Note 1. Basis of Presentation
Peregrine Industries, Inc. (the "Company") was formed on October 1, 1995 for
the purpose of manufacturing residential pool heaters. The Company was formerly located in
Deerfield Beach, Florida. Products were primarily sold throughout the United States,
Canada, and Brazil. In June 2002, the Registrant and its subsidiaries filed a petition for
bankruptcy in the U.S. Bankruptcy Court for the Southern District of Florida. At present,
the Company has no business operations and is deemed to be a shell company.
In the opinion of management, the accompanying unaudited condensed financial statements
include all adjustments, consisting of only normal recurring accruals, necessary for a
fair statement of financial position, results of operations, and cash flows. The
information included in this Quarterly Report on Form 10-Q should be read in conjunction
with the financial statements and the accompanying notes included in our Annual Report on
Form 10-K for the year ended June 30, 2012. The accounting policies are described in the
Notes to the Financial Statements in the 2012 Annual Report on Form 10-K and
updated, as necessary, in this Form 10-Q. The year-end balance sheet data presented for
comparative purposes was derived from audited financial statements, but does not include
all disclosures required by accounting principles generally accepted in the United States.
The results of operations for the three months ended September 30, 2012 are not
necessarily indicative of the operating results for the full year or for any other
subsequent interim period.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statement and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ
from the estimates.
Cash and Cash Equivalents: For financial statement presentation purposes, the
Company considers those short-term, highly liquid investments with original maturities of
three months or less to be cash or cash equivalents.
Stock Based Compensation: Stock-based awards to non-employees are accounted for
using the fair value method in accordance with Accounting Standard Codification
(ASC) 505-50, Accounting for Stock-Based Compensation , . All
transactions in which goods or services are the consideration received for the issuance of
equity instruments are accounted for based on the fair value of the consideration received
or the fair value of the equity instrument issued, whichever is more reliably measurable.
The measurement date used to determine the fair value of the equity instrument issued is
the earlier of the date on which the third-party performance is complete or the date on
which it is probable that performance will occur.
Fair Value of Financial Instruments: ASC # 825, "Disclosures about Fair Value
of Financial Instruments," requires disclosure of fair value information about
financial instruments. Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of September 30, 2012.
These financial instruments include accounts payable and accrued expenses. Fair values
were assumed to approximate carrying values for these financial instruments since they are
short-term in nature and their carrying amounts approximate fair values.
Earnings per Common Share: Basic net loss per share is computed using the weighted
average number of common shares outstanding during the period. Diluted net loss per common
share is computed using the weighted average number of common and dilutive equivalent
shares outstanding during the period. Dilutive common equivalent shares consist of options
to purchase common stock (only if those options are exercisable and at prices below the
average share price for the period) and shares issuable upon the conversion of issued and
outstanding preferred stock. Due to the net losses reported, dilutive common equivalent
shares were excluded from the computation of diluted loss per share, as inclusion would be
anti-dilutive for the periods presented.
Income Taxes: The Company accounts for income taxes in accordance with ASC # 740,
"Accounting for Income Taxes," which requires recognition of estimated income
taxes payable or refundable on income tax returns for the current year and for the
estimated future tax effect attributable to temporary differences and carry-forwards.
Measurement of deferred income tax is based on enacted tax laws including tax rates, with
the measurement of deferred income tax assets being reduced by available tax benefits not
expected to be realized.
FASB ASC # 740 prescribes a two-step process to determine the amount of
tax benefit to be recognized. First, the tax position must be evaluated to determine the
likelihood that it will be sustained upon external examination. If the tax position is
deemed more-likely-than-not to be sustained, the tax position is then assessed
to determine the amount of benefit to recognize in the financial statements. The amount of
the benefit that may be recognized is the largest amount that has a greater than 50%
likelihood of being realized upon ultimate settlement. There are no uncertain tax
positions taken by the Company on its tax returns. Tax years subsequent to 2006 remain
open to examination by U.S. federal and state tax jurisdictions.
Management of the Company is not aware of any additional liability for unrecognized tax
benefits at September 30, 2012 and June 30, 2012.
Impact of recently issued accounting standards
There were no new accounting pronouncements that had a significant impact on the
Companys operating results or financial position.
Note 2. Going Concern
The Company's financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and settlement of liabilities and commitments in
the normal course of business for the foreseeable future. Since adopting
"fresh-start" accounting as of September 5, 2002, the Company has accumulated
losses and has insufficient working capital to meet operating needs for the next twelve
months as of September 30, 2012, all of which raise substantial doubt about the Company's
ability to continue as a going concern.
Note 3. Convertible Note to Related Party
In April 2010, we issued one convertible promissory note in the amount of $97,500 to
our President and one convertible promissory note in the amount of $97,500 to a director.
The notes bear interests at 12% per annum until paid or converted. Interest is
payable upon the maturity date at December 31, 2013. The initial conversion rate is
$0.10 per share. The note formalized a like amount due through the accretion of cash
advances and the fair value of services provided without cost covering several years.
In accordance with Accounting Standard Codification ( ASC # 815), Accounting
for Derivative Instruments and Hedging Activities, we evaluated the holders
non-detachable conversion right provision and liquidated damages clause, contained in the
terms governing the notes stated above to determine whether the features qualify as an
embedded derivative instruments at issuance. Such non-detachable conversion right
provision and liquidated damages clause did not need to be accounted as derivative
financial instruments. However, since the conversion price was below the current stock
price a further evaluation needed to be performed for the existence of a beneficial
At April 2010, when the convertible notes were issued the price of our stock was $3.99,
such price would have created a beneficial conversion feature but as the Company is and
has been so thinly traded during the last 3 years, the fair value of the stock price was
deemed not to be of fair value of the conversion feature. Management decided that
because the Company's ability to continue as a going concern was in question and that it
has no revenue sources that a conversion price of $0.10 was a better measure of fair
market value. Based on that decision, no beneficial conversion feature was reflected in
the financial statements.
Note 4. Related Party Transactions
Fair value of services:
The executive officer provides services to the Company, which services are accrued and
are valued at $2,000 per month. The total of these accrued expenses was $6,000 for the
three months ended September 30, 2012 and 2011 and is reflected in the statement of
operations as general and administrative expenses.
The Companys non-executive director who was appointed to the board of directors
on December 7, 2009, is entitled to receive compensation of $1,000 per quarter, which
amount is reflected under general and administrative expenses during the three-months
period ended September 30, 2012 and 2011.
An entity affiliated by common management to the Company provided securities compliance
services related to SEC filing services valued at $6,000 during the three-month periods
ended September 30, 2012 and 2011. This amount was also reflected in the statement of
operations as general and administrative expenses.
The Company leases office space at a rate of $1,000 per month from an entity controlled
by our board members.
Due Related Parties:
Amounts due to related parties consist of:
- Expenses incurred in meeting ongoing disclosure and reporting requirements are
accrued and payable to the principal shareholders and officers
- The fair value of services of management provided to the Company
- and the fair value of services provided by an entity affiliated by common management
Amounts due to related parties totaled $359,000 at September 30, 2012 and $340,500 at
June 30, 2012, including the convertible notes.