Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - CENTAURUS DIAMOND TECHNOLOGIES, INC. | form8ka.htm |
| EX-99.2 - PRO FORMA FINANCIAL STATEMENTS - CENTAURUS DIAMOND TECHNOLOGIES, INC. | ex992.htm |
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Index to the Financial Statements
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
|
Balance Sheets at March 31, 2012 and 2011
|
F-3
|
|
Statements of Operations for the Fiscal Year Ended March 31, 2012 and 2011 and for the Period from July 27, 2001 (Inception) through March 31, 2012
|
F-4
|
|
Statement of Stockholder's Equity for the Period from July 27, 2001 (Inception) through March 31, 2012
|
F-5
|
|
Statements of Cash Flows for the Fiscal Year Ended March 31, 2012 and 2011 and for the Period from July 27, 2001 (Inception) through March 31, 2012
|
F-6
|
|
Notes to the Financial Statements
|
F-7
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholder of
Innovative Sales
(A Development Stage Company)
Las Vegas, Nevada
We have audited the accompanying balance sheets of Innovative Sales, a development stage company, (the “Company”) as of March 31, 2012 and 2011, and the related statements of operations, stockholder's equity and cash flows for the fiscal years then ended and for the period from July 27, 2001 (inception) through March 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes 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 amount 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 presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2012 and 2011, and the related statements of operations, stockholder's equity and cash flows for the fiscal years then ended and for the period from July 27, 2001 (inception) through March 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had a deficit accumulated during the development stage at March 31, 2012 and a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/Li & Company, PC
Li & Company, PC
Skillman, New Jersey
August 20, 2012
F-2
|
Innovative Sales
|
|
(A Development Stage Company)
|
|
Balance Sheets
|
|
March 31, 2012
|
March 31, 2011
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS
|
||||||||
|
Cash
|
$ | - | $ | 32 | ||||
|
Total Current Assets
|
- | 32 | ||||||
|
PATENT
|
||||||||
|
Patent
|
6,982 | 6,982 | ||||||
|
Accumulated amortization
|
(435 | ) | (87 | ) | ||||
|
Patent, net
|
6,547 | 6,895 | ||||||
|
Total Assets
|
$ | 6,547 | $ | 6,927 | ||||
|
LIABILITIES AND STOCKHOLDER'S EQUITY
|
||||||||
|
CURRENT LIABILITIES
|
||||||||
|
Advances from stockholder
|
$ | 6,225 | $ | 6,225 | ||||
|
Total Current Liabilities
|
6,225 | 6,225 | ||||||
|
STOCKHOLDER'S EQUITY
|
||||||||
|
Preferred stock at $0.0001 par value: 5,000,000 shares authorized;
|
||||||||
|
none issued or outstanding
|
- | - | ||||||
|
Common stock no par value: 25,000 shares authorized,
|
||||||||
|
25,000 shares issued and outstanding
|
3,000 | 3,000 | ||||||
|
Deficit accumulated during the development stage
|
(2,678 | ) | (2,298 | ) | ||||
|
Total Stockholder's Equity
|
322 | 702 | ||||||
|
Total Liabilities and Stockholder's Equity
|
$ | 6,547 | $ | 6,927 | ||||
See accompanying notes to the financial statements
F-3
|
Innovative Sales
|
|
(A Development Stage Company)
|
|
Statements of Operations
|
|
For the Fiscal Year
|
For the Period from July 27, 2001
|
|||||||||||
|
Ended
|
Ended
|
(Inception) through
|
||||||||||
|
March 31, 2012
|
March 31, 2011
|
March 31, 2012
|
||||||||||
|
Revenues earned during the development stage
|
$ | - | $ | - | $ | - | ||||||
|
Operating expenses
|
||||||||||||
|
Amortization expense
|
348 | 87 | 435 | |||||||||
|
General and administrative expenses
|
32 | 691 | 2,243 | |||||||||
|
Total operating expenses
|
380 | 778 | 2,678 | |||||||||
|
Loss from operations
|
(380 | ) | (778 | ) | (2,678 | ) | ||||||
|
Income tax provision
|
- | - | - | |||||||||
|
Net loss
|
$ | (380 | ) | $ | (778 | ) | $ | (2,678 | ) | |||
|
|
||||||||||||
See accompanying notes to the financial statements
F-4
|
Innovative Sales
|
|
(A Development Stage Company)
|
|
Statement of Stockholder's Equity
|
|
For the period from July 27, 2001 (inception) through March 31, 2012
|
| Common Stock, No Par Value | Additonal | Deficit Accumulated | Total | |||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | During the Development Stage | Stockholders' Equity | ||||||||||||||||
|
Balance, July 27, 2001
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
|
Common shares issued for cash
|
25,000 | 3,000 | - | 3,000 | ||||||||||||||||
|
Net loss for the period from July 27, 2001 (inception) through March 31, 2010
|
(1,520 | ) | (1,520 | ) | ||||||||||||||||
|
Balance, March 31, 2010
|
25,000 | 3,000 | - | (1,520 | ) | 1,480 | ||||||||||||||
|
Net loss
|
(778 | ) | (778 | ) | ||||||||||||||||
|
Balance, March 31, 2011
|
25,000 | 3,000 | - | (2,298 | ) | 702 | ||||||||||||||
|
Net loss
|
(380 | ) | (380 | ) | ||||||||||||||||
|
Balance, March 31, 2012
|
25,000 | $ | 3,000 | $ | - | $ | (2,678 | ) | $ | 322 | ||||||||||
See accompanying notes to the financial statements
F-5
|
Innovative Sales
|
|
(A Development Stage Company)
|
|
Statements of Cash Flows
|
|
For the Period from
|
||||||||||||
|
For the Fiscal Year
|
For the Fiscal Year
|
July 27, 2001
|
||||||||||
|
Ended
|
Ended
|
(Inception) through
|
||||||||||
|
March 31, 2012
|
March 31, 2011
|
March 31, 2012
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net loss
|
$ | (380 | ) | $ | (778 | ) | $ | (2,678 | ) | |||
|
Adjustments to reconcile net loss to net cash used in operating activities
|
||||||||||||
|
Amortization
|
348 | 87 | 435 | |||||||||
|
Net cash used in operating activities
|
(32 | ) | (691 | ) | (2,243 | ) | ||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Patent application costs
|
- | (847 | ) | (6,982 | ) | |||||||
|
Net cash used in investing activities
|
- | (847 | ) | (6,982 | ) | |||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Advances from (repayment to) stockholder
|
- | 1,567 | 6,225 | |||||||||
|
Proceeds from sale of common stock
|
- | - | 3,000 | |||||||||
|
Net cash provided by financing activities
|
- | 1,567 | 9,225 | |||||||||
|
NET CHANGE IN CASH
|
(32 | ) | 29 | - | ||||||||
|
Cash at beginning of period
|
32 | 3 | - | |||||||||
|
Cash at end of period
|
$ | - | $ | 32 | $ | - | ||||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
||||||||||||
|
Interest paid
|
$ | - | $ | - | $ | - | ||||||
|
Income tax paid
|
$ | - | $ | - | $ | - | ||||||
See accompanying notes to the financial statements
F-6
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
Note 1 – Organization and Operations
Innovative Sales
Innovative Sales (the “Company”) was incorporated on July 27, 2001 under the laws of the State of Nevada. The Company engages in the business of research and development of industrial grade cultured diamonds that are chemically, optically and physically the same as their natural counterparts.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Development Stage Company
The Company is a development stage company as defined by section 915-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification. Although the Company has recognized some nominal amount of revenues since inception, the Company is still devoting substantially all of its efforts on establishing the business and, therefore, still qualifies as a development stage company. All losses accumulated since inception have been considered as part of the Company’s development stage activities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The Company’s significant estimates include income tax rate, income tax provision and valuation allowance of deferred tax assets; the fair value of financial instruments; the carrying value and recoverability of long-lived assets, including the values assigned to and the estimated useful life of patent; and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted 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 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (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 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) 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 (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
F-7
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
Fair Value of Financial Instruments (cont'd)
|
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.
|
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
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. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s financial assets and liabilities, such as cash, approximates its fair value because of the short maturity of the instrument.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not, however, practical to determine the fair value of advances from stockholder, if any, due to their related party nature.
Carrying Value, Recoverability and Impairment of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include patent, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
The impairment charges, if any, is included in operating expenses in the accompanying statements of operations.
Fiscal Year End
The Company elected March 31st as its fiscal year ending date.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
F-8
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
Patent
The Company follows the guidelines as set out in paragraph 350-30-25-3 and paragraph 350-30-35-6 of the FASB Accounting Standards Codification for patent. For acquired patents the Company records the costs to acquire patents as patent and amortizes the patent acquisition cost over its remaining legal life, or estimated useful life, or the term of the contract, whichever is shorter. For internal developed patents, all costs incurred to the point when a patent application is to be filed are expended as incurred as research and development expense; patent application costs, generally legal costs, thereafter incurred are capitalized, which are to be amortized once the patents are granted or expended if the patent application is rejected. The Company amortizes the internal developed patents over the shorter of the expected useful lives or the legal lives of the patents, which are generally 17 to 20 years for domestic patents and 5 to 20 years for foreign patents from the date when the patents are granted. The costs of defending and maintaining patents are expended as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
F-9
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company will derive its revenue from sales contracts with customers with revenues being generated upon the shipment of products upon commencing operations. Persuasive evidence of an arrangement is demonstrated via invoice, product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the trucking company or third party carrier and title transfers upon shipment, based on free on board (“FOB”) warehouse; the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
Income Tax Provision
The Company follows paragraph 740-10-30-2 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.
The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13.addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the fiscal year ended March 31, 2012 or 2011.
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
F-10
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
|
Recently Issued Accounting Pronouncements
|
FASB Accounting Standards Update No. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.
The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.
FASB Accounting Standards Update No. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.
The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.
FASB Accounting Standards Update No. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: Derecognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.
The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.
FASB Accounting Standards Update No. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.
F-11
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
FASB Accounting Standards Update No. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-12 “Comprehensive Income: Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). This Update is a deferral of the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. FASB is to going to reassess the costs and benefits of those provisions in ASU 2011-05 related to reclassifications out of accumulated other comprehensive income. Due to the time required to properly make such a reassessment and to evaluate alternative presentation formats, the FASB decided that it is necessary to reinstate the requirements for the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.
Other Recently Issued, but not Yet Effective Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying financial statements, the Company had a deficit accumulated during the development stage at March 31, 2012, a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
While the Company is attempting to commence operations and generate sufficient revenues, the Company’s cash position, if any, may not be sufficient enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to commence explorations and generate sufficient revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 – Patent
The Company started its U.S. patent application process on June 20, 2006 and obtained the U.S. patent (U.S. Patent No.: 007854823B2) on December 21, 2010, titled "Synthesis of Diamond by Extraction of a Pulse Derived from the Abrupt Collapse of a Magnetic Field." Alvin A. Snaper, inventor. Patent application costs of $6,982, primarily legal costs, incurred during the patent application process were capitalized, and being amortized over the expected useful life of 20 years as of January 1, 2011.
F-12
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
Patent, stated at cost, less accumulated amortization at March 31, 2011, consisted of the following:
|
March 31, 2012
|
March 31, 2011
|
|||||||
|
Patent
|
$
|
6,982
|
$
|
6,982
|
||||
|
Accumulated amortization
|
(435
|
)
|
(87
|
)
|
||||
|
$
|
6,547
|
$
|
6,895
|
|||||
Amortization Expense
Amortization expense for the fiscal year ended March 31, 2012 and 2011 was $348 and $87, respectively.
Note 5 – Related Party Transactions
Advances from Stockholder
From time to time, the stockholder of the Company advances funds to the Company for working capital purposes. Those advances are unsecured, non-interest bearing and due on demand.
Advances from stockholder at March 31, 2012 and 2011 consisted of the following:
|
March 31, 2012
|
March 31, 2011
|
|||||||
|
Advances from major stockholder and officer
|
$
|
6,225
|
$
|
6,225
|
||||
|
$
|
6,225
|
$
|
6,225
|
|||||
Note 6 – Stockholder's Equity
Shares Authorized
Upon formation the total number of shares of all classes of capital stock which the Company is authorized to issue is Twenty-Five Thousand (25,000) shares with a par value of zero ($0), all of which are designated as Common Stock.
Common Stock
Upon formation, the Company sold 25,000 shares of its common stock to the founder at $0.12 per share or $3,000 in cash.
F-13
Innovative Sales
(A Development Stage Company)
March 31, 2012 and 2011
Notes to the Financial Statements
Note 7 – Income Tax Provision
Deferred Tax Assets
At March 31, 2012, the Company has available for federal income tax purposes net operating loss (“NOL”) carry-forwards of $2,678 that may be used to offset future taxable income through the fiscal year ending March 31, 2032. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements since the Company believes that the realization of its net deferred tax asset of approximately $911 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the full valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance increased approximately $129 and $265 for the fiscal year ended March 31, 2012 and 2011.
Components of deferred tax assets as of March 31, 2012 and 2011 are as follows:
|
March 31, 2012
|
March 31, 2011
|
|||||||
|
Net deferred tax assets – Non-current:
|
||||||||
|
Expected income tax benefit from NOL carry-forwards
|
911
|
782
|
||||||
|
Less valuation allowance
|
(911
|
)
|
(782
|
)
|
||||
|
Deferred tax assets, net of valuation allowance
|
$
|
-
|
$
|
-
|
||||
Income Tax Provision
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
|
For the Fiscal Year ended March 31, 2012
|
For the Fiscal Year ended March 31, 2011
|
|||||||
|
Federal statutory income tax rate
|
34.0
|
%
|
34.0
|
%
|
||||
|
Change in valuation allowance on net operating loss carry-forwards
|
(34.0
|
)
|
(34.0
|
)
|
||||
|
Effective income tax rate
|
0.0
|
%
|
0.0
|
%
|
||||
Note 8 – Subsequent Events
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were certain reportable subsequent events to be disclosed as followed:
Entry into an Asset Acquisition Agreement to Sell Certain Assets
On June 5, 2012 (the "Closing Date"), the Company closed an asset acquisition pursuant to the terms of the Asset Acquisition Agreement (the "Acquisition Agreement") by and between the Company and Centaurus Diamond Technologies, Inc. (formerly Sweetwater Resources, Inc.), a Nevada corporation ("Centaurus"), whereby the Company sold certain assets of the Company consisting of a cultured diamond technology patent and related intellectual property (the "Assets") in exchange for: (a) 43,850,000 shares (the "Consideration Shares") of Centaurus's restricted common stock (the "Acquisition") (these shares were issued on June 7, 2012), (b) Centaurus's assumption of certain debt of the Company in an amount not to exceed $100,000, (c) the satisfaction of all of Centaurus's debts and liabilities as of the Closing Date, and (d) Centaurus's simultaneous close on a private placement (the "Private Placement") of Centaurus's common stock and warrants to purchase shares of Centaurus's common stock for gross proceeds of at least $500,000, plus the amount necessary to pay any of Centaurus's remaining pre-closing debts, including, but not limited to, all legal and accounting costs associated with the preparation and filing of Centaurus's Annual Report on Form 10-K for the fiscal year ended March 31, 2012. For accounting purposes, this is being treated as a reverse acquisition.
F-14