U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2011

 

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

 

Commission file number: 000-53102

 

FARRALLON, INC.

(Exact name of registrant as specified in its charter)

 

Nevada	26-1469891
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

271 Serenity Place, Newport, VA  24128

(Address of principal executive offices)

540-641-0153

Issuer’s telephone number

 

14908 Oxford Hollow, Huntersville, NC 28078

(Former name, former address and former
fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. SYes £No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

SYes £No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   £	Accelerated filer     £
Non-accelerated filer  £  (Do not check if a smaller reporting company)	Smaller reporting company S

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). SYes £No

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. £ Yes £ No

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: At August 10, 2011, there were 1,000,000 shares of common stock outstanding.

 

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

Farrallon, Inc.
(A Development Stage Company)
Balance Sheets
		As of
		June 30, 2011				December 31, 2010
		(Unaudited)				(Audited)
ASSETS
CURRENT ASSETS:
Cash		$	77			$	77
TOTAL CURRENT ASSETS			77				77
TOTAL ASSETS		$	77			$	77
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Note Payable to Related Party			15,882				28,790
Accrued Interest to a Related Party			367				4,198
Accounts Payable			7,344				7,919
TOTAL CURRENT LIABILITIES			23,593				40,907
TOTAL LIABILITIES			23,593				40,907
STOCKHOLDERS' DEFICIT
Preferred stock ($0.0001 par value; 10,000,000 shares authorized;
no shares issued and outstanding)			—				—
Common stock ($0.0001 par value; 100,000,000 shares authorized:
550,000 and 1,000,000 issued and outstanding)			100				100
Paid in Capital			—				—
Accumulated Deficit			(23,616	)			(40,930	)
TOTAL STOCKHOLDERS' DEFICIT			(23,516	)			(40,830	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	77			$	77

 

 

 

 

Farrallon, Inc.
(A Development Stage Company)
Statement of Operations (Unaudited)
																		Cumulative
		For the								For the								Totals
		Three months ended								Six months ended								Since Inception
		June 30,								June 30,								November 13, 2007 to
		2011				2010				2011				2010				June 30, 2011
REVENUES
Income		$	—			$	—			$	—			$	—				$-
Total Revenues			—				—				—				—				-
EXPENSES
Selling, general and administrative			375				1,464				725				1,497				7,638
Professional Fees			7,200				5,000				14,582				5,000				44,401
TOTAL EXPENSES			7,575				6,464				15,307				6,497				52,039
Net Income/(Loss) from Operations			(7,575	)			(6,464	)			(15,307	)			(6,497	)			(52,039)
OTHER (EXPENSE)/INCOME
Forgiveness of Debt			29,758				—				33,758				—							33,758
Interest Expense			(591	)			(481	)			(1,137	)			(919	)			(5,335)
Total Other (expense)/income			29,167				(481	)			32,621				(919	)						28,423
Net Income/(Loss)		$	21,592			$	(6,945	)		$	17,314			$	(7,416	)			$(23,616)
Net income/(loss) per share--basic and fully diluted
Net income/(loss) per share		$	0.02			$	(0.01	)		$	0.02			$	(0.01	)			$(0.03)
Weighted average shares outstanding--basic and fully diluted			940,959				1,000,000				964,191				1,000,000				771,271

 

 

 

 

 

Farrallon, Inc.
(A Development Stage Company)
Statements of Cash Flows--Unaudited
										Cumulative
										Totals
		For the six months ended								Since Inception
		June 30,								November 13, 2007 to
		2011				2010				June 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net gain (loss)		$17,314				$(7,416)				$(23,616)
Adjustments to reconcile net (loss) to net cash used in operations:
Increase in Accrued Interest to a Related Party			1,137				919				5,336
Gain on forgiveness of debt			(33,758	)							(33,758	)
(Decrease) in Accrued Expenses			—				—				—
(Decrease) Increase In Accounts Payable			(575	)			—				7,344
NET CASH (USED IN) OPERATING ACTIVITIES			(15,882	)			(6,497	)			(44,694	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Note Payable to Related Party			15,882				6,564				44,672
Capitital Stock returned			(45	)							(45	)
Capital Stock purchase			45				—				145
NET CASH PROVIDED BY FINANCING ACTIVITIES			15,882				6,564				44,772
NET INCREASE IN CASH AND CASH EQUIVALENTS			—				67				77
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD			77				10				—
END OF THE PERIOD		$	77			$	77			$	77
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest		$	—			$	—			$	—
Taxes		$	—			$	—			$	—

 

 

 

 

 

Farrallon, Inc.
(A Development Stage Company)
Statement of Stockholders' Deficit--Unaudited
																						Deficit
																		Additional				Accumulated
		Common Stock								Preferred stock								Paid-in				Since Inception
		Shares				Amount				Shares				Amount				Capital				November 13, 2007
Balances, November 13, 2007, Inception			—			$	—				—			$	—			$	—			$	—
Shares issued			100,000				100				—				—				—				—
Net loss			—				—				—				—				—				(2,683	)
Balances, December 31, 2007			1,000,000			$	100				—			$	—			$	—			$	(2,683	)
Net loss			—				—				—				—				—				(13,353	)
Issuance of common shares			—				—				—				—				—				—
Balances, December 31, 2008			1,000,000			$	100				—			$	—			$	—			$	(16,036	)
Net loss			—				—				—				—				—				(9,780	)
Balances, December 31, 2009			1,000,000			$	100				—			$	—			$	—			$	(25,816	)
Net loss			—				—				—				—				—				(15,114	)
Balances, December 31, 2010			1,000,000			$	100				—			$	—			$	—			$	(40,930	)
Shares Returned			(450,000	)			(45	)			—				—				—				—
Shares Sold			450,000				45				—				—				—				—
Net gain (loss)			—				—				—				—				—				17,314
Balances, June 30, 2011			1,000,000			$	100				—			$	—			$	—			$	(23,616	)

 

 

 

 

 

FARRALLON, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

___________________________________________________________________________________

 

NOTE A—BUSINESS ACTIVITY

 

Business Activity—Farrallon, Inc. (“The Company”) was organized under the laws of the State of Nevada on November 13, 2007 as a corporation. The Company’s objective is to acquire or merge with a target business or company in a business combination.

 

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation—The financial statements included herein were prepared under the accrual basis of accounting.

 

Cash and Cash Equivalents—For purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.

 

Management’s Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The financial statements above reflect all of the costs of doing business.

 

Revenue Recognition—The Company’s policy is to recognize income when it is earned.

 

Going Concern—The accompanying financial statements have been prepared on a going concern basis, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business.  As reflected in the accompanying financial statements, the Company has a deficit accumulated during the development stage of $23,616, used cash from operations of $44,694 since its inception, and has a working capital deficit of $23,516 at June 30, 2011. 

 

The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  The Company’s ability to continue as a going concern is also dependent on its ability to find a suitable target company and enter into a possible reverse merger with such company.  Management’s plan includes obtaining additional funds by equity financing through a reverse merger transaction and/or related party advances; however there is no assurance of additional funding being available.  These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might arise as a result of this uncertainty.

 

Comprehensive Income (Loss) - The Company reports Comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements.

 

 

 

FARRALLON, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

___________________________________________________________________________________

 

 

 

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

 

Net Income per Common Share- Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of June 30, 2011.

 

Deferred Taxes- The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

Accounts Receivable—Accounts deemed uncollectible are written off in the year they become uncollectible. As of June 30, 2011, the balance in Accounts Receivable was $0.

 

Impairment of Long-Lived Assets- The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the quarter ended June 30, 2011.

 

Stock-Based Compensation- The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

 

 

 

 

FARRALLON, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

___________________________________________________________________________________

 

 

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

 

Fair Value for Financial Assets and Financial Liabilities- The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable, approximate their fair values because of the short maturity of these instruments. The Company’s note payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at June 30, 2011.

 

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at June 30, 2011, nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the quarter ended June 30, 2011.

 

Recent Accounting Pronouncements

 

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of our consolidated financial statements or disclosures as a result of implementing the Codification during the quarter ended June 30, 2011.

 

As a result of our implementation of the Codification during the quarter ended June 30, 2011, previous references to new accounting standards and literature are no longer applicable. In the current annual financial statements, we will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

 

 

 

FARRALLON, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

___________________________________________________________________________________

 

 

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

 

Recent Accounting Pronouncements (Cont.)

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by us.  SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact our consolidated financial statements. We evaluated for subsequent events through the issuance date of our consolidated financial statements. No recognized or non-recognized subsequent events were noted.

 

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

 

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date.  FSP SFAS No. 142-3 became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact our consolidated financial statements.

 

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

 

SFAS No. 160 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. We implemented SFAS No. 160 at the start of fiscal 2009 and no longer record an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at the time of buyout. The adoption of SFAS No. 160 did not have any other material impact on our consolidated financial statements.

 

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

 

SFAS No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. We will adopt SFAS No. 167 in fiscal 2010 and do not anticipate any material impact on our consolidated financial statements.

 

 

 

FARRALLON, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

___________________________________________________________________________________

 

 

NOTE C—SUPPLEMENTAL CASH FLOW INFORMATION

 

Supplemental disclosures of cash flow information for the quarters ended June 30, 2011 and 2010 is summarized as follows:

 

Cash paid during the quarters ended June 30, 2011 and 2010 for interest and income taxes:

 

2011 2010

 

Income Taxes $ --- $ ---

Interest $ --- $ ---

 

 

NOTE D—SEGMENT REPORTING

 

In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information.” This statement requires companies to report information about operating segments in interim and annual financial statements. It also requires segment disclosures about products and services, geographic areas and major customers. The Company determined that it did not have any separately reportable operating segments as of June 30, 2011.

 

NOTE E—INCOME TAXES

 

Due to the operating loss and the inability to recognize an income tax benefit, there is no provision for current or deferred federal or state income taxes for the six months ended June 30, 2011.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

 

The Company’s total deferred tax asset, calculated using federal and state effective tax rates, as of June 30, 2011 is as follows:

 

Total Deferred Tax Asset		$	(13,900	)
Valuation Allowance			13,900
Net Deferred Tax Asset		$	—

 

The reconciliation of income taxes computed at the federal statutory income tax rate to total income taxes as of June 30, 2011 and 2010 is as follows:

 

		2011				2010
Income tax computed at the federal statutory rate			34.0	%			34.0	%
State income tax, net of federal tax benefit			0.0	%			0.0	%
Total			34.0	%			34.0	%
Valuation allowance			-34.0	%			-34.0	%
Total deferred tax asset			0.0	%			0.0	%

 

 

 

 

FARRALLON, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

___________________________________________________________________________________

 

 

NOTE E—INCOME TAXES (CONT’D)

 

Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased (decreased) by approximately $5,300 and $3,400 for the six months ended June 30, 2011 and 2010.

 

As of June 30, 2011, the Company had a federal and state net operating loss carry forward in the amount of approximately $40,930, which expires in the year 2030.

 

NOTE F—CAPITAL STOCK

 

On Jan. 18th, 2011, the Board of Directors of the Company approved an agreement among the Company, its sole director, Bryan Arthur and Forest Garvin (Garvin), Garvin Strategic Capital, LLC (GSC) and Garvin Investments (GIL) whereas Garvin, GSC, and GIL would return all of the shares of common stock owned by them 450,000 shares and forgive and cancel the entire amount due under all of the promissory notes issued by the Company in the principal amount of $4,000.

 

In April 2011, the Company, Bryan Arthur, the sole officer and director of the Company as of said date, DYP Enterprises LLC, which is wholly owned by Mr. Arthur (“DYP”), and Hope Medical LLC (“Hope”) entered into an agreement whereby:

 

DYP, the sole owner of all of the outstanding shares of common stock of the Company, sold all of its shares common stock to Hope in consideration of the issuance by Hope to Mr. Arthur of membership interests in Hope equal to 20% of the total membership interests in Hope outstanding after giving effect to such issuance;

 

Mr. Arthur and DYP forgave all amounts due to them under certain promissory notes issued by the Company in the principal amount of $24,790 and cancelled said promissory notes;

 

The Company sold 450,000 shares of common stock to Hope for an aggregate purchase price of $45;

 

Hope agreed to pay all costs and expenses of any kind or nature incurred by the Company in connection with its operations;

 

Hope agreed to cause the timely filing of all reports the Company is required to file under the Exchange Act and to pay all costs and expenses in connection with such filing; and

 

Hope agreed to diligently pursue the Company’s business plan of identifying and merging with or acquiring a target company.

 

The Company is authorized to issue 1,000,000 common shares at $.0001 par value per share.

 

As of June 30, 2011, the Company has the 1,000,000 shares of common stock issued and outstanding.

 

The Company is authorized to issue 10,000,000 preferred shares at $.0001 par value per share. As of June 30, 2011 the Company issued no preferred shares.

 

 

 

 

 

FARRALLON, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

___________________________________________________________________________________

 

 

NOTE G – DEVELOPMENT STAGE COMPANY

 

The Company is in the development stage as of June 30, 2011 and to date has had no significant operations. Recovery of the Company’s assets is dependent on future events, the outcome of which is indeterminable. In addition, successful completion of the Company’s development program and its transition, ultimately, to attaining profitable operations is dependent upon obtaining adequate financing to fulfill its development activities and achieving a level of sales adequate to support the Company’s cost structure.

 

NOTE H—SHAREHOLDER LOAN/RELATED PARTY

 

The Company has signed promissory notes with related parties. The original amounts of these 8 % demand notes were $44,672. The outstanding balance as of June 30, 2011 was $15,882 because $28,790 was forgiven and written off. Accrued interest in the amount of $4,968 pertaining to this debt forgiven was also written off the books. The accrued interest not paid as of June 30, 2011 is $367.

 

NOTE I—SIGNIFICANT EVENTS

 

On August 9th, 2011, Eric Besenyei who was appointed as President of the Company on April 12, 2011, stepped down as President and Bryan Arthur was appointed as the President of the Company.

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Overview

 

Farrallon, Inc. (“we”, “us” or the “Company”) was organized in the State of Nevada on November 13, 2007. We are a developmental stage company and have not generated any revenues to date. We were organized to serve as a vehicle for a business combination through a capital stock exchange, merger, reverse acquisition, asset acquisition or other similar business combination (a “Business Combination”) with an operating or development stage business (the “Target”) which desires to utilize our status as a reporting company under the Exchange Act.

 

The Company voluntarily filed a registration statement on Form 10 with the U.S. Securities and Exchange Commission (the “SEC”) on February 19, 2008, and since its effectiveness, the Company has focused its efforts on identifying a possible Target for a Business Combination. We are not presently engaged in, and will not engage in, any substantive commercial business operations unless and until we consummate a Business Combination. Our fiscal year ends on December 31.

 

Based on our business activities, the Company is a “blank check” company. The SEC defines those companies as “any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the Exchange Act and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies. Many states have enacted statutes, rules and regulations limiting the sale of securities of “blank check” companies in their respective jurisdictions. In addition, under Rule 12b-2 of the Exchange Act, the Company also is a “shell company” which is defined, as a company which has (i) no or nominal operations; and (ii) either (x) no or nominal assets; (y) assets consisting solely of cash and cash equivalents; or (z) assets consisting of any amount of cash and cash equivalents and nominal other assets. Because we are a “shell” company, the Business Combination we enter into with a Target will be deemed to be a “reverse acquisition” or “reverse merger.”

 

Our management has broad discretion with respect to identifying and selecting a prospective Target. We have not established any specific attributes or criteria (financial or otherwise) for a prospective Target and may enter into a Business Combination with a development stage company, a distressed company or a foreign company engaged in any industry. Our sole officer and director has never served as an officer or director of a development stage public company that has consummated a Business Combination such as that contemplated by our Company. Accordingly, he may not successfully identify a Target or conclude a Business Combination. In addition, our management engages in other business activities and is not obligated to devote any specific number of hours to our matters. Management intends to devote only as much time as it deems necessary to our affairs.

 

We cannot assure you that we will be successful in concluding a Business Combination. We will not realize any revenues or generate any income unless and until we successfully merge with or acquire an operating business that is generating revenues and otherwise is operating profitably. Moreover, we can offer no guarantee that the Company will achieve long-term or immediate short-term earnings from any Business Combination.

 

Any entity with which we enter into a Business Combination will be subject to numerous risks in connection with its operations. To the extent we affect a Business Combination with a financially unstable company or an entity in its early stage of development or growth, including entities without established records of sales or earnings, we may be affected by numerous risks inherent in the business and operations of such companies. If we consummate a Business Combination with a foreign entity, we will be subject to all of the risks attendant to foreign operations. Although our management will endeavor to evaluate the risks inherent in a particular Target, we cannot assure you that we will properly ascertain or assess all significant risk factors.

 

We expect that in connection with any Business Combination, we will issue a significant number of shares of our common stock (equal to at least 80% of the total number of shares outstanding after giving effect to the transaction and likely, a significantly higher percentage) in order to ensure that the Business Combination qualifies as a “tax free” transaction under federal tax laws. The issuance of additional shares of our capital stock will:

 

·	significantly reduce the equity interest of our stockholders prior to the transaction; and
·	cause a change in control in our Company and likely result in the resignation or removal of our officer and directors as of the date of the transaction.

 

Our management anticipates that our Company likely will affect only one Business Combination, due primarily to our limited financial resources and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management's plan to offer a controlling interest to a Target in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us because it will not permit us to offset potential losses from one venture against potential gains from another.

 

The Company currently does not engage in any business activities that provide cash flow. During the next twelve months we anticipate incurring costs related to filing Exchange Act reports, investigating and analyzing Targets and consummating a Business Combination. We believe we will be able to meet these costs through use of funds in our treasury and from cash which may be loaned to or invested in us by our stockholders, management or other investors. There are no assurances that the Company will be able to secure additional funding as needed. Our ability to continue as a going concern is dependent upon our ability to generate cash from the sale of our common stock and/or obtain debt financing and attain future profitable operations by acquiring or merging with a profitable company.

 

 

Liquidity and Capital Resources

 

At June 30, 2011, we had total assets of $77, consisting exclusively of cash. This compares with total assets of $77 at December 31, 2010, our fiscal year end. At June 30, 2011, the Company had current liabilities of $23,593 compared with current liabilities of $40,907 at December 31, 2010, in each case, comprised of amounts owed to stockholders and accrued expenses.

 

Our existing cash reserves will not be sufficient to cover our operating costs and expenses over the next twelve months.

 

To date, we have funded our operations through loans from our stockholders. Our stockholders have advised management that they presently expect to fund additional costs and expenses we may incur through loans or further investment in the Company, as and when necessary. However, our stockholders are under no obligation to provide such funding.

 

The following is a summary of the Company's cash flows provided by (used in) operating and financing activities:

 

		Six Months Ended June 30, 2011				Six Months Ended June 30, 2010				For the Cumulative Period from November 13, 2007 (Inception) to June 30, 2011
Net Cash Used in Operating Activities		$	15,882			$	6,497			$	44,694
Net Cash Provided by Financing Activities		$	15,882			$	6,564			$	44,772
Net Increase (Decrease) in Cash and Cash Equivalents		$	—			$	67			$	77

 

We do not expect to engage in any substantive activities unless and until such time as we enter into a Business Combination, if ever. We cannot provide investors with any assurance that we will have sufficient capital resources to fund our operations and realize our business objectives.

 

Results of Operations

 

Since our inception, we have not engaged in any substantive operations, other than seeking to identify a Target, nor generated any revenues. We reported a net loss for the six months ended June 30, 2011 of $17,314, compared to a net loss of $7,416 for the comparable 2010 period, and have suffered a net loss since inception of $23,616. At June 30, 2011, we had a working capital deficit of $23,516 compared to $40,830 at June 30, 2010. Since our inception, our operating expenses have principally comprised professional fees and expenses incurred in connection with the filing of reports under the Exchange Act, as well as interest accrued on loans from one of our stockholders.

 

We do not expect to engage in any activities, other than seeking to identify a Target, unless and until such time as we enter into a Business Combination with a Target, if ever. We cannot provide investors with any assessment as to the nature of a Target’s operations or speculate as to the status of its products or operations, whether at the time of the Business Combination it will be generating revenues or its future prospects.

 

Going Concern

 

Our negative working capital, continuing operating losses, failure to generate revenues and lack of operating capital create substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on its ability to generate cash from the sale of its securities and attaining future profitable operations. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.

 

The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

 

Forward Looking Statements

 

Statements, other than historical facts, contained in this Quarterly Report on Form 10-Q, including statements of potential acquisitions and our strategies, plans and objectives, are "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although we believe that our forward looking statements are based on reasonable assumptions, we caution that such statements are subject to a wide range of risks, trends and uncertainties that could cause actual results to differ materially from those projected Among those risks, trends and uncertainties are important factors that could cause actual results to differ materially from the forward looking statements, including, but not limited to; the time management devotes to identifying a target business; management’s ability to consummate a business combination; the financial condition of the target company with which we may enter a business combination; the effect of existing and future laws; governmental regulations; the political and economic climate of the United States; and conditions in the capital markets. We undertake no duty to update or revise these forward-looking statements.

 

When used in this Form 10-Q, the words, "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4(T). Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of June 30, 2011, the Company’s management performed an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer, who is the Company’s principal executive officer and principal financial officer and who we refer to herein as our PEO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Exchange Act), pursuant to Exchange Act Rule 13a-15. As a result of our continuing efforts to remediate the material weaknesses in our internal control over financial reporting that existed as of December 31, 2010 and which remained extant as of the close of the period covered by this Report, our PEO concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2011.

 

The weaknesses in our disclosure and procedures encompassed weaknesses in certain elements of our internal control over financial reporting (ICFR) that our subsumed within our disclosure controls and procedures. A material weakness is defined in Section 210.1-02(4) of Regulation S-X as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The specific weaknesses relate to elements of our ICFR that provide reasonable assurances that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles and comprise the following:

 

1.	We did not maintain effective controls over the control environment.
2.	We did not maintain effective controls over financial statement disclosure.
3.	We did not maintain effective controls over financial reporting.
4.	There existed a lack of segregation of duties in regard to the Company’s financial reporting, procedures for depositing of funds, procedures for cash disbursements, procedures for checkbook entries, period close procedures, and procedures for financial statement preparation, because we have only one officer who is responsible for all such duties.

 

We believe that the weaknesses in our disclosure controls and procedures and ICFR are a direct consequence of our size, resource constraints and the nature of our business. We are a “shell company,” as defined under the Securities Act, in that we have no operations and nominal assets. Further, we have no full-time employees. As a result, we are constrained by our lack of resources to take the types of corrective actions that would be necessary to remediate the material weaknesses, including, for example, engaging additional accounting personnel and adopting an audit committee charter and seating an audit committee with at least one independent member who qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K

 

Changes in Internal Controls

 

There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) during the three months ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

 

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There are presently no material pending legal proceedings to which the Company and no such proceedings are known to the Company to be threatened or contemplated against it.

 

Item 1A. Risk Factors.

 

Smaller reporting companies are not required to provide the information required by this item. We refer readers to our Annual Report on Form 10-K as filed with the SEC on April 11, 2011 for a description of the risks associated with our business and an investment in our securities.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. (Reserved)

 

 

Item 5. Other Information.

 

On August 9, 2011, Eric Besenyei resigned as the president of the Company and the board of directors appointed to serve Bryan Arthur as the president of the Company.

 

Item 6. Exhibits.

 

Exhibit	Description
31.1	Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quart
32.1*	Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 200
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 

 

* Pursuant to Commission Release No. 33-8238, this certification will be treated as “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of Section 18 of the Securities Exchange Act of 1934, as amended, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused the Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

		FARRALLON, INC.
Date: August 10, 2011	By:	/s/ Bryan Arthur
	Name:	Bryan Arthur
	Title:	President, Principal Executive Officer and Principal Financial Officer