(A Development Stage Company)
Condensed Financial Statements
Note A. Description of Business
American Environmental, Inc. (the "Company" or "AEI") was
originally incorporated in the State of Florida on February 28, 2003 as
MyZipSoft, Inc. ("MyZipSoft"), a wholly owned subsidiary of eCom eCom.com, Inc. ("eCom").
MyZipSoft's core business was the development and distribution of software
products. Its first product was a digital image compression software call
MyPhotoZip. The Company ceased pursing this line of business during June 2006. The Company currently has no operations.
Pursuant to SEC Staff Legal Bulletin No. 4, eCom decided to spin off the Company into an independent company in the belief that the independent company, with a distinct business, would be better able to obtain necessary funding and develop their business plans.
December 1, 2003, the Board of Directors of eCom approved the spin-off of
eCom spun off
MyZipSoft on January 23, 2004. The spin-off was subject to the effectiveness of the bankruptcy of eCom.
The stock dividend from eCom was one share of MyZipSoft, Inc. for
every 100 shares of eCom held. This dividend had a shareholder of record
date of February 23, 2004 and a payment date of June 2, 2005.
On December 12, 2003, the Company changed its
name to Freedom 4 Wireless, Inc. ("F4W") in connection with its spin off by eCom
and its planned acquisition of certain assets of a company known as Freedom 4
Wireless, Inc. (Delaware). On January 24, 2005, the Company changed their
name back to MyZipSoft, Inc. due to the discontinued operations of the wireless
division. MyZipSoft, Inc. changed its name to American Environmental, Inc.
on November 2, 2005.
On March 28, 2008 the US Bankruptcy court issued a final order on the eCom bankruptcy case. As a result of the emergence of
American Environmental, Inc. (Prior American Environmental) ("Prior AEI") from operating under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) on March 28, 2008 (the Effective Date), the Company is the successor registrant to Prior
American Environmental pursuant to Rule 12g-3 under the Securities Exchange Act of 1934.
Note B. Summary of Significant Accounting Policies
BASIS OF PRESENTATION,
USE OF ESTIMATES
The Company maintains its accounts on the accrual basis of accounting. The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. Actual results could differ from those estimates.
Based upon the Company's business plan, it is a development stage
enterprise since planned principal activities have not yet commenced. As a
development stage enterprise, the Company discloses the deficit accumulated
during the development stage commencement to the current balance sheet
date on the condensed statement of changes in shareholders' deficit. The
development stage began February 28, 2003, the date the Company was
Revenue is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable and
collectability is assured.
Cash consists of deposits in banks and other financial
institutions having original maturities of less than ninety days.
The accounting for common stock issued for services
is based on the estimated fair value of the common stock issued as of the grant date. Because there is no market for the Company's common stock and no operations, the Company recorded the issuance of common stock for services at
par value, which approximated the value of services received.
The Company accounts for income taxes in accordance with FASB
Statement No. 109, Accounting for Income Taxes (FASB 109). Under FASB 109,
income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related to certain income and expenses recognized in different periods for
financial and income tax reporting purposes. Deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses and tax credits
that are available to offset future taxable income and income taxes,
respectively. A Valuation allowance is provided if it is more likely than not
that some or all of the deferred tax asset will not be realized.
PER COMMON SHARE
Basic net loss
per common share is computed using the weighted average number of common shares
outstanding during each period presented. Diluted net loss per common share is
computed by using the weighted average number of common shares and potential
common shares outstanding during the period.
In December 2008, the FASB issued FSP FIN No. 48-3, "Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises." FSP FIN No. 48-3
defers the effective date of FIN No. 48, "Accounting for Uncertainty in Income
Taxes," for certain nonpublic enterprises as defined in SFAS No. 109,
"Accounting for Income Taxes." However, nonpublic consolidated entities of
public enterprises that apply U.S. generally accepted accounting principles (GAAP)
are not eligible for the deferral. FSP FIN No. 48-3 was effective upon issuance.
The impact of adoption was not material to the Company's financial condition or
results of operations.
In December 2008, the FASB issued FSP FAS No. 140-4 and FIN No. 46(R) -8,
"Disclosures by Public Entities (Enterprises) about Transfers of Financial
Assets and Interests in Variable Interest Entities." This FSP amends SFAS No.
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," to require public entities to provide
additional disclosures about transfers of financials assets. FSP FAS No. 140-4
also amends FIN No. 46(R)-8, "Consolidation of Variable Interest Entities," to
require public enterprises, including sponsors that have a variable interest
entity, to provide additional disclosures about their involvement with a
variable interest entity. FSP FAS No. 140-4 also requires certain additional
disclosures, in regards to variable interest entities, to provide greater
transparency to financial statement users. FSP FAS No. 140-4 is effective for
the first reporting period (interim or annual) ending after December 15, 2008,
with early application encouraged. The adoption of FSP FAS No. 140-4 did not
have an impact on the Company's financial position and results of operations.
In October 2008, the FASB issued FSP FAS No. 157-3, "Determining the Fair Value
of a Financial Asset When the Market for That Asset is Not Active." This FSP
clarifies the application of SFAS No. 157, "Fair Value Measurements," in a
market that is not active. The FSP also provides examples for determining the
fair value of a financial asset when the market for that financial asset is not
active. FSP FAS No. 157-3 was effective upon issuance, including prior periods
for which financial statements have not been issued. The impact of adoption was
not material to the Company's financial condition or results of operations.
In June 2008, the FASB issued EITF Issue No. 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities." EITF No. 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting
and, therefore, need to be included in the earnings allocation in computing
earnings per share under the two-class method. The EITF 03-6-1 affects entities
that accrue dividends on share-based payment awards during the awards' service
period when the dividends do not need to
be returned if the employees forfeit the award. EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. The adoption of EITF 03-6-1 did
not impact the Company's financial position and results of operations.
In April 2008, the FASB issued FSP FAS No. 142-3, "Determination of the Useful
Life of Intangible Assets", which
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of intangible assets under SFAS
No. 142 "Goodwill and Other Intangible Assets". The intent of this FSP is to
improve the consistency between the useful life of a recognized intangible asset
under SFAS No. 142 and the period of the expected cash flows used to measure the
fair value of the asset under SFAS No. 141 (revised 2007) "Business
Combinations" and other U.S. generally accepted accounting principles. The
adoption of FSP FAS No. 142-3 did not have a material impact on the Company's
In February 2008, the FASB issued FSP FAS No. 157-2, "Effective Date of FASB
Statement No. 157". This FSP delays the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually).
The impact of adoption was not material to the Company's consolidated financial
condition or results of operations.
In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations." This
Statement replaces the original SFAS No. 141. This Statement retains the
fundamental requirements in SFAS No. 141 that the acquisition method of
accounting (which SFAS No. 141 called the purchase method) be used for
all business combinations and for an acquirer to be identified for each business
combination. The objective of SFAS No. 141(R) is to improve the relevance, and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. To accomplish
that, SFAS No. 141(R) establishes principles and requirements for how the
Recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree.
Recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase.
Determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008 and may not be applied before that date. The adoption of
SFAS No. 141(R) did not have a material impact on the Company's results of
operations and financial condition.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of SFAS No.
115," which becomes effective for the Company on February 1, 2008, permits
companies to choose to measure many financial instruments and certain other
items at fair value and report unrealized gains and losses in earnings. Such
accounting is optional and is generally to be applied instrument by instrument.
There was no material impact on the Company's results of operations and
financial condition due to the adoption of SFAS No. 159.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS
No. 157 provides guidance for using fair value to measure assets and
liabilities. SFAS No. 157 addresses the requests from investors for expanded
disclosure about the extent to which companies' measure assets and liabilities
at fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS No. 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and was adopted by the Company in the first quarter of fiscal
year 2008. There was no material impact on the Company's results of operations
and financial condition due to the adoption of SFAS No. 157.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note C. Involuntary
Reorganization under Chapter 11
Plan of Reorganization became effective and the Company emerged from Chapter 11
reorganization proceedings on March 28, 2008 (the "Reorganization Effective
Date"). On the Reorganization Effective Date, the Company implemented
fresh-start reporting in accordance with American Institute of Certified Public
Accounts Statement of Position 90-7: Financial Reporting by Entities in
Reorganization under the Bankruptcy Code ("SOP 90-7").
conditions required for the adoption of fresh-start reporting were met upon
emergence from the reorganization Proceedings on the Reorganization Effective
Date. As a result, the fair value of the Prior AEI assets became the new basis
for the Company's statement of financial position as of the
Fresh-Start Adoption Date, and all operations beginning on or after March 28,
2008 are related to the Successor Company.
result of the application of fresh-start reporting,
the financial statements prior to and including March 28, 2008 represent the
operations of the Prior AEI and are not comparable with the financial
statements for periods on or after March 28, 2008. References to "New AEI" refer to the Company on or after March 28, 2008, after giving effect
to the application of fresh-start reporting. References to the "Prior AEI" refer to the
Company prior to and including March 28, 2008.
Note and Loans Receivable
The Note receivable dated June 1, 2005 was with Miami Filter in the amount of
$50,000, plus accrued interest at 5% interest per annum on the unpaid balance.
The note was non-collateralized and was scheduled to mature on September 1, 2005.
On May 31, 2008, the note was deemed uncollectable and the uncollected principal
balance of $22,500 plus accrued
interest of $2,558 was charged off resulting in a net loss off $25,058.
Note E. Income Taxes
The Company does not believe that the realization of the related net deferred tax asset meets the criteria required by generally accepted accounting principles and, accordingly, the deferred income tax asset arising from such loss carry forward has been fully reserved.
Deferred income taxes (benefits) are provided for certain income and expenses which are recognized in different periods for tax and financial reporting purposes. The Company had cumulative net operating loss carry-forwards for income tax purposes at
November 30, 2008 of approximately $1,020,000, expiring through May 31, 2029. The Company has established a 100% valuation allowance against this deferred tax asset, as the Company has no history of profitable operations.
F. Related Party Transactions
Company is allocated certain expenses such as rent, travel and administrative
that are paid on behalf of the Company by American Capital Holdings, Inc., and
United States Financial Group, Inc,
companies that are related to the Company by mutual stockholders and Directors.
The total expenses allocated to the Company in the six months ended November 30,
2008 and for the period from March 28, 2008 (date of bankruptcy effectiveness)
through November 30, 2008 was $10,120
and $18,245, respectively.
The Company has received cash advances from Richard
Turner, CFO of the Company, in varying amounts and at various times subsequent
to November 30, 2008. These related party loans were non-collateralized, non-interest
bearing and due on
demand. As of November 30, 2008 the balance owed Mr. Turner was $252.