UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

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

For the Quarterly Period Ended August 31, 2012

OR

[ ]	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: 000-54440

CLOUD STAR CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		27-4479356
(State or Other Jurisdiction		(I.R.S. Employer
of Incorporation or Organization)		Identification No.)

 

9891 Irvine Center Drive, Suite 200, Irvine, CA		92618
(Address of principal executive offices)		(Zip Code)

(866) 250-2999
(Registrant’s telephone number, including area code)

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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). Yes [ ] No [ ] Not Applicable

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No [X]

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

As of October 15, 2012, the registrant’s outstanding common stock consisted of 97,200,000 shares, $0.001 par value.

 

 

Table of Contents

Cloud Star Corporation

Index to Form 10-Q

For the Quarterly Period Ended August 31, 2012

PART I	Financial Information	3
ITEM 1.	Unaudited Balance Sheets	3
	Unaudited Statements of Operations	4
	Unaudited Statement of Stockholders’ Deficit	5
	Unaudited Statements of Cash Flows	6
	Notes to the Unaudited Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	20
ITEM 4T.	Controls and Procedures	20
PART II	Other Information	23
ITEM 1.	Legal Proceedings	23
ITEM 1A.	Risk Factors	23
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
ITEM 3	Defaults Upon Senior Securities	23
ITEM 4	Submission of Matters to a Vote of Security Holders	23
ITEM 5	Other Information	23
ITEM 6	Exhibits	24
	SIGNATURES	25

 

 

 

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item I. Financial Statements.

 

 

CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

BALANCE SHEETS 

(Unaudited)

 

	August 31, 2012		February 29, 2012
ASSETS
Current assets:
Cash	$                  169		$             13,658
Total current assets	169		13,658
Website and software costs, net	61,279		31,279
TOTAL ASSETS	$             61,448		$             44,937
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$             27,344		$                    -
Accrued payroll and related	38,200		100
Related party convertible note payable	14,854		100,000
Total liabilities	80,398		100,100
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued
and outstanding at August 31, 2012 and February 29, 2012	-		-
Common stock, $0.001 par value, 190,000,000 shares authorized; 97,200,000 and 60,000,000 shares    issued and outstanding at August 31, 2012 and February 29, 2012, respectively	97,200		60,000
Additional paid-in capital	125,596		15,000
Deficit accumulated during the development stage	(241,746)		(130,163)
Total stockholders' deficit	(18,950)		(55,163)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$             61,448		$             44,937

 

 

See accompanying notes to unaudited financial statements.

 

3

 

 

CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

STATEMENTS OF OPERATIONS

(Unaudited) 

 

	For the Three Months Ended August 31, 2012		For the Six Months Ended August 31, 2012		For the Period from October 17, 2011 ("Inception") to August 31, 2012
Revenue	$                       -		$                             -		$                       -
General and administrative [a]	52,491		102,211		172,374
Loss from operations	(52,491)		(102,211)		(172,374)
Interest expense - related party	230		518		618
Net loss	$               (52,721)		$                   (102,729)		$             (172,992)
Weighted average shares basic and diluted	97,200,000		80,621,739
Weighted average basic and diluted loss    per common share	$                  (0.00)		$                        (0.00)
[a] Includes stock-based compensation of $0, $20,000, and $20,000 for three months ended August 31, 2012,
six months ended August 31, 2012, and for the period from October 17, 2011 ("Inception") to August 31, 2012, respectively

 

 

See accompanying notes to unaudited financial statements.

 

4

 

CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ DEFICIT

(Unaudited)

 

						Additional		Deficit Accumulated During the Development Stage		Total Stockholders' Deficit
		Common Stock				Paid-in
		Shares		Amount		Capital
Balance at October 17, 2011 (Inception)		-		$                      -		$                      -		$                              -		$                      -
Founders shares issued		60,000,000		60,000		-		(59,900)		100
Contributed services		-		-		15,000		-		15,000
Net loss		-		-		-		(70,263)		(70,263)
Balance at February 29, 2012		60,000,000		60,000		15,000		(130,163)		(55,163)
Net shares retained by stockholders
of Accend Media in May 2012		37,000,000		37,000		(34,800)		(8,854)		(6,654)
Fully vested stock issued to Director
($0.10 per share) in May 2012		200,000		200		19,800		-		20,000
Contributed capital from related party
convertible note payable in August 2012		-		-		125,596		-		125,596
Net loss		-		-		-		(102,729)		(102,729)
Balance at August 31, 2012		97,200,000		$               97,200		$             125,596		$                   (241,746)		$             (18,950)

 

 

See accompanying notes to unaudited financial statements.

 

5

CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(Unaudited)

 

	For the Six Months Ended		For the Period from October 17, 2011 ("Inception") to
	August 31, 2012		August 31, 2012
Cash flows from operating activities:
Net loss	$                    (102,729)		$                    (172,992)
Adjustments to reconcile net loss to net cash    used in operating activities:
Contributed services	-		15,000
Stock compensation	20,000		20,000
Changes in operating assets and liabilities:
Accounts payable	20,690		20,690
Accrued liabilities	38,696		38,796
Net cash used in operating activities	(23,343)		(78,506)
Cash flows from investing activities:
Website and software costs	(30,000)		(61,279)
Net cash used in investing activities	(30,000)		(61,279)
Cash flows from financing activities:
Proceeds from issuance of founders shares	-		100
Proceeds from related party convertible note payable	39,854		139,854
Net cash provided by financing activities	39,854		139,954
Net change in cash	(13,489)		169
Cash, beginning of period	13,658		-
Cash, end of period	$                             169		$                             169
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$                                -		$                                -
Taxes	$                                -		$                                -
Non-cash investing and financing activities:
Contributed capital from related party convertible note payable	$                      125,596		$                                -

 

 

 See accompanying notes to unaudited financial statements

 

6
 

CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 

 Note 1 - Organization and Business

 

Cloud Star Corporation (“Cloud Star” or the “Company”) was incorporated in the State of Nevada on October 17, 2011 (“Inception”) with operations located in California. The Company’s Chief Executive Officer assigned its rights and interests in technology named “The VirtualKey Desktop Solution” (or “MyComputerKey”). The Company’s principal business has been the research and development (“R&D”) of the MyComputerKey. Cloud Star is currently developing the software infrastructure and interface with the internet.

 

The MyComputerKey provides a simple and secure platform for enterprise customers and government agencies of all sizes to access their desktop infrastructure through the internet often referred to as the “cloud”. The product offers a person access to their desktop from any location, at any time, with no configuration requirements and no administration effort. A user inserts the MyComputerKey into a personal computer or “PC” or Mac USB port to gain instant access directly to their desktop that is familiar and pre-configured to their business needs. The user’s own desktop image with a standardized operating system, business and productivity applications, and related security safeguards is available from any corporate or remote site.

 

Merger

 

On May 22, 2012, Cloud Star entered into an Acquisition Agreement and Plan of Merger agreement with Accend Media (“Accend”). Prior to this period, Accend generated limited revenues from internet lead generation and marketing landing pages. Subsequent to the merger, Accend discontinued its business plan.

The Merger was accounted for as a reverse acquisition in accordance with Accounting Standards Codification (“ASC”) 805 Business Combinations. In connection with this agreement, Scott Gerardi and another shareholder of Accend transferred or canceled 118,000,000 of their 120,000,000 shares as follows: 60,000,000 shares transferred to acquire Cloud Star; 2,800,000 shares returned to Accend; 200,000 shares transferred to a new director; 5,000,000 shares to be transferred to a third party for contributed capital for the Company and 50,000,000 shares returned to Accend for cancellation.  Immediately prior to the merger, Accend had 150,000,000 shares outstanding after giving effect for the five for one stock split approved by its board of directors on March 22, 2012. Immediately after the merger, 97,200,000 shares are outstanding with the sole shareholder of Cloud Star owning 60,000,000 shares. 

 

The acquisition of Cloud Star resulted in a change in reporting entity, whereby the financial statements of Cloud Star are reported at historical costs.  As a result, the accompanying statement of shareholders’ deficit reflects the legal capital structure and shares of Accend.  This assumes and reports the shares of Accend issued at the time Cloud Star shares were originally issued beginning on October 17, 2011.  Accordingly, the shares totaling 37,000,000 retained by the shareholders of Accend on May 22, 2012 are reflected as effectively issued in the accompanying statement of shareholders’ deficit and the related assumption of net liabilities $6,654.  The assets and liabilities of Accend were reported at fair value.  

 

7 

 CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 

The historical share data of Accend were retroactively adjusted to reflect the five-for-one forward stock split effected on May 7, 2012 in contemplation of the acquisition. The following is a schedule of Accend assets acquired and liabilities assumed at the date of acquisition:

 

Assets acquired:
Accounts receivable		$                   335
Liabilities assumed:
Accounts payable		6,989
Net liabilities assumed		$              (6,654)

The following unaudited pro forma information was prepared as if the merger had taken place at the beginning of the period for the six months ended August 31, 2012:

 

	Pro Forma Combined
	Six Months Ended August 31, 2012
	(Unaudited)
Net loss	$             (102,729)
Weighted average shares basic and diluted	97,200,000
Weighted average shares basic and diluted
loss per common share	$                  (0.00)

 

Cloud Star did not have operations during the corresponding period in the preceding year.

 

8 

 CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 

Note 2 - Summary of Significant Accounting Policies

 

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities Exchange Commission. Certain information and disclosures normally included in the annual financial statements prepared in accordance with the accounting principles generally accepted in the Unites States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the historical financial statements and related notes thereto of the Company filed with the Securities and Exchange Commission including our Annual Report on Form 10-K for the fiscal year ended February 29, 2012 and the Form 8-K filed on May 22, 2012. The results of operations for the three and six months ended August 31, 2012, are not necessarily indicative of the results that may be expected for the full year.

 

We are a development-stage company under ASC 915 - Development Stage Entities with no commercial revenues achieved to date.

 

Going Concern Considerations and Management’s Plans

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred net losses of $172,992 since Inception. The Company currently has limited liquidity, limited access to capital, and no revenue generating activities. These factors raise substantial doubt about our ability to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

Management anticipates the Company will be dependent, for the foreseeable future, on additional capital to fund further development of our infrastructure and to fund operations until such time we have sufficient revenues to meet our cost structure. The Company has received $139,854 in funding from inception to August 31, 2012 from a company controlled by an officer and director. Additional capital is required in order to launch products in the marketplace. In light of Management’s efforts, there are no assurances that the Company will be successful in obtaining sufficient capital to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

9

 

 CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 

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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Basic Loss per Common Share

Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As of August 31, 2012, the Company had 148,540 shares of potentially dilutive shares that have been excluded from the diluted loss per share computations as they would be antidilutive for the periods presented.

 

Website and Software

Website and software development costs are expensed as incurred, except for internal use website and software development costs that qualify for capitalization as described below, and include compensation and related expenses, costs of computer hardware and software, and costs incurred in developing features and functionality.

 

The Company accounts for the costs of computer software obtained or developed for internal use in accordance with Accounting Standards Codification 350, Intangibles – Goodwill and Other  (formerly Statement of Position No. 98-1).  Accordingly, the Company expenses costs incurred in the preliminary project and post implementation stages of software development and capitalizes costs incurred in the application development stage and costs associated with significant enhancements to existing internal use website and software applications.  Costs incurred related to less significant modifications and enhancements as well as maintenance are expensed as incurred. 

 

As of August 31, 2012, the Company had capitalized internal use website and software costs of $61,279.  As of August 31, 2012, there was no accumulated amortization in connection with these costs as the website and software had not been placed into service. 

 

New Accounting Pronouncements

The Financial Accounting Standards Board issues Accounting Standard Updates (“ASU”) to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.

 

10 

 CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 

Note 3 – Related Party Convertible Notes Payable

The Company received advances from, and had expenses paid on its behalf by, Leeward Ventures, a Company controlled by Walter Grieves, a director of the Company, totaling $139,854 from Inception through August 31, 2012 to fund software and website development, and provide working capital. The note bears interest at 1% per annum and is convertible into shares of existing issued common stock at a rate of $0.10 per share. The notes were originally due on or about August 9, 2012. On such date, $125,000 along with accrued interest of $596 was converted through transfer of Cloud Star’s shares by an existing shareholder at $0.10 per share or 1,250,000 shares and thus no new shares were issued. As a result, $125,596 has been recorded as contributed capital in the accompanying financial statements.

 

Note 4 - Commitments and Contingencies

 

Operating Lease

On February 23, 2012, the Company entered into an operating lease for its corporate office for a period of six months for $800 per month. On August 23, 2012, the lease expired. A new lease has not been entered into as of August 31, 2012.

 

Employment Agreements

 

Safa Movassaghi, the Company’s Chief Executive Officer has provided services valued at $7,500 per month. As of August 31, 2012, the Company has accrued $20,500 in unpaid salary and $4,500 in accrued payroll taxes for Mr. Movassaghi’s employment agreement in the accompanying balance sheet.

 

When Accend Media and Cloud Star merged, Scott Gerardi, then CEO of Accend Media agreed to exchange the majority of his personal shares in exchange for an employment agreement as the Company’s Chief Compliance Officer and is entitled to $4,000 per month. As of August 31, 2012, the Company has accrued $12,000 and $1,200 for Mr. Gerardi’s employment agreement and related payroll taxes, respectively, in the accompanying balance sheet.

 

Note 5 - Stockholders’ Deficit

 

Authorizations and Designations

The Company is authorized to issue 190,000,000 shares of its $0.001 par value common stock and 10,000,000 shares of its $ 0.001 par value preferred stock. To date, no preferred stock is issued.

 

Common Stock

As of May 22, 2012, the existing shareholders of Accend retained 37,000,000 shares of its common stock in connection with the merger of Accend. At such date, net liabilities assumed were $6,654, which are reflected as a reduction of paid-in capital and the deficit accumulated during the development stage in the accompanying statement of stockholders’ deficit.

 

During the period from Inception to August 31, 2012, the Company issued 200,000 shares to a director for services rendered. The shares were fully vested on the date of issuance and stock compensation expense of $20,000 was recorded during the three months ended May 31, 2012. The compensation expense was determined based on the estimated fair value of the common stock which was deemed to be the conversion price of the convertible note payable.

 

11

Contributed Capital

During the period from Inception to August 31, 2012, services were provided by a director of the Company. During this period, the Chief Executive Officer forgave his salary for two months during the commencement of operations, valued at $7,500 per month. These unpaid services are considered contributed service to the Company. The fair value of contributed services totaled $15,000 and has been recognized in the accompanying statement of stockholders’ deficit as contributed services, and the accompanying statement of operations as general and administrative expense.

 

Note 6 – Subsequent Events

 

Subsequent to August 31, 2012, the Company had expenses paid on its behalf by, Leeward Ventures, a Company controlled by Walter Grieves, a director of the Company, totaling $11,500 used operations.

 

12

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

 

Forward-Looking Information

 

The Company from time to time may make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation

Reform Act of 1995.

 

These forward-looking statements include statements of the Company's plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, in addition to others not listed, could cause the Company's actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact on the Company's suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on the Company, the Company's ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. All forward-looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except

as required by law.

 

Critical Accounting Policies

 

We developed software for use in our key product, which was previously tested and proven to be operational. We began integrating the product with our website and internal systems, and to increase effectiveness and functionality. Such costs incurred have been capitalized. Recently, we began development of our software to accommodate different operating system platforms. As we perform development of our software, we are incurring costs which are related to software to sold or marketed, which has different accounting because of technology changes and feasibility. To the extent we incur costs for development that have not yet reached technological feasibility, we will expense these costs until such time it is achieved.

 

Results of Operations

 

Overview of Current Operations

 

Cloud Star Corporation was organized December 20, 2010 under the laws of the State of Nevada, as Accend Media. On or about May 22, 2012, Accend Media, and Cloud Star Corporation, a privately-held Nevada corporation headquartered in California, entered into an Acquisition Agreement and Plan of Merger.

 

Our Business

 

Cloud Star is an information technology services and software company that delivers immediate, easy and secure access to computer desktops and other consumer electron devices from remote locations.

 

Overview

 

Cloud Star's flagship product, MyComputerKey^TM is a proprietary, patent-pending technology that provides a secure multi-factor validation and authentication system for cloud-based infrastructures and protects data accessed from remote locations worldwide. The product is a custom-designed USB keycard programmed to connect via the Internet to users' desktop or server seamlessly, which provides the user immediate access to files, personalized environments, data, programs and applications. Said differently, MyComputerKey^TM allows a user to access his or her base computer from different locations utilizing the internet cloud through a separate computer (the “remote computer”). Working models were manufactured and a successful beta test was completed with the employees from three corporations.

 

Status of Product Development

 

MyComputerKey™ has been in various forms of Beta for the last 3 Quarters. The latest version of the product is currently undergoing field tests and the results have exceeded the Company’s expectations. In addition to MyComputerKey™, Cloud Star Corp has also developed Secure IP to IP connection technology, MyTabletKey™ and MyMobilekey™. The Company intends to expand its Beta tests not only with MyComputerKey™, but also the aforementioned products currently under development. Cloud Star Corp intends to being releasing its products to the retail market in late Q1 or Q2 of 2013.

 

Key Advantages MyComputerKey^TM

 

·         Users always access their same, consistent and familiar desktop where all of their customized and personal applications and files reside

 

·         No need for software installation on the remote computer and customization—just plug-in MyComputerKey^TM

 

·         Enhances compliance, and audit capabilities, of Risk Management and Legal

 

·         User desktop images can be backed up on hosting servers and restored in case of a disaster and existing corporate virus software provides continuous scans, monitoring, and virus protection against malware and virus attacks

 

There is an encryption between the host and remote computer as well as a paring feature between the connecting devices.

 

All information is stored on basis of expiration therefore avoiding an unauthorized access or codes between the connecting computers.

 

MyComputerKey also includes our own connection software that provides the actual connection between the user’s desktop and the host computer the user is using to connect. This software is fully supportive in all Microsoft ™ based computers with quick installation and full security and protection for the computer.

 

Cloud Star’s Goals and Objectives

 

Cloud Star's goal is to become a provider of customizable, secure, multi-factor validation and authentication systems.

 

To do so, it will aggressively pursue the following objectives:

 

·         Initiate a direct marketing campaign

·         Establish strategic alliances with key channel partners

·         Establish a recognized position in the market

·      Protect and expand its intellectual property

·         Introduce new products and product upgrades

 

The discussion that follows conveys these objectives.

 

For business users, a second version of the key has been designed that allows the user's information technology (“IT”) department to set the security parameters appropriate to the database to be protected. The modifications consist of creating a user friendly "dashboard" to make it easier for the customer to set up the system and create customized features and tokens—as well as de-activate keys in the event they are lost or stolen. This business-to-business sector is more competitive. In order to competitively differentiate itself, Cloud Star plans to develop strategic partnerships to build its market share of the less competitive retail market. Management expects that users will find the following characteristics very appealing:

 

·         Cloud Star’s USB keycard is 100% independent and self-contained—no software downloads, configurations, or synchronizations are required on the remote computer.

 

·         Various user-specific authentication, memory, or pre-set protocol access codes can be programmed into this solid-state hardware.

 

·         This technology is user-specific, allows information flow tracking, and can be used to access any pre-determined database, application, file or user-selected desktop that is cloud based.

 

·         This technology works universally on both Apple and PC systems. In addition, once the respective user has finished with the cloud access, there is no trace on the remote computer that the base computer has used. This is particularly important when using public computers while travelling.

 

Cloud Star’s Sales Strategy

 

While virtual USBs have been on the market for several years, to date, management is not aware of any company who has targeted the mass consumer. Rather, providers have focused on IT professionals, most likely due to the perceived complexity of virtualization and security issues. Cloud Star instead has simplified the process and through an integrated marketing approach, advertises this simplicity to general consumers for a variety of applications. The sales strategy is to offer a product that is easy to use and utilizes plug and play technology. Cloud Star wants to implement this very simple sales strategy. Cloud Star plans to market and sell their product through several partners on a distribution level relationship.

 

Through a combination of online marketing, radio and television, consumers are driven to the website where they can complete a 100% automated purchase. Cloud Star plans to provide support though phone sales and telephone call-in technical support. MyComputerKey is a high margin product so Cloud Star is able to outsource its fulfillment and customer support while still driving a high margin on all sales. This will allow Cloud Star to focus on product development and developing marketing strategies with its channel partners.

 

Cloud Star plans to market a version II key with enhanced security to businesses, government and educational entities that (i) have a mobile workforce (ii) currently utilize the cloud to increase the effectiveness and reduce costs associated with providing information technology to its employees, customers and suppliers and (iii) entities that are considering doing so but have been reluctant to do so because of security concerns. The market potential for Cloud Star's products encompasses several market segments, including healthcare facilities, government, media and telecom, manufacturing, educational facilities, consulting, legal and accounting and aerospace and defense. The Company successfully completed its Beta tests with three such companies and is currently implementing this enterprise model.

 

 

Cloud Star’s Market Strategy

 

Cloud Star's strategy is based on three target markets: (i) Direct-to-Consumer; (ii) Retail; and (iii) Business-to-Business (B2B)—including enterprise and the small and medium-size business market (SMB). The product is the same for each market segment.

 

Direct-to-Consumer (DTC)

 

Management believes the internet is the cornerstone to Cloud Star’s marketing effort. Management estimates at least 50% of Cloud Star’s sales will come from the internet and believes $0.50 of every dollar spent on marketing will drive consumers online to compare, research, sample and buy.

 

The internet strategy will focus on driving traffic (consumers) to offer pages by means of a series of internet marketing platforms including banners, sponsored links, social bookmarking, blogs, surveys, etc. Additionally, Cloud Star will focus on affiliate marketing roll out with the goal of the aforementioned internet marketing strategy to ultimately create an affiliate network.

 

Television

 

Management believes that it is not one tool or media platform that is the answer, but the right mix of media and relevant content delivered real-time. After management has all its infrastructure tested and proven, Cloud Star plans to test direct-response television with 30, 60 and 120 second spots, as well as a possible 30-minute long form infomercial nationally.

 

There are many companies that focus on TV as a medium and provide an array of services besides production. Some generally participate via revenue share, thus reducing any upfront costs to the advertiser. The key is to research those firms that have experience with similar products, know what sells and when to sell it. In other words, firms that have a good handle on the marketing mix, specifically the target market, how to reach them, and pricing.

 

Retail

 

Cloud Star plans to offer MyComputerKey through retail stores by selling a secure access and data protection service. This will involve the same product (a key and a disk to program the key and the computer) where the user could program his or her computer and the key and then have secure access to his computer from any other computer in the world. This would also protect the user from unauthorized access by others who might have access to his computer in his absence. This will require Cloud Star to set up a cloud service to authenticate the keys.

 

Traditional Retail – Point of Purchase

 

Cloud Star is already in talks with 3 national retailers and is considering an early launch versus waiting until the product reaches greater market penetration. Cloud Star has already begun to develop retail demand through all of its marketing and advertising efforts which will be leveraged by management to gain lower cost retail entry, excellent placement and shelf space. Cloud Star plans to hire a retail team that will work closely with all retail buyers, retail marketing directors and store managers to educate their employees and customers about the benefits of MyComputerKey.

 

Point-of- Purchase (“POP”) is not just displays, but a wider variety of printed material that communicates the products message at the point of purchase. Besides floor stands, wing racks, and counter unit displays, there are shelf talkers, product hang tags, shelf signage, ceiling signage, inflatable signage, in-store blimps, video end-caps, check out signage, window banners, in-store flyers, table tents and informational pamphlets, all vying for the attention of the time starved consumer who views close to 1,000 items per minute during their 24 minute shopping trip.

 

Cloud Star plans to employ a "PUSH" – "PULL" promotional & advertising strategy when building brand awareness, generating trial/sampling purchases and gaining distribution of MyComputerKey. Cloud Star three stage "go-to-market" approach will first educate the consumer about the product through a direct response advertising and marketing initiatives, then make the product readily available with direct distribution and finally implement programs to motivate consumers to buy MyComputerKey.

 

"PUSH", or "getting the product on the shelf", provides the programs necessary to gain distribution and secure product placement on limited retailer shelves. It consists of customer marketing funds (CMF) designed to support the customer's best promotional and consumption building vehicles as well as employee incentive and training programs while providing materials that clearly communicate MyComputerKey's unique selling points. These materials consist of a variety of "communication messages", including those listed above as well as shelf signs, neck hangers, window banners, floor displays with header cards, table tents and possibly logo apparel.

 

"PULL", or getting the product "off the shelf" and into the hands of consumers, answers the biggest question posed by on-premise and off-premise buyers; "What are you doing to drive consumers into my store to purchase your product?" Pull programs are designed to entice the customer and educate the consumer while motivating them to sell or purchase our product. Various Pull programs include advertising directed towards the consumer (print, radio, TV, internet, direct mail, etc), instant redeemable or mail-in coupons, mail-in money back rebates, retailer loyalty programs, co-branding with complementary products and wet sampling events.

 

The key strategy for MyComputerKey's growth is to understand consumer and channel member needs in order to satisfy them. In addition, focus communications within channels that meet primary target consumers and increase brand image, superior quality and performance attributes and leverage the brand for strategic product initiatives. Again, Cloud Star plans to use the above advertising and promotional strategies to drive awareness, trials and new usage.

 

Business to Business (B2B)

 

The business to business market consists of large businesses, educational or government entities. These entities utilize private, public or hybrid clouds and will have an infrastructure in place, complete with firewalls and other security systems. They also have an IT organization to operate and maintain the company's computer systems, networks and data on behalf of the company. The IT organization generally will be headed by a CIO or IT Director. Although the CIO's recommendations will generally be reviewed and approved by the CEO, the CIO or IT Director will be the primary decision maker with respect to IT matters.

 

Management believes that in the enterprise market, CIOs are looking for solutions, not technology. They typically have a staff of IT experts to evaluate technology. Selling in the enterprise market requires enough industry and company expertise to understand specific problems for which a CIO is seeking solutions. For these reasons, a successful market entry strategy in the enterprise market needs to be focused on selected vertical market segments, primarily in the professional service and medical practice sectors.

 

Small and medium size businesses may use the cloud for limited purposes, such as Gmail or Office 365, but may not yet maintain their data and other programs in the cloud. These companies may want to take advantage of the opportunities offered by the cloud, but may not yet have the infrastructure to do so. They may also have security concerns about using the Cloud, particularly with a mobile workforce. Attractive initial markets will include financial, legal, medical and educational institutions.

 

Pricing

 

Initial pricing for the basic key is $49.99, which includes the USB unit and the first year's subscription to the hosting service. In conjunction with the product launch, the Cloud Star plans to experiment with different offers, such as:

 

·         Simultaneous purchase of 2nd unit and subscription at 50% off

·         Bundled annual subscriptions, for example: One year = $ 49.99

Two year = $ 69.99

Three year = $ 79.99

·         Free 30-day trial with automatic billing on the 31st day unless cancelled

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 2012

 

For the three month period ending August 31, 2012, the Company recognized no revenues. The Company focused its activities during the three month period ended August 31, 2012 on the development of a software and encryption technology for its flagship product, MyComputerKey^TM and building its corporate infrastructure. Management believes that revenues will commence during the first half of the fiscal year ended February 28, 2014, and it will cost an additional $50,000 to release its flagship product.

 

The Company incurred total operating expenses of $52,491 during the three month period ending August 31, 2012. The operating expenses consisted of general and administrative fees of $52,491. The major components of general and administrative expenses during the three month period ended August 31, 2012 included $2,408 in rent and $37,988 in payroll costs.

 

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 2012

 

For the six month period ending August 31, 2012, and for the period from October 17, 2011 (Inception) to August 31, 2012 the Company recognized no revenues. The Company focused its activities during the six month period ended August 31, 2012 on the merger between Accend Media and Cloud Star Corp., the development of a software and encryption technology for its flagship product, MyComputerKey^TM and building its corporate infrastructure. Management believes that revenues will commence during the first half of the fiscal year ended February 28, 2014, and it will cost an additional $50,000 to release its flagship product.

 

The Company incurred total operating expenses of $102,211 and $172,374 during the six month period ending August 31, 2012 and the period from Inception to August 31, 2012, respectively. The operating expenses consisted of general and administrative fees of $102,211. The major components of general and administrative expenses during the six month period ended August 31, 2012 included $20,000 in stock-based compensation, $4,486 in rent and $62,738 in payroll costs.

 

The Company used net cash in operations of $23,343 during the six months ended August 31, 2012. The Company used cash in investing activities for the development of software of $30,000 during the same period, which was provided by cash of $39,854 from financing activities from Leeward Ventures, an entity controlled by a director of the Company.

 

 

 

 

Management’s Plan of Operation

 

Management does not believe that the Company will be able to generate any significant profit during the coming year. Management believes that general and administrative costs, as well as building its infrastructure will most likely curtail any significant profits.

 

Notwithstanding, the Company anticipates it will continue to generate losses and therefore it may be unable to continue operations in the future. Management anticipates it will need to raise $25,000 to implement its business plan. As a result, Cloud Star will have to issue debt or equity or enter into a strategic arrangement with a third party to meet its funding requirements. There can be no assurance that additional capital will be available to Cloud Star, especially with the current economic environment.

 

Management believes it has sufficient cash reserves to keep the Company operational through the third quarter of 2012. Management will need to obtain outside funding to keep the Company operational beyond the second quarter. There are no assurances that management will be able to secure outside funding. Management anticipates that the Company will need to spend a minimum of $15,000 over the next twelve months to pay for audit and legal fees to keep the company fully reporting. Failure to secure additional funding can result in the company being fully reporting, nonoperational or both non-operational and fully reporting. The Company will require additional funds to build its business infrastructure. In order to fulfill its capital requirements and execute on its business plan, the Company will be required to raise additional funds through the issuance of debt or equity securities. There are no assurances additional capital will be available or if available, on acceptable terms.

 

Summary of any product research and development that we will perform for the term of our plan of operation.

 

We do not anticipate performing any additional significant product research and development under our current plan of operation.

 

Expected purchase or sale of plant and significant equipment

 

We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.

 

Significant changes in the number of employees

 

As of August 31, 2012, we had two employees, our Chief Executive Officer and Chief Compliance Officer. We are dependent upon officers and directors for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.

 

Liquidity and Capital Resources

 

The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity, activities and operations. These limitations have adversely affected the Company's ability to obtain certain projects and pursue additional business. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. In order for the Company to remain a Going Concern it will need to find additional capital. Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained on terms favorable to the Company, or at all.

 

As of August 31, 2012, our current assets were $169 and our current liabilities were $80,398. As of August 31, 2012, our total assets were $61,448 compared to total assets of $44,937 as of February 29, 2012. Total assets as of August 31, 2012 consisted of $169 in cash and $61,279 in website and internal use software costs incurred with the development of MyComputerKey. As of August 31, 2012, our total liabilities were $80,398 compared to current and total liabilities of $100,100 as of February 29, 2012. Our liabilities consisted of $27,322 in accounts payable, $38,200 in payroll related liabilities, $22 of accrued interest to a related party, and $14,854 for a related party convertible note payable.

 

We have not generated positive cash flows from operating activities. For the six months ended August 31, 2012, net cash flow used in operating activities was $23,343, our net cash flow used in investing activities was $30,000, and our net cash flows provided by financing activities was $39,854.

 

Going Concern

 

Our ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations.

 

Therefore, management plans to raise equity capital to finance the operating and capital requirements of the Company. While the Company is devoting its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

Item 4T. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, who is also the sole member of our Board of Directors, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the "material weaknesses" described below under "Management's report on internal control over financial reporting," which are in the process of being remediated as described below under "Management Plan to Remediate Material Weaknesses."

 

Management's Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:

 

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements

 

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

 

Our management assessed the effectiveness of our internal control over financial reporting as of May 31, 2012. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of May 31, 2012.

 

A "material weakness" is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of quarter related to the preparation of management's report on internal controls over financial reporting required for this quarterly report on Form 10-Q, management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following:

 

1)   lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;

 

2)          insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;

 

We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the quarter ended May 31, 2012. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Management Plan to Remediate Material Weaknesses

 

Management believes that the material weaknesses set forth in item (2) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

 

We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

 

We believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This quarterly report does not include an attestation report of the Corporation's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Corporation's registered public accounting firm pursuant to temporary rules of the SEC that permit the Corporation to provide only the management's report in this quarterly report.

 

 

PART II. OTHER INFORMATION

 

Item 1 - Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

 

Item 1A - Risk Factors

 

See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 2012 and the discussion in Item 1, above, under "Liquidity and Capital Resources."

 

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

 

None.

 

Item 3 - Defaults Upon Senior Securities

 

None.

 

Item 4 - Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5 - Other Information

 

Cloud Star Corporation common stock is currently listed on the OTC-BB. Following the merger with Accend Media, on May 24, 2012, the Company changed its trading symbol from ACNM to CLDS.

 

 

 

 

 

 

 

 

 

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Item 6 - Exhibits

 

 

Exhibit Number		Ref		Description of Document
31.1				Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1				Certification of 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 2002.
101		*		The following materials from this Quarterly Report on Form 10-Q for the quarter ended August 31, 2012, formatted in XBRL (eXtensible Business Reporting Language):
				(1) Balance Sheets at August 31, 2012 (unaudited), and February 29, 2012 (audited)
				(2) Unaudited Statements of Operations for the three and six-month periods ended August 31, 2012, and the period from October 17, 2011 (Inception) to August 31, 2012
				(3) Unaudited Statements of Stockholders’Deficit from October 17, 2011 (Inception) to August 31, 2012
				(4) Unaudited Statements of Cash Flows for the six-month periods ended August 31, 2012, and the period from October 17, 2011 (Inception) to August 31, 2012
				(5)    Notes to the financial statements.

 

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 15, 2012

	Cloud Star Corporation
	By: /s/ Safa Movassaghi
	Safa Movassaghi Director and CEO (principal executive, financial and accounting officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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