our issuance of additional shares of common stock and other
forms of equity securities, which we expect to make in connection with
future acquisitions or capital financings to fund our operations and
growth, to attract and retain valuable personnel and in
connection with future strategic partnerships with other
companies;
|
|
·
|
announcements
of new acquisitions or other business initiatives by our
competitors;
|
|
·
|
our
ability to take advantage of new acquisitions or other business
initiatives;
|
|
·
|
quarterly
variations in our revenues and operating
expenses;
|
|
·
|
changes
in the valuation of similarly situated companies, both in our industry and
in other industries;
|
|
·
|
changes
in analysts’ estimates affecting our company, our competitors and/or our
industry;
|
|
·
|
changes
in the accounting methods used in or otherwise affecting our
industry;
|
|
·
|
additions
and departures of key personnel;
|
|
·
|
announcements
by relevant governments pertaining to additional quota restrictions;
and
|
|
·
|
fluctuations
in interest rates and the availability of capital in the capital
markets.
|
18
These and
other factors are largely beyond our control, and the impact of these risks,
singly or in the aggregate, may result in material adverse changes to the market
price of our common stock and/or our results of operations and financial
condition.
Our
operating results may fluctuate significantly, and these fluctuations may cause
our stock price to decline.
Our
operating results will likely vary in the future primarily as the result of
fluctuations in our revenues and operating expenses, expenses that we incur,
prices of feed used in our business, the price that customers are willing and
able to pay for our products and other factors. If our results of operations do
not meet the expectations of current or potential investors, the price of our
common stock may decline.
Our
directors and officers will have a high concentration of ownership of our common
stock.
Based on
the 45,261,000 shares of common stock that are estimated to be outstanding
(excluding shares underlying warrants) as of June 30, 2010, our officers and
directors beneficially own approximately 74.8% of our outstanding common
stock. Such a high level of ownership by such persons may have a
significant effect in delaying, deferring or preventing any potential change in
control of our company. Additionally, as a result of their high level
of ownership, our officers and directors might be able to strongly influence the
actions of the our board of directors and the outcome of actions brought to our
shareholders for approval. Such a high level of ownership may adversely affect
the voting and other rights of our shareholders.
We
do not expect to pay dividends in the foreseeable future.
We do not
intend to declare dividends for the foreseeable future, as we anticipate that we
will reinvest any future earnings in the development and growth of our business.
Therefore, investors will not receive any funds unless they sell their common
stock, and stockholders may be unable to sell their shares on favorable terms or
at all. Investors cannot be assured of a positive return on investment or that
they will not lose the entire amount of their investment in the common
stock.
Applicable
SEC rules governing the trading of “penny stocks” limit the trading and
liquidity of our common stock, which may affect the trading price of our common
stock.
Shares of
common stock may be considered a “penny stock” and be subject to SEC rules and
regulations which impose limitations upon the manner in which such shares may be
publicly traded and regulate broker-dealer practices in connection with
transactions in “penny stocks.” Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer’s account. In addition,
the penny stock rules generally require that prior to a transaction in a penny
stock, the broker-dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules which may increase the
difficulty investors may experience in attempting to liquidate such
securities.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
None.
19
Item
3. Defaults Upon Senior Securities.
None.
Item
4. (Removed and Reserved).
Item
5. Other Information.
None.
Item 6. Exhibits.
Exhibit
Number
|
Description
|
|
3.1
|
Articles
of Incorporation (incorporated by reference from our SB-2 as filed with
the SEC on July 12, 2006)
|
|
3.2
|
Bylaws
(incorporated by reference from our SB-2 as filed with the SEC on July 12,
2006)
|
|
10.1
|
Share
Exchange Agreement dated May 3, 2010, among our company, Atlantis Group
HF, Bluefin Acquisition Group Inc. and Kali Tuna d.o.o. (incorporated by
reference from our current report on Form 8-K filed on May 3,
2010)
|
|
10.2
|
Form
of warrant to purchase shares of our common stock
|
|
10.3
|
Employment
Agreement dated July 1, 2010 with Oli Valur Steindorsson (incorporated by
reference from our current report on Form 8-K as filed with the SEC on
July 7, 2010)
|
|
10.4
|
Employment
Agreement dated July 1, 2010 with Dan Zang (incorporated by reference from
our current report on Form 8-K as filed with the SEC on July 7,
2010)
|
|
10.5
|
Sales
Agency Agreement dated June 30, 2010 with Atlantis Group hf. (incorporated
by reference from our current report on Form 8-K as filed with the SEC on
July 7, 2010)
|
|
10.6
|
Call
Option Agreement dated June 30, 2010 with Atlantis Group hf. (incorporated
by reference from our current report on Form 8-K as filed with the SEC on
July 7, 2010)
|
|
31.1*
|
Section
302 Certification of Oli Valur Steindorsson
|
|
31.2*
|
Section
302 Certification of Daniel G. Zang
|
|
32.1*
|
Section
906 Certification of Oli Valur Steindorsson
|
|
32.2*
|
Section
906 Certification of Daniel G.
Zang
|
* Filed
herewith.
20
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
LIONS
GATE LIGHTING CORP.
|
|
/s/Oli Valur Steindorsson
|
|
By: Oli
Valur Steindorsson
|
|
President,
Chief Executive Officer and Chairman
|
|
(Principal
Executive Officer)
|
|
Dated:
July 14, 2010
|
|
/s/Daniel G. Zang
|
|
By: Daniel
G. Zang
|
|
Chief
Financial Officer and Secretary
|
|
(Principal
Financial Officer and
|
|
Principal
Accounting Officer)
|
|
Dated:
July 14, 2010
|
21