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EX-5.1 - ContinuityX Solutions, Inc. | v206139_ex5-1.htm |
EX-23.1 - ContinuityX Solutions, Inc. | v206139_ex23-1.htm |
As
filed with the United States Securities and Exchange Commission on December
22, 2010
Registration
No. 333-_______
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
to
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
EDUTOONS,
INC.
(Exact
Name of Registrant as Specified in our Charter)
Delaware
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4841
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27-2701563
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||
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
I.D No.)
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EDUtoons,
Inc.
101
East 52nd Street, 10th Floor
New
York, NY 10022
Tel:
(212) 319-1754
(Name,
address, Including Zip Code and Telephone Number, Including Area Code, of Agent
for Service)
Copies
to:
Gersten
Savage LLP
Arthur
S. Marcus, Esq.
Cheryll
J. Calaguio, Esq.
600
Lexington Avenue, 9th Floor
New
York, NY 10022-6018
Tel:
(212) 752-9700
Fax:
(212) 980-5192
Approximate date of proposed sale to
the public: As soon as practicable after the effective date of this
Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. þ
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. ¨
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
the 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
þ
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CALCULATION
OF REGISTRATION FEE
Amount to be
Registered
|
Proposed
Maximum
Offering Price
per Share(1)
|
Proposed
Maximum
Aggregate
Offering
|
Amount of
Registration
Fee(2)
|
|||||||||||||
Common
stock of the registrant, par value
$.001 per share
|
3,000,000 | $ | 0.05 | $ | 150,000 | $ | 10.70 | |||||||||
Total
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3,000,000 | $ | 0.05 | $ | 150,000 | $ | 10.70 |
(1) This
price was arbitrarily determined by us.
(2) Estimated
solely for the purpose of calculating the registration fee under Rule 457(o) of
the Securities Act as defined below.
The registrant hereby amends this
registration statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 (the
“Securities Act”) or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to Section
8(a), may determine.
i
The
information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is declared effective. This prospectus
is not an offer to sell these securities and it is not a solicitation of
an offer to buy these securities in any state or jurisdiction where the
offer or sale is not permitted by the law of such state or jurisdiction.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon
the adequacy or accuracy of the prospectus. Any representation to the
contrary is a criminal offense.
|
SUBJECT
TO COMPLETION, DATED DECEMBER 22, 2010
PRELIMINARY
PROSPECTUS
EDUtoons,
Inc.
3,000,000
SHARES
OF
COMMON
STOCK
EDUtoons,
Inc., a Delaware corporation (“EDUtoons” or the “Company”) is offering, on a
best efforts basis, up to 3,000,000 shares of its common stock at a price of
$0.05 per share (the “Shares”) in a direct public offering, without any
involvement of underwriters or broker-dealers. The Shares are intended to be
sold directly through the efforts of the director and officers of the
Company. As of this date, we have not entered into any agreements or
arrangements for the sale of the Shares with any broker/dealer or sales agent.
However, if we were to enter into such arrangements, we will file a post
effective amendment to disclose those arrangements.
The
Company is not required to sell any specific number of Shares but will use its
best efforts to sell all of the Shares offered herein. This offering will
terminate when all of the 3,000,000 shares of common stock have been sold, or
ninety (90) days after the registration statement is declared effective by the
Securities and Exchange Commission. EDUtoons shall have the right to
extend the offering, in its sole discretion, for an additional period of ninety
(90) days. The proceeds from the sale of the Shares in this offering will
be payable to EDUtoons, Inc.
The
Company may not sell the Shares until the registration statement filed with the
Securities and Exchange Commission (“SEC”) is declared effective. Its
common stock is presently not traded on any market or securities
exchange. The Company is a development stage company that currently has
very limited operations and has not generated any revenue. Therefore, any
investment in the Shares involves a high degree of risk.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. CONSIDER CAREFULLY THE “RISK
FACTORS” BEGINNING ON PAGE 5 OF THIS PROSPECTUS BEFORE INVESTING IN THE
SHARES.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
ii
You
should rely only on the information contained in this Prospectus and the
information we have referred you to. We have not authorized any person to
provide you with any information about this offering, EDUtoons, Inc., or the
Shares offered hereby that is different from the information included in this
prospectus. If anyone provides you with different information, you should not
rely on it.
The date
of this prospectus is December ___, 2010
iii
Table
of Contents
GENERAL
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2
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PROSPECTUS
SUMMARY
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2
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RISK
FACTORS
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5
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TAX
CONSIDERATIONS
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10
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USE
OF PROCEEDS
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10
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DETERMINATION
OF OFFERING PRICE
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10
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DILUTION
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10
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SHARES
ELIGIBLE FOR RESALE
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11
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SELLING
SHAREHOLDERS
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12
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PLAN
OF DISTRIBUTION
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12
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DESCRIPTION
OF SECURITIES
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13
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INTERESTS
OF NAMED EXPERTS AND COUNSEL
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14
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LEGAL
REPRESENTATION
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14
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EXPERTS
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14
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TRANSFER
AGENT
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14
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DESCRIPTION
OF BUSINESS
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14
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REPORTS
TO STOCKHOLDERS
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19
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DESCRIPTION
OF PROPERTY
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19
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LEGAL
PROCEEDINGS
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19
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MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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19
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FINANCIAL
STATEMENTS
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21
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SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
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42
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
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42
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RESULTS
OF OPERATIONS
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42
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LIQUIDITY
AND CAPITAL RESOURCES
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43
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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43
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DIRECTORS
AND EXECUTIVE OFFICERS
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43
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EXECUTIVE
COMPENSATION
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44
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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46
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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46
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DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
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46
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WHERE
YOU CAN FIND ADDITIONAL INFORMATION
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47
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PART
II INFORMATION NOT REQUIRED IN PROSPECTUS
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49
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SIGNATURES
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52
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YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE
HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL
THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE
DATE OF THIS DOCUMENT.
iv
GENERAL
As
used in this Prospectus, references to the “EDUtoons,” “Company,” “we,” “our,”
“ours” and “us” refer to EDUtoons, Inc., a Delaware corporation, unless the
context otherwise requires. In addition, references to our “audited financial
statements” are to our financial statements for the fiscal year ending June 30,
2010, and any reference to our “financial statements” refer to our financial
statements for the three month period ending September 30, 2010, except as the
context otherwise requires. Any references to “fiscal year” refer to our
fiscal year ending June 30. Unless otherwise indicated, the term “common stock”
refers to shares of the Company’s common stock, par value
$0.001.
PROSPECTUS
SUMMARY
The
following summary highlights some of the information in this Prospectus. It may
not contain all of the information that is important to you. To understand this
offering fully, you should read the entire Prospectus carefully, including the
risk factors and our financial statements and the notes accompanying the
financial statements appearing elsewhere in this Prospectus.
THE
COMPANY
Where
You Can Find Us
Our
principal executive offices are located at 101 East 52nd Street, 10th Floor, New
York, NY 10022. Our telephone number is (212) 319-1754. We have acquired
the domain rights to www.edutoons4kids.com.
Corporate
Background
We were
incorporated in the state of Delaware on April 28, 2010, under the name
EDUtoons, Inc. Our business purpose is to provide reinforcement in
children’s programming by producing one-minute, three-minute and five-minute
educational cartoons, which are intended to serve as both an educational tool
and counter-balance to the, at times, violent and age-inappropriate nature of
cartoons and programming directed at children. We will seek to provide a
useful educational format for school children and intend to market the cartoon
segments to television programmers, as well as to educational institutions in
order to enable teachers to expose their students to a new learning format while
keeping it fun at the same time. As of the date hereof, we have only
conducted initial research into the competitive conditions in the industry in
which we operate.
We are
a development stage company that has not generated any revenue and has had
limited operations to date. From April 28, 2010 (inception) to June 30, 2010, we
have incurred accumulated net losses of $3,950. As
of September 30, 2010, we had total assets of $27,500 which consisted of
$8,644 in cash and $18,856 in deferred registration costs, and total liabilities
of $4,850 and accumulated net losses of $4,850. At the present time,
we do not incur any fixed monthly expenses other than the legal and accounting
costs related to the filing of this Registration Statement. However, we do
anticipate beginning to incur approximately $24,000 in expenses during the four
months immediately following this offering in order to accomplish the initial
stages of our business plan, such as costs related to the development and
production of an initial set of cartoons and for costs related to the marketing
of such initial set of cartoons. During the 12 months following the
offering, we anticipate incurring costs of approximately $95,000 in order to
fully implement our business plan, which amount includes the $24,000 to be
incurred during the four months following the offering. At the
present time, we do not anticipate earning significant revenues until after the
12 months following the offering, however, no assurance can be given that we
will be able to earn any revenues during such time as
anticipated. (Please see the “Use of Proceeds” section beginning on
page 10 hereof.)
2
We
anticipate that unless we obtain additional capital in the near future, we will
be unable to execute on our business plan. Based on our financial history
since inception, our independent auditor has expressed substantial doubt as to
our ability to continue as a going concern.
In
addition, we have not identified or approached any market makers that may assist
us in applying for the quotation of our common stock on a national stock
exchange or association, or inter-dealer quotation system. We are unable to
estimate when we expect to undertake this endeavor or whether we will be
successful. In the absence of listing, no market will be available
for investors in our common stock in which they can sell the Shares. We cannot
guarantee that a meaningful trading market will develop or that we will be able
to get the Shares listed for trading.
THE
OFFERING
Securities
Being Offered
|
Up
to 3,000,000 shares of common stock.
|
|
Initial
Offering Price
|
The
purchase price for the Shares is $0.05 per share. This price was
determined arbitrarily by us.
|
|
Terms
of the Offering
|
The
Company’s director and officers will sell the Shares beginning on such
date as the registration statement filed with the Securities and Exchange
Commission is declared effective.
|
|
Termination
of the Offering
|
This
offering will terminate when all of the 3,000,000 shares of common stock
have been sold, or ninety (90) days after the registration statement is
declared effective by the Securities and Exchange Commission.
EDUtoons shall have the right to extend the offering, in its sole
discretion, for an additional period of ninety (90)
days.
|
|
Risk
Factors
|
The
Shares being offered hereby involve a high degree of risk and should not
be purchased by investors who cannot afford the loss of their entire
investment. See “Risk Factors” beginning on page 5.
|
|
Common
Stock Issued and Outstanding Before the Offering
|
3,250,000
shares of our common stock are issued and outstanding as of the date of
this Prospectus.
|
|
Common
Stock Issued and Outstanding After the Offering
|
Assuming
the sale of all 3,000,000 shares offered under this Prospectus, there will
be 6,250,000 shares of our common stock issued and outstanding after the
offering is completed.
|
|
Use
of Proceeds
|
We
will use the net proceeds from this offering primarily for the production,
development and marketing of the educational
cartoons.
|
3
SUMMARY
FINANCIAL AND OTHER DATA
THE
FOLLOWING TABLE PRESENTS SUMMARY FINANCIAL AND OTHER DATA AND HAS BEEN DERIVED
FROM OUR FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD ENDING SEPTEMBER 30,
2010 AND FROM OUR AUDITED FINANCIAL STATEMENTS FOR THE PERIOD SINCE INCEPTION
(APRIL 28, 2010) UP TO JUNE 30, 2010. THE INFORMATION BELOW SHOULD BE READ IN
CONJUNCTION WITH THE “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS” AND OUR FINANCIAL STATEMENTS AND THE NOTES
TO OUR FINANCIAL STATEMENTS, EACH OF WHICH IS INCLUDED IN ANOTHER SECTION OF
THIS PROSPECTUS.
( US Dollars)
|
September
30, 2010
(unaudited)
|
|||
Revenues
|
$ | - | ||
Operating
Expenses
|
900 | |||
Net
(Loss)
|
(900 | ) | ||
Total
Assets
|
27,500 | |||
Total
Liabilities
|
4,850 | |||
Total
Stockholders’ Equity
|
22,650 | |||
(Loss)
per common share, basic and diluted
|
(0.00 | ) | ||
Weighted
average shares outstanding, basic and diluted
|
2,750,000 |
(US Dollars)
|
June 30,
2010
|
|||
Revenues
|
$ | - | ||
Operating
Expenses
|
3,950 | |||
Net
(Loss)
|
(3,950 | ) | ||
Total
Assets
|
37,500 | |||
Total
Liabilities
|
13,950 | |||
Total
Stockholders’ Equity
|
23,550 | |||
(Loss)
per common share, basic and diluted
|
(0.00 | ) | ||
Weighted
average shares outstanding, basic and diluted
|
2,750,000 |
4
An
investment in the Shares involves a high degree of risk. Prospective investors
should carefully consider the risks and uncertainties described below before and
all of the information contained in this prospectus before deciding whether to
purchase the Shares. If any of the following risks actually occur, our
business, financial condition and results of operations could be harmed. The
risks and uncertainties described below consists of all known material risks
which management currently believes may significantly affect us.
Risks
Related to Our Business
We
have no operating history and therefore we cannot project our revenues and
results of operations.
We have
no operating history and our business and prospects must be considered in light
of the risks and uncertainties to which a start up company is exposed. We
cannot provide assurances that our business strategy will be successful or that
we will generate any revenues in the future. We may incur losses on
a quarterly or annual basis for a number of reasons, some within and others
outside our control. The growth of our business and our ability to generate
revenue will depend largely on our ability to execute our business plan and the
acceptance of the educational cartoons that we may develop. However, no
assurance can be given that we will successfully implement our business plan,
that our educational cartoons will gain market acceptance or that we will be
able to generate any revenues.
Members
of our management team have no experience in producing and marketing educational
cartoons.
Our
officers have no experience in producing and marketing educational cartoons and
none of our director or officers have any significant technical training or
experience in this regard. We rely on our Cartoon and Animation Advisor, Irwin
Hansen, on the execution of management’s ideas and vision. Further, none of our
officers or director has any experience in operating a publicly reporting
company. As a result of management’s inexperience, there is a higher risk
of us being unable to successfully execute our business plan or operate as a
public company.
We
have incurred historical losses as a result, we may not be able to generate
profits, support our operations, or establish a return on invested
capital.
We
incurred net losses from our inception, April 28, 2010 to September 30, 2010 in
the amount of $4,850. We expect that our operating expenses will increase
as we begin to produce and develop cartoon segments. In addition, we will
incur additional expenses associated with being a public company, such as
additional legal expenses, additional accounting costs and other expenses
related to the compliance and disclosure requirements that are imposed on all
public companies, which are currently estimated at approximately $7,500 per
quarter. We cannot assure you that our business strategy will be
successful or that significant revenues or profitability will ever be achieved
or, if they are achieved, that they can be consistently sustained or increased
on a quarterly or annual basis. Further, based on our financial history
since inception, our independent auditor has expressed substantial doubt as to
our ability to continue as a going concern
Our
limited operating history makes it difficult to evaluate our current business
and future prospects, and may increase the risk of your investment.
We have
been in existence only since April 2010. Our limited operating history will make
it difficult for an investor to evaluate our current business and our
future prospects. We have encountered, and will continue to encounter, risks and
difficulties frequently experienced by start-up companies. If we do not address
these risks successfully, our business will be harmed, which may increase the
risk associated with an investment in the Shares.
5
If
we do not effectively build our sales force and internal support staff, our
future operating results will suffer.
We plan
to build a direct sales force that will be responsible for marketing our
products to television station programmers and educators. We believe that
there is significant competition for direct sales, service and support personnel
with the skills and knowledge that we, as a new business, will require. Our
ability to achieve significant revenue growth will depend not only on our
internal marketing but also on our success in recruiting, training and retaining
a sufficient number of personnel to support our growth. New hires often require
significant training and, in most cases, take significant time before they
achieve full productivity. Our intended hires may not become as productive as we
expect, and we may be unable to hire or retain a sufficient number of qualified
individuals. If our efforts to build a direct sales force are not successful or
do not generate a corresponding increase in revenue, our business will be
harmed.
We
may be unable to properly manage our growth.
We may be
unable to properly manage any rapid growth in our business in the event that the
cartoons we produce gain wide market acceptance. Failure to manage this
growth effectively could adversely affect our profitability. If we are not
successful in managing or expanding our operations or maintaining adequate
management, financial and operating systems and controls, our performance will
be adversely affected.
We
are highly dependent upon our current management.
We intend
to expand operations in the future and anticipate that such expansion of our
operations will continue to be required in order to address potential market
opportunities. Any such growth, if it occurs, will place a significant strain on
our management and on our operational and financial resources. Our success is
principally dependent on our current management personnel for the operation
of our business. The loss of any of the members of our management
could negatively impact our ability to develop and/or sell our educational
cartoons, which could adversely affect our financial results and impair our
operations.
We
have no employment or consulting agreement with our Cartoon and Animation
Advisor, Irwin Hansen and our business may suffer in the event that Mr. Hansen
decides to cease to offer his services to us.
Mr.
Irwin Hansen, our Cartoon and Animation Advisor, provides his services to the
Company free of charge pursuant to a verbal agreement between him and our Chief
Executive Officer and President, Ms. Eileen Russell and we do not have any
written agreement with Mr. Hansen that obligates him to continue provide his
services to us, whether with or without compensation, for any definite period of
time. Mr. Hansen is currently tasked with selecting and supervising
our animators, with providing editorial direction and with selecting the final
cartoon strips and sketches to be used in our cartoons. As such, the loss of his
services may delay the execution of our business plan. Further, our
anticipated expenses and forecasts regarding revenue all presume that Mr. Hansen
will continue to provide his services to us free of charge. As such,
in the event that Mr. Hansen ceases to provide services to us under the current
arrangement, for whatever reason, our financial operations will
suffer.
We
have not sold any cartoons to date. We cannot guarantee we will be
successful in selling cartoons or that if we are able to sell cartoons, that we
will make a profit.
We do not
currently have any clients who have agreed to purchase the cartoons we intend to
produce and no assurance can be given that we will be successful in selling the
cartoons to our targeted markets. Further, even if we obtain clients, no
assurance can be given that that we will generate a profit from such sales. If
we cannot generate a profit, we will have to suspend or cease operations and any
investor in the Company may lose their entire investment.
6
If
we are unable to sell our products to our targeted market, our revenue will not
grow as expected.
Our
ability to attract customers and generate revenue will depend in large part on
our ability to successfully market the cartoons we produce to our targeted
markets, television station programmers and educators. Our success in
selling our product depends on several factors, including the timely completion,
introduction and market acceptance of our educational cartoons. Further, any new
educational cartoons we develop or produce in response to market demands may not
be completed in a timely or cost-effective manner, or may not achieve the broad
market acceptance necessary to generate significant revenue. If we are unable to
successfully market and sell the cartoons, sell the same into new markets or
enhance existing educational cartoons to meet customer requirements, our revenue
will not grow as expected, which may have a negative impact on our financial
operations.
We
expect to face intense competition.
The
educational cartoons will compete with a variety of other programs intended for
children. All of our competitors have greater financial resources, greater
public and industry recognition and broader marketing capabilities than us. In
addition, the market in which we operate is characterized by numerous small
companies, with whose products we may be unfamiliar with, and which may be in
direct competition with our products. Our inability to adequately
compete with our competitors regardless
of their respective size, may
result in lost sales and will affect our overall profitability.
Risks
Related To Our Industry
Lack
of compliance with industry laws and regulations may result in litigation
against us.
We
operate in a highly regulated industry. Our failure to comply with rules and
regulations of various federal, state and local government authorities could
have a significant financial impact on our operations and profitability. No
assurance can be given that we will always be in compliance with these rules and
regulations. Failure to comply with these rules and regulations may result in,
among other things, class action lawsuits, administrative enforcement actions
and/or civil and criminal liability against us, any of which may have a negative
impact on our reputation and our over-all profitability.
Inability
to protect our intellectual property may have a negative impact on our
profitability.
Trademarks
and other proprietary rights are important to our success and competitive
position. While we intend to protect our trademarks and other proprietary
rights through a variety of means when products that are entitled to
intellectual property protection are developed by us, no assurance can be given
that such actions will be adequate to protect these rights. Our
failure to protect our intellectual property may result in third parties using
our products without payment of royalties to us and may have a negative impact
on our profitability.
Assertions
by a third party that we infringe its intellectual property, whether successful
or not, could subject us to costly and time-consuming litigation.
The
industry in which we are engaged in is characterized by the existence of a large
number of copyrights, trademarks and trade secrets and by frequent litigation
based on allegations of infringement or other violations of intellectual
property rights. As we face increasing competition and become a publicly
traded company, the possibility that claims against us for
alleged intellectual property rights violations may grow. Any
intellectual property rights claim against us, with or without merit, could be
time-consuming, expensive to litigate or settle and could divert management
attention and our financial resources. An adverse determination could also
prevent us from offering the cartoon segments we intend to produce to our
customers and may require that we develop substitute cartoon segments that do
not infringe on any third party’s intellectual property, which could be
financially burdensome and may affect our profitability.
7
We
may fail to comply with rules and regulations promulgated by the FCC and
other state and federal agencies.
Though we
receive advice from management and consultants regarding compliance with FCC
regulations, such regulations are very complex and, in some instances, are
subject to interpretation. Our business is primarily regulated by the FCC which
has jurisdiction over granting licenses and monitoring what goes out over the
public airwaves. Any violation or alleged violation of FCC regulations
could adversely affect our business.
Risks
Relating To Our Common Stock
Because
our Chief Executive Officer and sole Director owns 38.46% of our issued and
outstanding common stock, she can exert significant influence over corporate
decisions that may be disadvantageous to minority shareholders.
As of
December 20, 2010, our Chief Executive Officer, President and sole
director, Ms.
Eileen Russell, owns approximately 38.46% of our issued and
outstanding shares of common stock. While such ownership does not grant her
absolute control over the Company, such ownership is sufficient to permit her to
exert influence in determining the outcome of all corporate transactions or
other matters, including the election of directors, mergers, consolidations, the
sale of all or substantially all of our assets, and a change in control. Ms.
Russell’s interests may
differ from the interests of our other shareholders and thus may result in
corporate decisions that are disadvantageous to our other
shareholders.
We
arbitrarily determined the price of the shares of our common stock to be sold
pursuant to this prospectus, and such price may not reflect the actual market
price for the Shares.
The
initial offering price of $0.05 per share of common stock offered by us under to
this Prospectus was determined by us arbitrarily. The price is not based on our
financial condition and prospects, market prices of similar securities of
comparable publicly traded companies, certain financial and operating
information of companies engaged in similar activities to ours, or general
conditions of the securities market. The price may not be indicative of the
market price, if any, for the common stock that may develop in the trading
market after this offering. The market price for our common stock, if any, may
decline below the initial public price at which the Shares
are offered. Moreover, recently the stock markets have experienced extreme
price and volume fluctuations which have had a negative effect impact on smaller
companies. In the past, securities class action litigation has often been
instituted against various companies following periods of volatility in the
market price of their securities. If instituted against us, regardless of the
outcome, such litigation would result in substantial costs and a diversion of
management’s attention and resources, which would increase our operating
expenses and affect our financial condition and business
operations.
Because
we do not intend to pay any dividends on our common stock, holders of our common
stock must rely on stock appreciation for any return on their
investment.
We have
not declared or paid any dividends on our common stock since our inception, and
we do not anticipate paying any such dividends for the foreseeable future.
Accordingly, holders of our common stock will have to rely on stock
appreciation, if any, to earn a return on their investment in our common
stock.
Additional issuances of our
securities may result in immediate dilution to existing
shareholders.
We are
authorized to issue up to 10,000,000 shares of common stock, $0.001 par
value per share, of which 3,250,000 shares of common stock are currently issued
and outstanding. Our Board of Directors has the authority to cause us to issue
additional shares of common. We may, in the future, issue shares in connection
with financing arrangements or otherwise. Any such issuances will result in
immediate dilution to our existing shareholders’ interests, which will
negatively affect the value of your shares.
8
Currently,
there is no public market for our common stock, and there is no assurance that
any public market will ever develop or that our common stock will be quoted for
trading and, even if quoted, that a viable, liquid market with low volatility
will develop.
Currently,
our common stock is not listed on any public market, exchange, or quotation
system. Although we are taking steps to enable our common stock to be publicly
traded, a market for our common stock may never develop. We currently plan to
apply for quotation of our common stock on the Over the Counter Bulletin Board
(the “OTC Bulletin Board”) upon the effectiveness of the registration statement
of which this Prospectus forms a part. However, our common stock may never be
traded on the OTC Bulletin Board or even if traded, a viable public market may
not materialize. Even if we are successful in developing a public market, there
may not be enough liquidity in such market to enable shareholders to sell their
Shares. If our common stock is not quoted on the OTC Bulletin Board or if a
viable public market for our common stock does not develop, investors may not be
able to re-sell the Shares, rendering the same effectively worthless and
resulting in a complete loss of their investment.
We are
planning to identify a market maker to file an application with the Financial
Industry Regulatory Authority, Inc. (“FINRA”) on our behalf so that we may
quote our shares of common stock on the OTC Bulletin Board (which is maintained
by the FINRA) commencing upon the effectiveness of our registration statement of
which this Prospectus is a part. We cannot assure you that such market maker’s
application will be accepted by the FINRA. We are not permitted to file such
application on our own behalf. If the application is accepted, there can be no
assurances as to whether any market for our common stock will develop or of the
price at which our common stock will trade. If the application is accepted, we
cannot predict the extent to which investor interest in us will lead to the
development of an active, liquid trading market. Active trading markets
generally result in lower price volatility and more efficient execution of buy
and sell orders for investors.
In
addition, our common stock is unlikely to be followed by any market analysts,
and there may be few institutions acting as market makers for the common stock.
Either of these factors could adversely affect the liquidity and trading price
of our common stock. Until our common stock is fully distributed and an orderly
market develops in our common stock, if ever, the price at which it trades is
likely to fluctuate significantly. Prices for our common stock will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for shares of our common stock,
developments affecting our business, including the impact of the factors
referred to elsewhere in these Risk Factors, investor perception of the Company,
and general economic and market conditions. No assurances can be given that an
orderly or liquid market will ever develop for the shares of our common
stock.
Because
we will be subject to “penny stock” rules once our shares are quoted on the OTC
Bulletin Board, the level of trading activity in our stock may be
reduced.
Broker-dealer
practices in connection with transactions in “penny stocks” are regulated by
penny stock rules adopted by the Securities and Exchange Commission. Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on some national securities exchanges or quoted on
NASDAQ). 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
nature and level of risks in the penny stock market. The broker-dealer also must
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, if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer’s presumed control over the market, and
monthly account statements showing the market value of each penny stock held in
the customer’s account. In addition, broker-dealers who sell these securities to
persons other than established customers and “accredited investors” must 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.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their Shares.
9
TAX
CONSIDERATIONS
We are
not providing any tax advice as to the acquisition, holding or disposition of
the Shares offered herein. In making an investment decision, investors are
strongly encouraged to consult their own tax advisor to determine the U.S.
federal, state and any applicable foreign tax consequences relating to their
investment in the Shares.
USE
OF PROCEEDS
The
offering is being conducted on a self-underwritten basis and no minimum number
of Shares needs to be sold in order for the offering to proceed.
In the
event that we are able to sell 1,000,000 shares pursuant to this offering (for
net proceeds of approximately $29,990 after deducting estimated expenses of
$20,010) we will use approximately $18,000 for the development and production of
an initial set of one-minute, three-minute and five-minute educational cartoons
and approximately $6,000 for marketing purposes in order to generate interest in
our products. In the event that we are able to sell between two million
and three million shares under this offering for net proceeds of between $79,990
and $129,990, we will use an additional $40,000 to $60,000 for the creation,
development and production of additional cartoons segments and approximately
$20,000 to $32,000 to cover costs of additional marketing efforts that the
Company intends to undertake. Any amounts remaining after expenses for the
production of cartoons and marketing efforts will be retained for any unknown
expenses that the Company may incur.
DETERMINATION
OF OFFERING PRICE
As there
is no established public market for our shares, the offering price and other
terms and conditions relative to our shares have been arbitrarily determined by
EDUtoons and do not hear any relationship to the assets, earning, book value, or
any other objective criteria of value. In addition, no investment banker,
appraiser or other independent third party has been consulted concerning the
offering price for the shares or the fairness of the offering price used for the
shares.
DILUTION
Our
net tangible book value as of September 30, 2010 was approximately $22,650, or
$0.00824 per share of common stock based on 2,750,000 shares of common stock
outstanding as of such date. Net tangible book value per share represents the
amount of our total tangible assets less total liabilities, divided by the
number of shares of common stock outstanding as of September 30, 2010. Dilution
in net tangible book value per share to new investors represents the difference
between the amount per share paid by purchasers of Shares in this offering and
the net tangible book value per share of common stock immediately after
completion of this offering.
10
After
giving effect to the sale of all the Shares being sold pursuant to this offering
at the offering price of $0.05 per share, and after deducting estimated offering
expenses payable by us in the amount of $20,010, our net tangible book value
would be approximately $152,640, or $0.02655 per share of common stock. This
represents an immediate increase in net tangible book value of $0.01831 per
share of common stock to existing stockholders and an immediate dilution in net
tangible book value of $0.02345 per share to new investors purchasing the Shares
in this offering.
The
following table illustrates this per share dilution:
Offering
($150,000)
|
||||||||
Public
offering price per share of common stock
|
$ | 0.05 | ||||||
Net
tangible book value per common share as of September 30,
2010
|
$ | 0.00824 | ||||||
Increase
in net tangible book value per share attributable to existing
stockholders
|
$ | 0.01831 | ||||||
Net
tangible book value per share as adjusted after this
offering
|
$ | 0.02655 | ||||||
Dilution
per share to new investors
|
$ | 0.02345 |
SHARES
ELIGIBLE FOR RESALE
The
Shares sold pursuant to this offering will generally be freely transferable
without restriction or further registration under the Securities Act, except
that any shares of our common stock held by an “affiliate” of ours may not be
resold publicly except in compliance with the registration requirements of the
Securities Act or under an exemption under Rule 144 or otherwise. In general,
under Rule 144 as currently in effect, a person who is not one of our affiliates
and who is not deemed to have been one of our affiliates at any time during the
three months preceding a sale and who has beneficially owned shares of our
common stock that are deemed restricted securities for at least six months would
be entitled, after such six-month holding period, to sell the common stock held
by such person, subject to the continued availability of current public
information about us (which current public information requirement is eliminated
after a one-year holding period).
A person
who is one of our affiliates, or has been an affiliate of ours at any time
during the three months preceding a sale, and who has beneficially owned shares
of our common stock that are deemed restricted securities for at least six
months would be entitled after such six-month holding period to sell his or her
securities, provided that he or she sells an amount that does not exceed 1% of
the number of shares of our common stock then outstanding (or, if our common
stock is listed on a national securities exchange, the average weekly trading
volume of the shares during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale), subject to the continued
availability of current public information about us, compliance with certain
manner of sale provisions, and the filing of a Form 144 notice of sale if the
sale is for an amount in excess of 5,000 shares or for an aggregate sale price
of more than $50,000 in a three-month period.
Rule 144
is not available for resales of restricted securities of shell companies or
former shell companies until one year elapses from the time that such company is
no longer considered a shell company.
11
There are
no selling shareholders involved in this offering.
PLAN
OF DISTRIBUTION
We are
offering 3,000,000 shares of our common stock at a purchase price of $0.05 per
share. There is no public market for our common stock. To date, we have not
obtained listing or quotation of our securities on a national stock exchange or
association, or inter-dealer quotation system. We have not identified or
approached any market makers with regard to assisting us to apply for such
quotation. We are unable to estimate when we expect to undertake this endeavor
or whether we will be successful. In the absence of listing, no market is
available for investors in our common stock to sell the Shares. We cannot
guarantee that a meaningful trading market will develop or that we will be able
to get the Shares listed for trading.
If the
Shares ever become tradable, the trading price of such could be subject to wide
fluctuations in response to various events or factors, many of which are beyond
our control. As a result, investors may be unable to sell the Shares at a price
greater than the price at which they are being offered.
This
offering will be conducted on a best-efforts basis utilizing the efforts of the
officers and director of the Company. We do not anticipate entering into any
agreements or arrangements for the sale of the Shares with any broker/dealer or
sales agent. However, if we were to enter into such arrangements, we will
file a post effective amendment to disclose those arrangements.
The
officers and director of the Company will not receive commissions for any sales
originated on our behalf. We believe that our officers and director are exempt
from registration as brokers under the provisions of Rule 3a4-1 promulgated
under the Securities Exchange Act of 1934. In particular, as to our officers and
director, they:
|
1.
|
Are
not subject to a statutory disqualification, as that term is defined in
Section 3(a)39 of the Act, at the time of his or her participation;
and
|
|
2.
|
Are
not to be compensated in connection with their participation by the
payment of commissions or other remuneration based either directly or
indirectly on transactions in securities;
and
|
|
3.
|
Are
not an associated person of a broker or dealer;
and
|
Meets the
conditions of the following:
|
a.
|
Primarily
performs, or is intended primarily to perform at the end of the offering,
substantial duties for or on behalf of the issuer otherwise than in
connection with transactions in securities;
and
|
|
b.
|
Was
not a broker or dealer, or associated persons of a broker or dealer,
within the preceding 12 months;
and
|
12
|
c.
|
Did
not participate in selling an offering of securities for any issuer more
than once every 12 months other than in reliance on paragraphs within this
section, except that for securities issued pursuant to rule 415 under the
Securities Act of 1933, the 12 months shall begin with the last sale of
any security included within one rule 415
registration.
|
|
d.
|
The
officers and director of the Company may purchase the Shares sold
pursuant to this offering.
|
There can
be no assurance that all, or any, of the Shares will be sold. In order to
comply with the applicable securities laws of certain states, the securities may
not be offered or sold unless they have been registered or qualified for sale in
such states or an exemption from such registration or qualification requirement
is available and with which we have complied. The purchasers in this offering
and in any subsequent trading market must be residents of such states where the
Shares have been registered or qualified for sale or an exemption from such
registration or qualification requirement is available. As of this date, we have
not identified the specific states where the offering will be sold.
Investors
can purchase the Shares in this offering by contacting the Company. All payments
must be made in United States currency either by personal check, bank draft, or
cashiers check. There is no minimum subscription requirement. All subscription
agreements are irrevocable. We expressly reserve the right to either accept or
reject any subscription. Any subscription rejected will be returned to the
subscriber within 5 business days of the rejection date. Furthermore, once a
subscription agreement is accepted, it will be executed without reconfirmation
to or from the subscriber. Once we accept a subscription, the subscriber cannot
withdraw it.
DESCRIPTION
OF SECURITIES
General
Our total
authorized capital stock consists of 10,000,000 shares of common stock, par
value $0.001 per share.
Common
Stock
The
holders of common stock are entitled to one vote for each share held of record
on all matters submitted to a vote of our stockholders. Holders of common stock
are entitled to share ratably in dividends, as may be declared by our board of
directors out of funds legally available therefore. In the event we are
liquidated, dissolved or wound up, holders of the common stock shall be entitled
to share ratably in all assets remaining, if any, after payment of liabilities,
subject to the rights of the holders of preferred stock, if any. Holders of
common stock have no preemptive rights and have no rights to convert their
shares of common stock into any other securities.
We are
authorized to issue up to 10,000,000 shares of common stock, par value $0.001
per share. As of December 20, 2010, there were 3,250,000 shares of our common
stock issued and outstanding.
Preferred
Stock
We do not
have an authorized class of preferred stock.
Warrants
We have
not issued and do not have outstanding any warrants to purchase shares of our
common stock.
13
Options
We have
not issued and do not have outstanding any options to purchase shares of our
common stock.
Convertible
Securities
We have
not issued and do not have outstanding any securities convertible into shares of
our common stock or any rights convertible or exchangeable into shares of our
common stock.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this Prospectus as having prepared or certified any part of
this Prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had, or
is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant. Nor was any such person connected with the
registrant as a promoter, managing or principal underwriter, voting trustee,
director, officer, or employee.
LEGAL
REPRESENTATION
The
validity of the issuance of the common stock offered hereby will be passed upon
for us by Gersten Savage LLP, at 600 Lexington Avenue, New York, New York
10022.
EXPERTS
The
financial statements for the fiscal period ending June 30, 2010 included
in this Prospectus and the registration statement have been audited by Wei, Wei
&Co., LLP to the extent and for the periods set forth in their report
appearing elsewhere in this document and in the registration statement filed
with the SEC, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
TRANSFER
AGENT
We do not
currently have a transfer agent. We are currently in the process of identifying
potential transfer agents and plan to select one as soon as
practicable.
DESCRIPTION
OF BUSINESS
General
We were
incorporated in the state of Delaware in April 28, 2010, under the name
EDUtoons, Inc. Our business purpose is to provide reinforcement in
children’s programming by producing one-minute, three-minute and five-minute
educational cartoons, which are intended to serve as both an educational tool
and counter-balance to the, at times, violent and age-inappropriate nature of
cartoons and programming directed at children. We will seek to provide a
useful educational format for school children, and intend to market the cartoon
segments that we intend to produce to television programmers, as well as to
educational institutions to enable teachers to expose their students to a new
learning format while keeping it fun at the same time. We believe that the
cartoon segments we intend to develop and produce, once developed, will be in
keeping with the FCC regulations regarding educational
programming.
14
Our
business plan evolved as a result of Ms. Russell’s background in
television, broadcasting, and teaching in the public school system, during which
time, she broadened her understanding of the industry and determined that there
is a need for more educational programming. After a discussion with Mr.
Irwin Hasen, our Cartoon and Animation Advisor and Ms. Charlotte Veal, our
Vice-President, regarding the programming that she believed, based on her
experience, to be most effective, they determined that the combination of a
formal classroom-instruction-type format enriched by cartoon programming would
have appeal to broadcasters and schools.
In
order to execute our business plan, we intend to retain animators on an hourly
basis to be chosen by our Cartoon and Animation Advisor, Mr. Irwin Hansen, who
currently provides his services to us at no cost and without the benefit of an
employment or consulting agreement. These animators will be under the
supervision of Mr. Hansen and will be responsible for producing initial
sketches of the cartoons, either by hand or using computer illustration
software. As our Cartoon and Animation Advisor, Mr. Hansen will be
responsible for selecting the final cartoons sketches or strips to be
produced. Together with Ms. Russell, Mr. Hansen will supervise the story
line of each cartoon.
During
the first 12 months following the offering, no permanent staff is expected to be
hired for either the creation of cartoons or for the marketing thereof, as such
marketing will be done primarily by Ms. Russell and Ms. Veal. At this
time, it is anticipated that such marketing activities will consist of Internet
advertising, the sending of announcements to their contacts in the industry and
by calls directly to the four major television and cable networks and their
affiliates. In addition, Ms. Russell will also take part in marketing our
product to schools, and intends to initially contact the New York City Board of
Education and the Teacher’s Union, as well as various educational institutions
located in New York City.
To
date, we have not generated any revenues and as of the date hereof, we have only
taken the initial steps necessary before we can implement our business plan,
such as the raising of initial capital through the sale of 2,750,000 shares of
our common stock which occurred in May to June 2010. In addition, in
October of 2010, we obtained the domain rights to our website, www.edutoons4kids.com. During
the first quarter of 2010, our management team also developed a business plan
and intends to implement the initial phase thereof during the twelve months
following the offering, during which time we intend to conduct the following
activities:
First
Quarter Following the Offering:
During
the first three month period following the offering, we intend to conduct
initial research and development activities related to the production of one set
of one-minute, three-minute and five-minute cartoons. Such activities will
consist mostly of research related to the categories and content of the cartoons
in order to determine what categories will be most acceptable to our targeted
market. We also intend to begin the actual development and
production of the initial set of cartoon segments (i.e. one set of one-minute,
three-minute and five-minute cartoons) and intend to use the same for marketing
activities to be conducted during the next three-month period. We
do not anticipate generating revenues during this period and further anticipate
that approximately $17,000 will be spent on the development and production of
the initial set of cartoon segments and that approximately $7,000 will be spent
on research related to the categories and content of the
cartoons.
15
Second
Quarter Following the Offering:
During
this time, we intend to begin the marketing of the initial set of cartoons that
we develop during the first quarter following the offering. As part of our
initial marketing strategy, we intend to advertise our product on the internet,
send announcements to our management team’s contacts in the industry and make
calls directly to the four major television and cable networks and their
affiliates. It is currently intended that Ms. Russell will also market the
cartoons to schools, particularly, those educational institutions located in
city of New York. Also as a part of our marketing strategy, we will make a
clip of the cartoon segments available at no charge by posting the same on our
website, which website will be minimally developed during the second
quarter following the offering for the purpose of making such clips available
therein. Prior to downloading such clips, any potential customer will be
required to provide us with their names and contact information. As an
additional marketing strategy, it is anticipated that all such customers will be
provided with newsletters informing them of any additional cartoon strips
developed by the Company. We do not anticipate generating revenues during
this period and further anticipate that approximately $60,000 will be spent on
our marketing activities during this period, of which approximately $40,000 is
expected to account for costs related to advertising our product and
approximately $19,000 will be spent on the printing of our
newsletters. It is also anticipated that approximately $1,000
will be used to update and develop our website in such a manner that will permit
us to make the clips of the cartoon segments we develop available on such
website.
Third
Quarter Following the Offering:
We
currently intend to devote the third quarter following the offering on further
developing and completing our website. At the present time, it is
anticipated that a website designer will be engaged during this period that will
assist us in designing and completing our website. It is anticipated that
approximately $8,000 will be spend for the development of our
website.
It is
also anticipated, although no assurance can be given, that during this period,
we will begin to receive orders for the cartoons that we intend to
produce. During this time, only the initial set of one-minute,
three-minute and five-minute cartoons will be available for sale and/or
distribution. However, we do not anticipate receiving a significant amount
of revenue during this period.
Fourth
Quarter Following the Offering:
Based
on our current business plan, we anticipate that the fourth quarter following
the offering will be devoted to the development of additional cartoons at an
anticipated cost of roughly $3,000. It is intended that the cartoons that
we develop will have themes and categories that are based on the feedback we get
from potential customers as a result of our marketing efforts.
It is
currently anticipated that the net proceeds from the offering may be less than
our estimated budget for the twelve months following the
offering. Further, we do not anticipate receiving a
significant amount of revenues,
if any, until after 12 months following the offering. In the event
that the net proceeds from the offering are insufficient to cover our expenses
for the 12 months following the offering, we intend to engage in additional
financing activities in order to implement our business plan, including the
possible sale of debt instruments to be issued by us. However, no
assurance can be given that we will be successful in obtaining the necessary
financing, or that we will be able to negotiate acceptable terms in a timely
fashion. In addition, our access to capital is affected by prevailing conditions
in the financial and equity capital markets, as well as our own financial
condition. At this time, we have not entered into any agreements with any
third-party relating to the provision of credit facilities to
us.
Educational
Cartoons
Pediatric
and Adolescent Medicine magazine has reported that about 90% of children aged
twenty-four (24) months and under regularly watch television. A study
conducted by the University of Texas in Austin has shown that pre-school
children who watch a few hours a week of educational programming perform better
on achievement tests over time than those who watch general entertainment
shows. Our intent is to provide children with the educational programming
that we deem is currently lacking in the market today.
16
We intend
to initially produce television programming in a one-minute, 26-segment series,
each devoted to one letter of the alphabet. For instance, “A” could be
illustrated by “Ant”; “B” by “Bear”; and so forth. Thereafter,
three-minute segments, which would be offered in 13 and 26 series, will have
varied subjects such as “Presidents of the United States”; the “Countries of the
World”; the “States of the United States”, and the like. The five-minute
segments will be focused primarily on nature, various animal habitats around the
world, the stars, sea life—the potential content of our five-minute segments is
virtually unlimited and we intend to produce such five-minute segments that we
deem to be educational and of high quality.
During
our start up period, our management will be primarily responsible for developing
the contents of the cartoon segments that we intend to produce. We also
intend to engage individual animators who will execute on our management’s ideas
and vision.
All of
our cartoon animators will be supervised by Irwin Hansen, our Cartoon and
Animation Advisor. Mr. Hansen created the comic strip “Dondi,” a
cartoon strip about a six-year old boy which was syndicated in 300 newspapers
around the country. While Mr. Hansen has not previously
created cartoon animation for distribution on the internet similar to the
cartoons that we intend to produce and develop, he was retained as a consultant
on the movie based on the comic strip he created. He began his career
drawing covers for comic books including The Green Lantern, Wonder Woman, The
Flash and Wildcat. He is a two-time recipient of the annual National
Cartoonist Society Award. The
Company’s management believes that Mr. Hansen's experience, his
ability to create a story-line that appeals to children (as evidenced by the
success of Dondi) and his understanding of cartoon presentation makes him a
suitable selection as the Company’s Cartoon and Animation
Advisor.
Given
the limited amount of funding available to the Company, we intend to engage
cartoon animators with the intention of compensating them on an hourly
basis. At the present time however, we have not entered into any
agreements with cartoon animators regarding the creation of educational
cartoons.
Pricing
and Licensing
It is
our intention to develop the cartoons at a minimal cost so that we can produce
quality work and become established as providers of educational
programming. In order to keep costs at a minimum, we currently do not
intend to hire any office staff or hire any cartoon animators on a full time
basis and will retain such individuals on an hourly basis only. At this
time, prices for the cartoons we intend to develop are not definitively
set. However, it is intended that each cartoon developed will be offered
at three times of the aggregate
hourly fee paid
by us to the particular cartoon animator responsible for creating such
cartoon.
We intend
to grant each purchaser of the cartoons a license to use such for a period of
one (1) year, which license will be renewable for an unlimited number of one (1)
year periods. It is further anticipated that each customer will be require
to contractually agree not to distribute or copy any of the cartoons purchased
without the express written consent of the Company.
Sales
and Marketing Strategy
The
Internet is the least expensive marketing tool and we intend to use the Internet
as a primary tool in our efforts to reach out to television station programmers,
as well as to educational institutions and individual teachers. During the
first three (3) months following the offering, we intend to begin the
development of an initial set of our one-minute, three-minute and five-minute
educational cartoon segments. As part of our initial marketing strategy, a
clip of such segments will be made available at no charge on the Internet.
Prior to downloading such clips, any potential customer will be required to
provide us with their names and contact information. As an additional
marketing strategy, it is anticipated that all such customers will be provided
with newsletters informing them of any additional cartoon strips developed by
the Company.
We
anticipate that revenue will come from the sales of the programming
series. At the present time, we intend to sell the cartoon segments to
various television networks and independent television stations, other
digital platforms and to educational institutions throughout the United States
and Canada. At this time, we have not entered into any agreements with any
third parties for the sale and/or purchase of the cartoon
segments.
17
We
anticipate that initial sales of the cartoons we intend to produce will be
difficult. However, we believe, although no assurance can be given, that
when television stations start to include EDUtoons to their children
programming, customer feedback and word-of-mouth will stimulate sales fairly
rapidly. Further, we believe, although no assurance can be given, that
educational institutions and individual teachers and educators may also be
another important source of revenue for the Company. We would also seek to
capitalize on any of the cartoon characters that become popular with children by
licensing stuffed toys, games and similar extensions.
Competition
There
are a number of companies that offer cartoon programs for children, such as the
Children’s Television Workshop, Nickelodeon, Walt Disney Studios, Warner Bros.
(Cartoon Network), Turner Broadcasting System (Time Warner), and other major
production companies. Based on our initial research, the four major
networks, ABC, CBS, NBC and Fox all have over 200 affiliate stations. In
addition, the CW network has approximately 100 affiliate stations. These
stations cover almost all of the cartoon programming that are geared towards our
same target market. Further, there are numerous small companies that
also offer cartoon programs for children, some of
which we may be unfamiliar with, and
which may be in direct competition with our products.
All of
the companies listed above have funding and personnel far exceeding ours.
However, based on our initial research, it appears that their programs are
significantly different in terms of content and length and do not
specifically aim to educate as we expect EDUtoons will do. Moreover, our
initial research has shown that there are no other companies that are focused on
1, 3, and 5-minute educational cartoon segments that we intend to offer.
However, in the event that we are successful in selling the cartoons, there is
no guarantee that companies already engaged in offering programs for children
will not capitalize on our success and seek to produce cartoon segments similar
to ours.
SOURCES
AND AVAILABILITY OF PRODUCTS AND SUPPLIES
We
believe there are no constraints on the sources or availability of products and
supplies related to the development of our educational cartoons.
REGULATORY
MATTERS
The
cartoon segments may be subject to federal and state regulations relating to
content. The Company intends to distribute its cartoon segments initially
through the Internet, and thereafter, through various television networks that
the Company may be able to secure contracts with. Both the Internet and
television industries are subject to a variety of regulations at the federal and
state levels. We expect that legislative enactments, court actions, and
regulatory proceedings will continue to expand these regulations, and in some
cases change the rights of cable companies and other entities providing video
content, such as the cartoon segments we intend to produce, under the
Communications Act of 1934, as amended (the “Communications Act”).
EMPLOYEES
As of the
date of this Prospectus, we do not have any employees.
RESEARCH
AND DEVELOPMENT EXPENDITURES
We have
not incurred any research and development costs to date. We anticipate
research and development to begin during the first quarter after the offering
and further anticipate that expenditures for research and development of the
cartoons during this time will be approximately $6,000, which amount will
be taken from the proceeds of the offering.
SUBSIDIARIES
None.
18
INTELLECTUAL
PROPERTY
We
intend, in due time and upon advise of counsel, to take all measures to
determine whether we are entitled to protection under current intellectual
property laws for the cartoon segments we intend to produce. While no
assurance can be given that we will be able to obtain the necessary protection
over our intellectual property, we intend to aggressively assert our
intellectual property rights, including those relating to any materials that may
qualify for copyright protections as well as trade names or trademarks that we
may develop. These rights are protected through the application for
copyrights, the acquisition of trademark registrations and when appropriate,
litigation against those who are, in our opinion, infringing these
rights.
REPORTS
TO STOCKHOLDERS
We are
not currently a reporting company, but upon effectiveness of the registration
statement of which this Prospectus forms a part, we will be required to file
reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). These reports include annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K. You may obtain
copies of our registration statement and our future filings with the
SEC from the SEC’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549, on official business days during the hours of 10 A.M. to 3 P.M. or
on the SEC’s website, at www.sec.gov. You may also obtain copies of such
documents at prescribed rates by writing to the Public Reference Room or by
calling the SEC at 1-800-SEC-0330.
DESCRIPTION
OF PROPERTY
We
currently maintain our corporate office at 101 East 52nd Street, 10th Floor, New
York, NY 10022, which premises are currently being provided to us free of charge
from an independent third party that has no affiliations with the
Company.
LEGAL
PROCEEDINGS
There are
no pending, nor to our knowledge threatened, legal proceedings against
us.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is
presently no public market for our common stock. We anticipate applying for
quotation of our common stock on the OTC Bulletin Board upon the effectiveness
of the registration statement of which this Prospectus forms a part. However, we
cannot assure you that our common stock will be quoted on the OTC Bulletin Board
or, if quoted, that a public market will materialize.
The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally 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 quotation system. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document prepared by the Securities and Exchange
Commission, that:
(a)
|
contains
a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary
trading;
|
19
(b)
|
contains
a description of the broker’s or dealer’s duties to the customer and of
the rights and remedies available to the customer with respect to a
violation of such duties or other requirements of the securities
laws;
|
(c)
|
contains
a brief, clear, narrative description of a dealer market, including bid
and ask prices for penny stocks and the significance of the spread between
the bid and ask price;
|
(d)
|
contains
a toll-free telephone number for inquiries on disciplinary
actions;
|
(e)
|
defines
significant terms in the disclosure document or in the conduct of trading
in penny stocks; and
|
(f)
|
contains
such other information and is in such form, including language, type, size
and format, as the Securities and Exchange Commission shall require by
rule or regulation.
|
The
broker or dealer also must provide, prior to effecting any transaction in a
penny stock, the customer with:
(a)
|
bid
and offer quotations for the penny
stock;
|
(b)
|
the
compensation of the broker-dealer and its salesperson in the
transaction;
|
(c)
|
the
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market
for such stock; and
|
(d)
|
a
monthly account statement showing the market value of each penny stock
held in the customer’s account.
|
In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser’s written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a suitably written
statement.
These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for our common stock. Therefore, if our common stock
becomes subject to the penny stock rules, stockholders may have difficulty
selling those securities.
Shareholders
of Our Common Stock
As of
the date of this prospectus, we have 28 shareholders of record.
Dividends
We have
never declared or paid any cash dividends on our common stock. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
Securities
Authorized for Issuance under Equity Compensation Plans
We do not
have any securities authorized for issuance under any equity compensation
plans.
20
(A
DEVELOPMENT STAGE COMPANY)
FINANCIAL
STATEMENTS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
CONTENTS
|
PAGE
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
22
|
|
FINANCIAL
STATEMENTS:
|
|
|
Balance
Sheet
|
23
|
|
Statement
of Operations
|
24
|
|
Statement
of Changes in Stockholders’ Equity
|
25
|
|
Statement
of Cash Flows
|
26
|
|
NOTES
TO FINANCIAL STATEMENTS
|
27
|
21
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Stockholders of
EDUtoons,
Inc.
We have
audited the accompanying balance sheet of EDUtoons, Inc. (the “Company”), a
development stage company, as of June 30, 2010, and the related statements of
operations, changes in stockholders’ equity, and cash flows for the period from
April 28, 2010 (inception) to June 30, 2010. 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 audit.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required, nor have we been engaged to perform, an audit of its
internal control over financial reporting. Our audit 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentations. We believe
that our audit provides 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 EDUtoons, Inc. at June 30, 2010,
and the results of its operations and its cash flows for the period from April
28, 2010 (inception) to June 30, 2010, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that EDUtoons,
Inc. will continue as a going concern. As more fully described in
Note 5, the Company is a start up company subject to substantial business risks
and uncertainties that has not generated revenues since
inception. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans
in regard to these matters are also described in Note 5. The
financial statements as of June 30, 2010 and for the period from April 28, 2010
(inception) to June 30, 2010 do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
As
more fully described in Note 6, subsequent to the issuance of the Company’s
financial statements as of June 30, 2010 and for the period from April 28, 2010
(inception) to June 30, 2010 and our report thereon dated July 14, 2010, we
became aware that certain registration costs were not properly reflected in the
financial statements. In our original report, we expressed an
unqualified opinion on the financial statements as of June 30, 2010 and for the
period from April 28, 2010 (inception) to June 30, 2010, and our opinion on
the revised financial statements, as expressed herein, remains
unqualified.
/s/
Wei Wei & Co. LLP
New York,
New York
November
18, 2010
22
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEET
JUNE
30, 2010
ASSETS
|
||||
Current
assets:
|
||||
Cash
(Note2)
|
$ | 27,500 | ||
Total
current assets
|
27,500 | |||
Deferred
registration costs (Note
2)
|
10,000 | |||
TOTAL
ASSETS
|
$ | 37,500 | ||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
Current
liabilities:
|
||||
Due
to stockholder (Note
2)
|
$ | 10,000 | ||
Accrued
liabilities
|
3,950 | |||
Total
current liabilities
|
13,950 | |||
Stockholders’
equity:
|
||||
Common
stock, $0.001 par value per share, 10,000,000 shares authorized, and
2,750,000 shares issued and outstanding
|
2,750 | |||
Additional
paid-in capital
|
24,750 | |||
Deficit
accumulated during development stage
|
(3,950 | ) | ||
Total
stockholders’ equity
|
23,550 | |||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 37,500 |
See
accompanying notes to financial statements
23
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF OPERATIONS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
Revenue
|
$ | - | ||
Operating
expenses:
|
||||
General
and administrative expenses
|
3,950 | |||
Net
(loss)
|
$ | (3,950 | ) | |
(Loss)
per common share, basic and diluted (Note
2)
|
$ | (0.00 | ) | |
Weighted
average shares outstanding, basic and diluted
|
2,750,000 |
See
accompanying notes to financial statements.
24
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
Common
Stock
|
Additional
Paid-in
Capital
|
Deficit
Accumulated
During
Development
Stage
|
Total
|
|||||||||||||
Initial
capitalization
|
$ | 2,750 | $ | 24,750 | $ | - | $ | 27,500 | ||||||||
Net
(loss)
|
- | - | (3,950 | ) | (3,950 | ) | ||||||||||
Balance,
June 30, 2010
|
$ | 2,750 | $ | 24,750 | $ | (3,950 | ) | $ | 23,550 |
See
accompanying notes to financial statements.
25
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CASH FLOWS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
Cash
flows from operating activities:
|
||||
Net
(loss)
|
$ | (3,950 | ) | |
Change
in operating assets and liabilities:
|
||||
Deferred
registration costs
|
(10,000 | ) | ||
Advance
from stockholder
|
10,000 | |||
Accrued
liabilities
|
3,950 | |||
Net
cash provided by operating activities
|
- | |||
Cash
flows from financing activities:
|
||||
Proceeds
from issuance of common stock
|
27,500 | |||
Net
cash provided by financing activities
|
27,500 | |||
Net
change in cash
|
27,500 | |||
Cash,
beginning of period
|
- | |||
Cash,
end of period
|
$ | 27,500 |
See
accompanying notes to financial statements.
26
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
1.
|
GENERAL
|
Organization
and Business Nature
EDUtoons,
Inc. (the “Company”) was incorporated in the State of Delaware on April 28, 2010
to produce one-minute, three-minute and five-minute educational cartoons
primarily to be sold to television networks and independent television stations,
and digital platforms throughout the United States and Canada, and thereafter
offered at a lower cost to schools. The Company aims to provide
reinforcement in children’s programming that will serve as both an educational
tool and counter-balance to the violence and age-inappropriate nature of
cartoons and programming currently directed at children. The
Company’s one-minute television programming consists of 26-segment series, each
devoted to one letter of the alphabet; the three-minute segments would be
offered in 13 and 26 series in subjects such as the presidents of the United
States, the countries of the world, and the states of the United States, etc.;
and the five-minute segments would be focused primarily on nature, various
animal habitats around the world, the stars and sea life.
The
Company is in the development stage and has not generated any revenues from
operations and has no assurance of any future revenues. The Company
will require substantial additional funding to cover its
operations. There is no assurance that the Company will be able to
obtain sufficient additional funds when needed, or that such funds, if
available, will be obtainable on terms satisfactory to the Company.
2.
|
ACCOUNTING
POLICIES
|
Cash
and Cash Equivalents
The
Company considers all liquid investments with an original maturity of three
months or less that are readily convertible into cash to be cash
equivalents. The Company places its cash with high credit quality
financial institutions. Accounts at these institutions are insured by
the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At
June 30, 2010, the Company did not have cash balances which were in excess of
the FDIC insurance limit. The Company performs ongoing evaluations of
these institutions to limit its concentration of risk
exposure. Management believes this risk is not significant due to the
financial strength of the financial institutions utilized by the
Company.
Due
to Stockholder
Amount
due to stockholder, representing the advance from a stockholder, is non-interest
bearing and is due on demand.
27
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
2.
|
ACCOUNTING
POLICIES (continued)
|
Deferred
Registration Costs
Deferred
registration costs are incremental costs incurred by the Company in connection
with a proposed common stock offering to be charged against the gross proceeds
of the offering. Deferred registration costs do not include any
allocation of salaries, overhead or similar costs.
Use
of Estimates
The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Income
Taxes
The
Company accounts for income taxes in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which requires
the recognition of deferred income taxes for differences between the basis of
assets and liabilities for financial statement and income tax
purposes. Deferred tax assets and liabilities represent the future
tax consequence for those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or
settled. Deferred taxes are also recognized for operating losses that
are available to offset future taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. At June 30, 2010, the Company has
established full valuation allowances against deferred tax assets, recognized
for operating losses, due to the uncertainty in realizing their
benefits.
At June
30, 2010, the Company had $3,950 of unused operating losses expiring in
2030.
The
Company adopted the provisions of FASB ASC 740-10-25. The provisions
prescribe a recognition threshold and measurement attribute for the recognition
and measurement of tax positions taken or expected to be taken in income tax
returns and require that uncertain tax positions are evaluated in a two-step
process. The implementation of the provisions of FASB ASC 740-10-25
resulted in no material liability for unrecognized tax benefits. As
of June 30, 2010 and during the period from April 28, 2010 to June 30, 2010, the
Company did not have a liability for any unrecognized tax benefits.
No income
taxes or interest were paid as of June 30, 2010.
28
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
2.
|
ACCOUNTING
POLICIES (continued)
|
Fair
Value of Financial Instruments
FASB ASC
820, Fair Value Measurements
and Disclosures, defines fair value as the price that would be received
upon sale of an asset or paid upon transfer of a liability in an orderly
transaction between market participants at the measurement date and in the
principal or most advantageous market for that asset or
liability. The fair value should be calculated based on assumptions
that market participants would use in pricing the asset or liability, not on
assumptions specific to the entity. The Company did not identify any
financial assets and liabilities that are required to be presented on the
balance sheet at fair value.
The
carrying values of cash, due to stockholder and accrued liabilities approximate
fair values due to the short maturity of these financial
instruments.
Earnings
per Share
Net
income (loss) per share is calculated in accordance with FASB ASC 260, Earnings Per
Share. Basic net income (loss) per share is based upon the
weighted average number of common shares outstanding. Diluted net
income (loss) per share is based on the assumption that all dilutive convertible
shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period. Basic and diluted earnings per share are the same at June 30,
2010 because the Company had no common stock equivalents.
3.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS
|
In
January 2010, the FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair
Value Measurements (“ASU No. 2010-06”). ASU No. 2010-06 amends
FASB ASC Topic 820, to require additional information to be disclosed
principally regarding Level 3 measurements and transfers to and from Level 1 and
2. In addition, enhanced disclosure is required concerning inputs and
valuation techniques used to determine Level 2 and Level 3
measurements. This guidance is generally effective for interim and
annual reporting periods beginning after December 15, 2009; however,
requirements to disclose separately purchases, sales, issuances, and settlements
in the Level 3 reconciliation are effective for fiscal years beginning after
December 15, 2010 (and for interim periods within such years). The
update did not have a material impact on the Company’s results of operations or
financial position.
29
EDUTOONS,
INC .
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
3.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS
(continued)
|
In
February 2010, the FASB issued Accounting Standards Update No. 2010-09, Amendments to Certain Recognition
and Disclosure Requirements (“ASU No. 2010-09”). ASU No.
2010-09 amends FASB ASC Topic 855-10, Subsequent Events, to remove
the requirement for an SEC filer to disclose the date through which subsequent
events have been evaluated in both issued and revised financial
statements. This change alleviates potential conflicts between ASC
855-10 and the SEC’s requirements. The update did not have a material
impact on the Company’s financial statements.
4.
|
SHARE
CAPITAL
|
Number of
shares
|
Amount
|
|||||||
Authorized:
|
||||||||
Common
stock at $0.001 par value per share
|
10,000,000 | $ | 10,000 | |||||
At
June 30, 2010
|
10,000,000 | $ | 10,000 | |||||
Issued
and outstanding:
|
||||||||
Shares
issued at $0.001 par value per share
|
2,750,000 | $ | 2,750 | |||||
At
June 30, 2010
|
2,750,000 | $ | 2,750 |
5.
|
GOING
CONCERN/RISKS AND UNCERTAINTIES
|
The
Company’s financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is a
start-up company subject to the substantial business risks and uncertainties
inherent to such an entity, including the potential risk of business
failure. This raises substantial doubt about the Company’s ability to
continue as a going concern. The reasons for the substantial doubt
along with management’s plans are as follows.
30
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO JUNE 30, 2010
5. GOING
CONCERN/RISKS AND UNCERTAINTIES (continued)
The
Company has not generated any revenues since inception. While the
Company is attempting to commence operations and generate revenues, the
Company’s cash position may not be sufficient to support the Company’s daily
operations. Management intends to raise additional funds through the
issuance of equity or debt securities. Management believes that the
actions presently being taken to implement its business plan and to generate
revenues provide the opportunity for the Company to continue as a going
concern. While the Company believes in the viability of its strategy
to generate revenues and in its ability to raise additional funds, there can be
no assurances to that effect. The Company’s continuation as a going
concern and its ability to emerge from the development stage with any planned
principal business activity is dependent upon the continued financial support
from its stockholders and its ability to obtain the necessary equity or debt
financing and attain profitable operations.
The
accompanying financial statements do not include any adjustments that would be
necessary should the Company be unable to continue as a going
concern.
6. RESTATEMENT
OF FINANCIAL STATEMENTS
Subsequent
to the issuance of the Company’s financial statements, management became aware
that the legal fees attributable to a proposed offering of the Company’s common
stock were expensed, instead of being deferred to be charged against the gross
proceeds of the proposed offering. The correction of the error in the
revised financial statements has the effect of decreasing net loss for the
period from April 28, 2010 (inception) to June 30, 2010 by $10,000, and
decreasing the loss per basic and diluted common shares by $0.00 from that of
previously reported amounts.
31
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
FINANCIAL
STATEMENTS
FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2010
AND
PERIOD
FROM APRIL 28, 2010
(INCEPTION) TO SEPTEMBER 30, 2010
CONTENTS
|
PAGE
|
|
FINANCIAL
STATEMENTS:
|
||
Balance
Sheets
|
33
|
|
Statements
of Operations
|
34
|
|
Statements
of Changes in Stockholders’ Equity
|
35
|
|
Statements
of Cash Flows
|
36
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
37
|
32
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
September 30,
2010
|
June 30,
2010
|
|||||||
|
(Unaudited)
|
(Audited)
|
||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
(Note2)
|
$ | 8,644 | $ | 27,500 | ||||
Total
current assets
|
8,644 | 27,500 | ||||||
Deferred
registration costs (Note
2)
|
18,856 | 10,000 | ||||||
TOTAL
ASSETS
|
$ | 27,500 | $ | 37,500 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Due
to stockholder (Note
2)
|
$ | - | $ | 10,000 | ||||
Accrued
liabilities
|
4,850 | 3,950 | ||||||
Total
current liabilities
|
4,850 | 13,950 | ||||||
Stockholders’
equity:
|
||||||||
Common
stock, $0.001 par value per share, 10,000,000 shares authorized, and
2,750,000 shares issued and outstanding
|
2,750 | 2,750 | ||||||
Additional
paid-in capital
|
24,750 | 24,750 | ||||||
Deficit
accumulated during development stage
|
(4,850 | ) | (3,950 | ) | ||||
Total
stockholders’ equity
|
22,650 | 23,550 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 27,500 | $ | 37,500 |
See
accompanying notes to financial statements.
33
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS (UNAUDITED)
For the Period From
|
||||||||
For the Three Months
|
April 28, 2010
|
|||||||
Ended
|
(Inception) to
|
|||||||
September 30, 2010
|
September 30, 2010
|
|||||||
Revenue
|
$ | - | $ | - | ||||
Operating
expenses:
|
||||||||
General and administrative
expenses
|
900 | 4,850 | ||||||
Net (loss)
|
$ | (900 | ) | $ | (4,850 | ) | ||
(Loss)
per common share, basic and diluted (Note
2)
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
Weighted
average shares outstanding, basic and diluted
|
2,750,000 | 2,750,000 |
See
accompanying notes to financial statements.
34
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR
THE PERIOD FROM APRIL 28, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
Common
|
Additional
Paid-in
|
Deficit
Accumulated
During
Development
|
||||||||||||||
Stock
|
Capital
|
Stage
|
Total
|
|||||||||||||
Initial
capitalization
|
$ | 2,750 | $ | 24,750 | $ | - | $ | 27,500 | ||||||||
Net
(loss)
|
- | - | (3,950 | ) | (3,950 | ) | ||||||||||
Balance,
June 30, 2010
|
2,750 | 24,750 | (3,950 | ) | 23,550 | |||||||||||
Net
(loss)
|
- | - | (900 | ) | (900 | ) | ||||||||||
Balance,
September 30, 2010
|
$ | 2,750 | $ | 24,750 | $ | (4,850 | ) | $ | 22,650 |
See
accompanying notes to financial statements.
35
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS (UNAUDITED)
For the Three Months
|
For the Period
From
April 28, 2010
|
|||||||
Ended
|
(Inception) to
|
|||||||
September 30, 2010
|
September 30, 2010
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
(loss)
|
$ | (900 | ) | $ | (4,850 | ) | ||
Change
in operating assets and liabilities:
|
||||||||
Deferred
registration costs
|
(8,856 | ) | (18,856 | ) | ||||
Repayment
of stockholder advance
|
(10,000 | ) | - | |||||
Accrued liabilities
|
900 | 4,850 | ||||||
Net cash (used in) operating
activities
|
(18,856 | ) | (18,856 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds from issuance of common
stock
|
- | 27,500 | ||||||
Net cash provided by financing
activities
|
- | 27,500 | ||||||
Net
change in cash
|
(18,856 | ) | 27,500 | |||||
Cash, beginning of
period
|
27,500 | - | ||||||
Cash, end of period
|
$ | 8,644 | $ | 8,644 |
See
accompanying notes to financial statements.
36
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2010
AND
PERIOD
FROM APRIL 28, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
1.
|
GENERAL
|
Organization
and Business Nature
EDUtoons,
Inc. (the “Company”) was incorporated in the State of Delaware on April 28, 2010
to produce one-minute, three-minute and five-minute educational cartoons
primarily to be sold to television networks and independent television stations,
and digital platforms throughout the United States and Canada, and thereafter
offered at a lower cost to schools. The Company aims to provide
reinforcement in children’s programming that will serve as both an educational
tool and counter-balance to the violence and age-inappropriate nature of
cartoons and programming currently directed at children. The Company’s
one-minute television programming consists of 26-segment series, each devoted to
one letter of the alphabet; the three-minute segments would be offered in 13 and
26 series in subjects such as the presidents of the United States, the countries
of the world, and the states of the United States, etc.; and the five-minute
segments would be focused primarily on nature, various animal habitats around
the world, the stars and sea life.
The
Company is in the development stage and has not generated any revenues from
operations and has no assurance of any future revenues. The Company will
require substantial additional funding to cover its operations. There is
no assurance that the Company will be able to obtain sufficient additional funds
when needed, or that such funds, if available, will be obtainable on terms
satisfactory to the Company.
2.
|
ACCOUNTING
POLICIES
|
Basis
of Accounting and Presentation
The
unaudited interim financial statements of the Company as of September 30, 2010
and for the three months ended September 30, 2010 and the period from April 28,
2010 (inception) to September 30, 2010, have been prepared in accordance with
accounting principles generally accepted in the United States of America and the
rules and regulations of the Securities and Exchange Commission (the “SEC”)
which apply to interim financial statements. In the opinion of management,
such information contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the periods
presented. The results of operations for the three months ended September
30, 2010 are not necessarily indicative of the results to be expected for future
quarters or for the year ending June 30, 2011.
37
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2010
AND
PERIOD
FROM APRIL 28, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
2.
|
ACCOUNTING
POLICIES (continued)
|
Basis
of Accounting and Presentation (continued)
Certain
information and disclosures normally included in the notes to financial
statements have been condensed or omitted as permitted by the rules and
regulations of the SEC, although the Company believes the disclosure is adequate
to make the information presented not misleading. The accompanying
unaudited financial statements should be read in conjunction with the audited
financial statements of the Company for the period from April 28, 2010
(inception) to June 30, 2010.
Cash
and Cash Equivalents
The
Company considers all liquid investments with an original maturity of three
months or less that are readily convertible into cash to be cash
equivalents. The Company places its cash with high credit quality
financial institutions. Accounts at these institutions are insured by the
Federal Deposit Insurance Corporation (FDIC) up to $250,000. At September
30, 2010 and June 30, 2010, the Company did not have cash balances which were in
excess of the FDIC insurance limit. The Company performs ongoing
evaluations of these institutions to limit its concentration of risk
exposure. Management believes this risk is not significant due to the
financial strength of the financial institutions utilized by the
Company.
Due
to Stockholder
Amount
due to stockholder, representing the advance from a stockholder, is non-interest
bearing and is due on demand. In August 2010, the advance was paid
off.
Deferred
Registration Costs
Deferred
registration costs are incremental costs incurred by the Company in connection
with a proposed common stock offering to be charged against the gross proceeds
of the offering. Deferred registration costs do not include any allocation
of salaries, overhead or similar costs.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimated.
38
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2010
AND
PERIOD
FROM APRIL 28, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
2.
|
ACCOUNTING
POLICIES (continued)
|
Income
Taxes
The
Company accounts for income taxes in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which requires
the recognition of deferred income taxes for differences between the basis of
assets and liabilities for financial statement and income tax purposes.
Deferred tax assets and liabilities represent the future tax consequence for
those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also
recognized for operating losses that are available to offset future taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. At September
30, 2010 and June 30, 2010, the Company has established full valuation
allowances against deferred tax assets, recognized for operating losses, due to
the uncertainty in realizing their benefits. At September 30, 2010, the
Company had $4,850 of unused operating losses expiring in 2030.
The
Company adopted the provisions of FASB ASC 740-10-25. The provisions
prescribe a recognition threshold and measurement attribute for the recognition
and measurement of tax positions taken or expected to be taken in income tax
returns and require that uncertain tax positions are evaluated in a two-step
process. The implementation of the provisions of FASB ASC 740-10-25
resulted in no material liability for unrecognized tax benefits. The
Company did not have a liability for any unrecognized tax benefits as of
September 30, 2010. It is not anticipated that unrecognized tax benefits
would significantly increase or decrease within 12 months of the reporting
date.
No
income taxes or interest were paid as of September 30, 2010.
Fair
Value of Financial Instruments
FASB
ASC 820, Fair Value
Measurements and Disclosures, defines fair value as the price that would
be received upon sale of an asset or paid upon transfer of a liability in an
orderly transaction between market participants at the measurement date and in
the principal or most advantageous market for that asset or liability. The
fair value should be calculated based on assumptions that market participants
would use in pricing the asset or liability, not on assumptions specific to the
entity. The Company did not identify any financial assets and liabilities
that are required to be presented on the balance sheets at fair
value.
Financial
instruments include cash, due to stockholder and accrued liabilities. As
of September 30, 2010 and June 30, 2010, the carrying values of these financial
instruments approximated their fair values due to the short maturity of these
financial instruments.
39
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2010
AND
PERIOD
FROM APRIL 28, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
2.
|
ACCOUNTING
POLICIES (continued)
|
Earnings
per Share
Net
income (loss) per share is calculated in accordance with FASB ASC 260, Earnings Per Share.
Basic net income (loss) per share is based upon the weighted average number of
common shares outstanding. Diluted net income (loss) per share is based on
the assumption that all dilutive convertible shares and stock options were
converted or exercised. Dilution is computed by applying the treasury
stock method. Under this method, options and warrants are assumed to be
exercised at the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock at the
average market price during the period. Basic and diluted earnings per
share are the same at September 30, 2010 and June 30, 2010 because the Company
had no common stock equivalents.
3.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS
|
In
January 2010, the FASB issued Accounting Standards Update No. 2010-6, Improving Disclosures about Fair
Value Measurements (“ASU No. 2010-06”). ASU No. 2010-06 amends FASB
ASC Topic 820, to require additional information to be disclosed principally
regarding Level 3 measurements and transfers to and from Level 1 and 2. In
addition, enhanced disclosure is required concerning inputs and valuation
techniques used to determine Level 2 and Level 3 measurements. This
guidance is generally effective for interim and annual reporting periods
beginning after December 15, 2009; however, requirements to disclose separately
purchases, sales, issuances, and settlements in the Level 3 reconciliation are
effective for fiscal years beginning after December 15, 2010 (and for interim
periods within such years). The update did not have a material impact on
the Company’s financial statements.
In
February 2010, the FASB issued Accounting Standards Update No. 2010-09, Amendments to Certain Recognition
and Disclosure Requirements (“ASU No. 2010-09”). ASU No. 2010-09
amends FASB ASC Topic 855-10, Subsequent Events, to remove
the requirement for an SEC filer to disclose the date through which subsequent
events have been evaluated in both issued and revised financial
statements. This change alleviates potential conflicts between ASC 855-10
and the SEC’s requirements. The update did not have a material impact on
the Company’s results of operations or financial position.
40
EDUTOONS,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2010
AND
PERIOD
FROM APRIL 28, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
4.
|
SHARE
CAPITAL
|
Number of
shares
|
Amount
|
|||||||
Authorized:
|
||||||||
Common stock at $0.001 par value per
share
|
10,000,000 | $ | 10,000 | |||||
At September 30, 2010 and June 30,
2010
|
10,000,000 | $ | 10,000 | |||||
Issued
and outstanding:
|
||||||||
Shares issued at $0.001 par value per
share
|
2,750,000 | $ | 2,750 | |||||
At September 30, 2010 and June 30,
2010
|
2,750,000 | $ | 2,750 |
5.
|
GOING
CONCERN/RISKS AND UNCERTAINTIES
|
The
Company’s financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is a startup
company subject to the substantial business risks and uncertainties inherent to
such an entity, including the potential risk of business failure. This
raises substantial doubt about the Company’s ability to continue as a going
concern. The reasons for the substantial doubt along with management’s
plans are as follows.
The
Company has not generated any revenues since inception. While the Company
is attempting to commence operations and generate revenues, the Company’s cash
position may not be sufficient to support the Company’s daily operations.
Management intends to raise additional funds through the issuance of equity or
debt securities. Management believes that the actions presently being
taken to implement its business plan and to generate revenues provide the
opportunity for the Company to continue as a going concern. While the
Company believes in the viability of its strategy to generate revenues and in
its ability to raise additional funds, there can be no assurances to that
effect. The Company’s continuation as a going concern and its ability to
emerge from the development stage with any planned principal business activity
is dependent upon the continued financial support from its stockholders and its
ability to obtain the necessary equity or debt financing and attain profitable
operations.
The
accompanying financial statements do not include any adjustments that would be
necessary should the Company be unable to continue as a going
concern.
6.
|
SUBSEQUENT
EVENTS
|
On
December 15, 2010, the Company issued an aggregate of 500,000 share of common
stock to the Company’s officers in consideration for services rendered by them
to the Company .
41
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
Prospectus contains “forward-looking statements” and information relating to our
business that are based on our beliefs as well as assumptions made by us or
based upon information currently available to us. When used in this Prospectus,
the words anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,”
“project,” “should” and similar expressions are intended to identify
forward-looking statements. These forward-looking statements include, but are
not limited to, statements relating to our performance in “Business” and
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” These statements reflect our current views and assumptions with
respect to future events and are subject to risks and uncertainties. Actual and
future results and trends could differ materially from those set forth in such
statements due to various factors. Such factors include, among others: general
economic and business conditions; industry capacity; industry trends;
competition; changes in business strategy or development plans; project
performance; availability, terms, and deployment of capital; and availability of
qualified personnel. These forward-looking statements speak only as of the date
of this Prospectus. Subject at all times to relevant securities law disclosure
requirements, we expressly disclaim any obligation or undertaking to disseminate
any update or revisions to any forward-looking statement contained herein to
reflect any change in our expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is based. In
addition, we cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking
statements.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Our
plan of operation for the twelve (12) months following the offering is to
primarily develop our three (3) cartoon segments (1,3 and 5 minutes) that focus
on educational story lines and animation, which will be distributed initially
through the Internet.
Over
the next twelve (12) months, we anticipate spending approximately $95,000
for business operations. This budget assumes that all shares offered herein will
be sold, permitting the Company to execute its current business plan, as
intended, and includes all anticipated costs associated with the production of
cartoon segments, professional fees-which include the filing of this
registration statement and future compliance with reporting obligations,
marketing expenses.
During
this first year of operation, our management team will contribute to the
long-term growth and success of the business by donating their time without
charge to the business. Our director will spend at least 25 to 30 hours per week
on company business.
RESULTS
OF OPERATIONS
We are
a development stage company with no established source of revenue. From the
period from inception (April 28, 2010) to September 30, 2010, we have incurred
general & administrative expenses in the amount
of $4,850 consisting of the audit fee. We have not generated any
revenues and as of the date hereof, we have only taken the initial steps
necessary before it can fully implement its business plan, such as the raising
of initial capital through the sale of 2,750,000 shares of our common stock and
obtaining the domain rights to our website. Our auditors have expressed
substantial doubt about our ability to continue as a going concern. Without
realization of additional capital, it would be unlikely for us to continue as a
going concern. Since inception, our activities have been supported by equity
financing, and as of September 30, 2010, we have sustained losses in the amount
of $4,850.
42
LIQUIDITY
AND CAPITAL RESOURCES
Since
inception, we have raised $27,500 through the sale or our common stock and have
incurred expenses of $4,850. In addition, since inception, we obtained an
advance from a stockholder in the amount of $10,000, which was repaid in August
of 2010. We anticipate that our future cash needs will be approximately
$95,000 for the twelve month period following the offering. We anticipate
obtaining net proceeds of approximately $29,900 to $129,990 through the sale of
our common stock pursuant to this offering. Such amounts will be used to
fund our anticipated expenses for the next twelve to eighteen months, including
those expenses relating to the execution of our business plan, as discussed
above. However, no assurance can be given that any proceeds will be
received from this offering, in which event, we may engage in additional
financing activities, including the possible sale of debt instruments to be
issued by us. However, no assurance can be given that we will be
successful in obtaining the necessary financing, or that we will be able to
negotiate acceptable terms in a timely fashion. In addition, our access to
capital is affected by prevailing conditions in the financial and equity capital
markets, as well as our own financial condition. At this time, we have not
entered into any agreements with any third-party relating to the provision of
credit facilities to us. In addition, none of our current officers,
directors or shareholders has committed, whether orally or in writing, to
provide us with additional financing when needed. Moreover, even if we are
able to execute our business plan as intended, no assurance can be given that we
will be able to sell any of the cartoons that we create or that we will be able
to generate sufficient revenues to become profitable.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
We have
not had changes in or disagreements with accountants on accounting and financial
disclosure.
DIRECTORS
AND EXECUTIVE OFFICERS
Our
executive officers and director and their respective ages as of the date of this
prospectus are as follows:
Director:
Name of Director
|
Age
|
|
Eileen
Russell
|
70
|
Executive
Officer:
Name of Officer
|
Age
|
Position
|
||
Eileen
Russell
|
70
|
Chief
Executive Officer, President and Treasurer
|
||
Charlotte
Kelly Veal
|
81
|
Vice-President
and
Secretary
|
Biographical
Information
Set forth
below is a brief description of the background and business experience of our
executive officers and director for the past five years.
43
Eileen
Russell, CEO,
President, Treasurer and Director
Ms.
Russell joined the Company in April, 2010 as its CEO, President, Treasurer and
sole Director. Ms. Russell is an educator and journalist and spent
years at ABC News where she produced investigative documentaries on
Agribusiness, Illegal Aliens, the Oil Industry, Chemicals in the Environment,
Police Stress, The Art Field, Asbestos, Sex Discrimination at Yale University,
and Vietnam Veterans, as well as The Castro Generation, Cambodia: The Lost
Generation, and two Action Biographies. Action Biography: Sadat won the
George Forster Peabody Award and Action Biography: Rabin won the Overseas Press
Club of America Award. Ms. Russell also taught children in middle and high
school in Yonkers, New York, and was an adjunct professor of broadcast
journalism at Columbia University School of Journalism in New York. She
received her Bachelor of Science Degree from Marymount Manhattan College in 1961
and her Masters Degree from Fordham University in 1965.
Charlotte Kelly
Veal,
Vice-President, Secretary
Ms.
Veal is the Vice-President and Secretary of the Company, a position she has held
since the Company’s inception. Since 2006 to present, she has worked as an
independent consultant providing advice to a variety of companies, such as The
Conde Nast Publications, and at the The New York Post and at the New York Women
in Communications. Ms. Veal has spent over 30 years working in such
diverse industries as advertising (McCann-Erickson Worldwide and the American
Association of Advertising Agencies); broadcasting (NBC-TV); publishing (The
Hearst Magazine Group and The Magazine Publishing Association); and
not-for-profit (Odyssey House; Big Brothers, Big Sisters). She attended
Hunter College from 1950 to 1951.
Term
of Office
Our
directors hold office for a period of one-year term, and hold such office until
the next annual meeting of our shareholders or until removed from office in
accordance with our bylaws. Our officers are appointed by our board of directors
and hold office until removed by the board.
Board
Committees
There are
no board committees at this time.
EXECUTIVE
COMPENSATION
The
following table sets forth the aggregate cash compensation paid by the Company
to its officers and our sole director for services performed from our inception,
April 28, 2010, to our fiscal year ended June 30, 2010.
Name and
Principal Position
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compen-
sation
($)
|
Non-
qualified
Deferred
Compen-
sation
Earnings
($)
|
All Other
Compen-
sation
($)
|
Total
($)
|
||||||||||||||||||||||||
Eileen
Russell/CEO,
President,
Treasurer and Board Member
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Charlotte
Kelly Veal,
Vice-President
and Secretary
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
44
Options
To date,
no stock options have been granted to officers or the director of the
Company.
Stock
Awards
On
December 15, 2010, we granted 250,000 shares of common stock to each of our CEO
and President, Ms. Eileen Russell and our Vice-President and Secretary, Ms.
Charlotte Kelly Veal, for services rendered by them to the Company to
date.
Employment
Agreements and Consulting Agreements
We have
not entered into any employment agreement or consulting agreements since our
inception.
45
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership of
our capital stock as of December 20, 2010 by (i) each person whom we know
to beneficially own more than five percent of our common stock, (ii) our
director, (iii) each of our executive officers and (iv) our director and
executive officers as a group. Unless otherwise indicated, each of the persons
listed below have sole voting and investment power with respect to the shares
beneficially owned.
Our
total authorized capital stock consists of 10,000,000 shares of common stock,
par value $0.001 per share. As of December 20, 2010 there were 3,250,000 shares
of our common stock outstanding. Each share of our common stock entitles its
holder to one vote on each matter submitted to our stockholders. As of the date
of this Prospectus, there were no shares of preferred stock
authorized.
Name and Address of
Beneficial Owner
|
Shares of Common Stock
Beneficially Owned(1)
|
Percentage of Common Shares
Beneficially Owned
|
||||||
Eileen
Russell/CEO, President, Treasurer and
Board Member
|
1,250,000
|
38.46
|
%
|
|||||
Charlotte
Kelly Veal, Vice-President and Secretary
|
250,000
|
7.69
|
%
|
|||||
All
directors and officers as a group (2 persons)
|
1,500,000
|
46.15
|
%
|
(1)
|
Pursuant
to the rules and regulations of the Securities and Exchange Commission,
shares of common stock that an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are deemed
to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person shown
in the table.
|
COMPENSATION
PLANS
We
currently do not have any compensation plans in place.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
None of
our director, officers or principal shareholders, nor any family member of the
foregoing, has or had any material interest, direct or indirect, in any
transaction, or in any proposed transaction which has materially affected or
will materially affect us.
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
“Act”) may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to Delaware law, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
46
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
In
accordance with the Securities Act, we are filing with the SEC a registration
statement on Form S-1, of which this Prospectus is a part, covering the
securities being offered hereby. As permitted by rules and regulations of the
SEC, this Prospectus does not contain all of the information set forth in the
registration statement. For further information regarding both our Company and
our common stock, we refer you to the registration statement, including all
exhibits and schedules, which you may inspect without charge at the public
reference facilities of the SEC’s Washington, D.C. office, 100 F Street, N.E.,
Washington, D.C. 20549, on official business days during the hours of 10 A.M.
and 3 P.M., and on the SEC Internet site at www.sec.gov. Information regarding
the hours of operations of the public reference rooms may be obtained by calling
the SEC at 1-800-SEC-0330.
We are
not currently a reporting company, but upon effectiveness of the registration
statement of which this prospectus forms a part, we will be required to file
reports with the SEC pursuant to the Exchange Act. These reports include annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form
8-K. You may obtain copies of these reports from the SEC’s Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549, on official business days during
the hours of 10 A.M. to 3 P.M. or on the SEC’s website, at
www.sec.gov.
47
EDUTOONS,
INC.
3,000,000
Shares
of
Common
Stock
PROSPECTUS
You
should rely only on the information contained in this document or that we have
referred you to. We have not authorized anyone to provide you with information
that is different from that contained herein. This Prospectus is not an offer to
sell common stock and is not soliciting an offer to buy common stock in any
state where the offer or sale is not permitted.
Until
______________, 2010, all dealers that effect transactions in these securities,
whether or not participating in the offering, may be required to deliver a
Prospectus. This is in addition to the dealers’ obligation to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
____________,
2010
48
PART
II INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13.
|
Other
Expenses of Issuance and
Distribution
|
The
following table sets forth estimated expenses expected to be incurred in
connection with the issuance and distribution of the Shares being registered.
All such expenses will be paid by us. The amounts listed below are estimates
only and are subject to future contingencies.
Expenses:
|
Dollar amount
|
|||
Securities
and Exchange Commission Registration Fee
|
$
|
10.70
|
||
Edgarization,
Printing and Engraving (1)
|
$
|
2,000.00
|
||
Accounting
Fees and Expenses (1)
|
$
|
3,000.00
|
||
Legal
Fees and Expenses (1)
|
$
|
15,000.00
|
||
TOTAL
(1)
|
$
|
20,010.70
|
(1)
Estimates only
Item
14.
|
Indemnification
of Directors and Officers
|
Section 102(b)(7)
of the Delaware General Corporation Law, or the DGCL, provides that a
corporation may eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director’s duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL (regarding, among other
things, the payment of unlawful dividends), or (iv) for any transaction
from which the director derived an improper personal benefit.
Section 145(a)
of the DGCL empowers a corporation to indemnify any director, officer, employee,
or agent, or former director, officer, employee, or agent, who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation) by
reason of his service as a director, officer, employee, or agent of the
corporation, or his service, at the corporation’s request, as a director,
officer, employee, or agent of another corporation or enterprise, against
expenses (including attorneys’ fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit, or proceeding, provided that such director or officer acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding; provided that such director or officer had no reasonable cause to
believe his conduct was unlawful.
Section 145(b)
of the DGCL empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that such person is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
enterprise, against expenses (including attorneys’ fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit;
provided that such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue, or matter as to which such director or officer shall have been adjudged
to be liable to the corporation unless and only to the extent that the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such director or officer is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper. Notwithstanding the preceding sentence, except as otherwise
provided in the bylaws, the Company is required to indemnify any such person in
connection with a proceeding (or part thereof) commenced by such person only if
the commencement of such proceeding (or part thereof) by any such person was
authorized by the Company’s board of directors.
49
Item
15.
|
Recent
Sales of Unregistered Securities
|
Since the
Company’s inception on April 28, 2010, we sold the following
securities:
|
1.
|
In
May, 2010, we sold 1,000,000 shares of our common stock to our Chief
Executive Officer and
President, Ms. Eileen Russell, for
proceeds of $10,000;
|
|
2.
|
From
May 11, 2010 to June 30, 2010, we sold an aggregate of 1,750,000 shares of
common stock to 26 other individuals for aggregate proceeds of
$17,500.
|
|
3.
|
On
December 15, 2010, we issued an aggregate of 500,000 shares of our common
stock to our Chief
Executive Officer and President,
Ms.
Eileen Russell, and to our Vice-President and secretary,
Ms. Charlotte Kelly Veal, for
services rendered to the Company by each of them to
date.
|
We
believe that the sales of these securities were considered to be exempt from
registration under Section 4(2) of the Securities Act and/or Rule 506 of
Regulation D promulgated there under. The purchasers of the securities in such
transactions represented their intention to acquire the securities for
investment purposes only and not with a view to or for sales in connection with
any distribution thereof and appropriate legends were affixed to the
certificates for the securities issued in such transactions.
Item
16.
|
Exhibits
and Financial Statement Schedules
|
(a)
|
Exhibits:
|
The
following exhibits are filed as part of this registration
statement:
Exhibit
|
Description of Exhibit
|
|
3.1*
|
Certificate
of Incorporation of EDUtoons, Inc.
|
|
3.2*
|
Bylaws
of EDUtoons, Inc.
|
|
4.1*
|
Specimen
Stock Certificate
|
|
5.1
|
Opinion
of Gersten Savage LLP
|
|
10.1*
|
Form
of Subscription Agreement related to the Regulation D private
placement
|
|
23.1
|
Consent
of Wei, Wei &Co., LLP, Independent Auditor
|
|
23.2
|
Consent
of Gersten Savage LLP (included in Exhibit
5.1)
|
*
Previously filed as exhibits to the Registration Statement on Form S-1 filed by
the Company on August 6, 2010.
50
Item
17.
|
Undertakings
|
The
undersigned Registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the “Act”);
(ii) to
reflect in the prospectus any facts or events arising after the effective date
of this registration statement (or the most-recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement;
(iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) Insofar
as indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(5) That,
for the purpose of determining liability under the Act to any purchaser, each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
51
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant
has duly caused the registration statement to be signed on its behalf by the
undersigned thereto duly authorized, in New York, New York, on December 22,
2010.
EDUTOONS,
INC.
|
||
By:
|
/s/
Eileen Russell
|
|
Eileen
Russell
|
||
Chief
Executive Officer and President
|
||
(Principal
Executive Officer and
Principal
Financial Officer and Principal Accounting
Officer)
|
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE
|
CAPACITY IN WHICH SIGNED
|
DATE
|
||
/s/
Eileen Russell
|
CEO,
President, Treasurer and
|
December
22, 2010
|
||
Eileen
Russell
|
Director
(Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer)
|
|||
/s/
Charlotte Kelly Veal
|
Vice-President
and Secretary
|
December
22, 2010
|
||
Charlotte
Kelly Veal
|
52
EXHIBITS
Exhibit
|
Description of Exhibit
|
|
3.1*
|
Certificate
of Incorporation of EDUtoons, Inc.
|
|
3.2*
|
Bylaws
of EDUtoons, Inc.
|
|
4.1*
|
Specimen
Stock Certificate
|
|
5.1
|
Opinion
of Gersten Savage LLP.
|
|
10.1*
|
Form
of Subscription Agreement related to the Regulation D private
placement
|
|
23.1
|
Consent
of Wei, Wei &Co., LLP, Independent Auditor
|
|
23.2
|
Consent
of Gersten Savage LLP (included in Exhibit
5.1)
|
*
Previously filed as exhibits to the Registration Statement on Form S-1 filed by
the Company on August 6, 2010
53