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EXCEL - IDEA: XBRL DOCUMENT - INTERNATIONAL LEADERS CAPITAL Corp | Financial_Report.xls |
EX-31 - EXHIBIT 31 - INTERNATIONAL LEADERS CAPITAL Corp | joriexhibit31.htm |
EX-32 - EXHIBIT 32 - INTERNATIONAL LEADERS CAPITAL Corp | joriexhibit32.htm |
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 September 30, 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 000-53780
JOURNAL OF RADIOLOGY, INC.
(Exact name of registrant as specified in its charter)
Nevada | 27-0491634 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
|
| ||
2230 Michigan Avenue Santa Monica, California | 90404 | ||
(Address of Principal executive offices) | (Zip Code) | ||
|
| ||
Registrants telephone number, including area code. | (310) 460-7303 |
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 þ No o
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) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
1
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. o
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company þ |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of November 14, 2012, the registrant had 1,781,550,000 outstanding shares of Common Stock.
2
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
INDEX
|
| Page Number |
PART I. | FINANCIAL INFORMATION |
|
|
|
|
Item 1 | Financial Statements: |
|
| Balance Sheets as of September 30, 2012 and June 30, 2012 (Unaudited) | 6 |
| Statements of Operations for the Three Months Ended September 30, 2012 and 2011 and from inception (May 21, 2009) to September 30, 2012 (Unaudited) | 7 |
| Statement of Stockholders Equity (Deficit) from inception (May 21, 2009) to September 30, 2012 (Unaudited) | 8 |
| Statements of Cash Flows for the Three Months Ended September 30, 2012 and 2011 and from inception (May 21, 2009) to September 30, 2012 (Unaudited) | 9 |
| Notes to Financial Statements (Unaudited) | 10 |
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 15 |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 17 |
Item 4T | Controls and Procedures | 17 |
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PART II | OTHER INFORMATION |
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|
|
Item 1 | Legal Proceedings | 18 |
Item 1A | Risk Factors | 18 |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
Item 3 | Defaults upon Senior Securities | 22 |
Item 4 | Mine Safety Disclosures | 23 |
Item 5 | Other Information | 23 |
Item 6 | Exhibits | 23 |
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|
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SIGNATURES | 24 | |
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|
EXHIBITS |
| |
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|
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|
3
Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the 1933 Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical fact are forward-looking statements for purposes of this Quarterly Report on Form 10-Q, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as may, will, expects, plans, anticipates, estimates, potential or continue, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in Part II, Item 1A Risk Factors below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the Company, Journal of Radiology, we, us and our refer to Journal of Radiology, Inc., a Nevada corporation.
4
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared by Journal of Radiology, Inc. (the Company). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. It is suggested that these financial statements and notes to the financial statements be read in conjunction with the financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2012.
5
JOURNAL OF RADIOLOGY, INC. | |||
(A Development Stage Company) | |||
BALANCE SHEETS | |||
(Unaudited) | |||
|
|
|
|
| September 30, |
| June 30, |
| 2012 |
| 2012 |
Assets: |
|
|
|
Cash | $ 1,576 |
| $ 3,154 |
Accounts receivable | 16,257 |
| 58,000 |
Total Current Assets | $ 17,833 |
| $ 61,154 |
|
|
|
|
Liabilities and Stockholders Deficit: |
|
|
|
Liabilities: |
|
|
|
Accounts payable | $ 98,998 |
| $ 89,000 |
Advances | - |
| 16,970 |
Due to director | 49,000 |
| 49,000 |
Total Current Liabilities | 147,998 |
| 154,970 |
|
|
|
|
Stockholders' Deficit: |
|
|
|
Preferred stock; par value $0.01; 49,000,000 shares authorized, nil issued and outstanding | - |
| - |
Series A Convertible Preferred Stock; par value $0.01; 1,000,000 shares authorized, nil issued and outstanding | - |
| - |
Common stock; par value $0.001; 5,000,000,000 shares authorized, 1,781,550,000 and 1,781,550,000 issued and outstanding, respectively. | 1,781,550 |
| 1,781,550 |
Additional paid-in capital | 107,325,535 |
| 107,325,535 |
Deficit accumulated during development stage | (109,237,250) |
| (109,200,901) |
Total stockholders' deficit | (130,165) |
| (93,816) |
Total liabilities and stockholders deficit | $ 17,833 |
| $ 61,154 |
|
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|
|
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|
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|
The accompanying notes are an integral part of these financial statements. |
6
JOURNAL OF RADIOLOGY, INC. | |||||
(A Development Stage Company) | |||||
STATEMENTS OF OPERATIONS | |||||
(Unaudited) | |||||
|
|
|
|
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| For the Three Months |
| For the Three Months |
| From Inception |
| Ended |
| Ended |
| (May 21, 2009) to |
| September 30, |
| September 30, |
| September 30, |
| 2012 |
| 2011 |
| 2012 |
Revenue | $ - |
| $ - |
| $ 105,000 |
Total revenue | - |
| - |
| 105,000 |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
Professional fees | 24,360 |
| 22,605 |
| 228,701 |
Administrative expenses | 11,989 |
| 283 |
| 13,549 |
Impairment of licensing rights | - |
| - |
| 64,500,000 |
Stock based compensation | - |
| - |
| 44,600,000 |
Total operating expenses | 36,349 |
| 22,888 |
| 109,342,250 |
|
|
|
|
|
|
Net loss | $ (36,349) |
| $ (22,888) |
| $ (109,237,250) |
|
|
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|
|
|
Net loss per share, basic | $ (0.00) |
| $ (0.00) |
|
|
|
|
|
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|
|
Weighted average number of common shares outstanding basic | 1,781,550,000 |
| 212,550,000 |
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The accompanying notes are an integral part of these financial statements. |
7
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (MAY 21, 2009) TO SEPTEMBER 30, 2012
(Unaudited)
| Common Shares | Common Stock | Additional Paid-in Capital | Deficit Accumulated During Development Stage |
| Total Stockholders Equity (Deficit) |
|
Common stock issued per court order May 21, 2009 | 32,550,000 | $ 2,550 | $ (31,465) | $ - |
| $ 1,085 |
|
Net loss | - | - | - | (1,085) |
| (1,085) |
|
Balance June 30, 2009 | 32,550,000 | 32,550 | (31,465) | (1,085) |
| - |
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Common stock issued for cash | 180,000,000 | 180,000 | (174,000) | - |
| 6,000 |
|
Net loss | - | - |
| (3,801) |
| (3,801) |
|
Balance June 30, 2010 | 212,550,000 | 212,550 | (205,465) | (4,886) |
| 2,199 |
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Net loss | - | - | - | (26,439) |
| (26,439) |
|
Balance June 30, 2011 | 212,550,000 | 212,550 | (205,465) | (31,325) |
| (24,240) |
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Common stock issued for consulting services | 669,000,000 | 669,000 | 43,931,000 |
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Common stock issued for licensing rights | 900,000,000 | 900,000 | 63,600,000 |
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Net loss | - | - |
| (109,169,576) |
| (109,169,576) |
|
Balance June 30, 2012 | 1,781,550,000 | 1,781,550 | 107,325,535 | (109,200,901) |
| (93,816) |
|
|
|
|
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|
|
Net loss | - | - | - | (36,349) |
| (36,349) |
|
Balance September 30, 2012 | 1,781,550,000 | $ 1,781,550 | $ 107,325,535 | $ (109,237,250) |
| $ (130,165) |
|
The accompanying notes are an integral part of these financial statements.
8
JOURNAL OF RADIOLOGY, INC. | |||||
(A Development Stage Company) | |||||
STATEMENTS OF CASH FLOWS | |||||
(Unaudited) | |||||
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| For the Three months |
| For the Three months |
| From Inception |
| Ended |
| Ended |
| (May 21, 2009) to |
| September 30, |
| September 30, |
| September 30, |
| 2012 |
| 2011 |
| 2012 |
Cash Flows from Operating Activities |
|
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|
|
Net loss | $ (36,349) |
| $ (22,888) |
| $ (109,237,250) |
Adjustments to reconcile net loss to net cash used for operating activities: |
|
|
|
|
|
Issuance of common stock per court order | - |
| - |
| 1,085 |
Shares issued for services | - |
| - |
| 44,600,000 |
Impairment of licensing rights | - |
| - |
| 64,500,000 |
Changes in operating assets and liabilities |
|
|
|
|
|
(Increase) decrease in accounts receivable | - |
| 25,000 |
| (58,000) |
(Decrease) increase in accounts payable | 9,998 |
| (10,000) |
| 98,998 |
Net cash used in operating activities | (26,351) |
| (7,888) |
| (95,167) |
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Cash Flows from Financing Activities |
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Increase in advance from director | - |
| 10,000 |
| 49,000 |
Issuance of common stock | - |
| - |
| 6,000 |
Advances | 24,773 |
| - |
| 42,243 |
Repayment of advances | - |
| - |
| (500) |
Net cash provided by financing activities | 24,773 |
| 10,000 |
| 96,743 |
|
|
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|
|
|
Increase (decrease) in cash | (1,578) |
| 2,112 |
| 1,576 |
Cash, beginning of period | 3,154 |
| 5,760 |
| - |
Cash, end of period | $ 1,576 |
| $ 7,872 |
| $ 1,576 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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| |
Cash paid during the period for: |
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Interest | $ - |
| $ - |
| $ - |
Income taxes | $ - |
| $ - |
| $ - |
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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|
|
|
|
Advances applied against account receivable | $ 41,743 |
| $ - |
| $ 41,743 |
The accompanying notes are an integral part of these financial statements. |
9
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2012
(Unaudited)
NOTE 1. NATURE AND BACKGROUND OF BUSINESS
Journal of Radiology, Inc. ("the Company" or "the Issuer") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
The unaudited financial statements included herein have been prepared by the Company. In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. It is suggested that these financial statements and notes to the financial statements be read in conjunction with the financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2012.
The Company has been in the development stage since its formation and has only one client from its planned operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF ACCOUNTING
The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a June 30 year-end.
b. BASIC EARNINGS PER SHARE
ASC No. 260, Earnings Per Share, specifies the computation, presentation, and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. The Company has adopted the provisions of ASC No. 260.
Basic net loss per share amount is computed by dividing the net loss by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Common stock equivalents, which include warrants to purchase common stock, on September 30, 2012 and 2011 were not included in the computation of diluted earnings per share because the effect would be antidilutive.
c. ESTIMATES
The preparation of financial statements in conformity with 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.
10
d. CASH AND CASH EQUIVALENT
Investments with maturity of three months or less are considered to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At September 30, 2012 and June 30, 2012, the balance did not exceed the federally insured limit.
e. REVENUE RECOGNITION
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts, and other allowances based on its historical experience.
f. STOCK-BASED COMPENSATION
The Company follows FASB ASC Subtopic 718, Stock Compensation, which requires that new, modified and unvested share-based payment transactions with employees, such as grants of stock options and restricted stock, be recognized in the financial statements based on their fair value at the grant date and recognized as compensation expense over their vesting periods. The Company estimates the fair value of stock options as of the date of grant using the Black-Scholes option pricing model and restricted stock based on the quoted market price. For non-employee stock-based compensation, the Company follows ASC Topic 505 Equity-Based Payments to Non-Employees, which requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or options or the fair value of the services on the grant date, whichever is more readily determinable in accordance with ASC Topic 718.
g. INCOME TAXES
Income taxes are provided in accordance with Codifications topic 740, Income Taxes, which requires an asset and liability approach for the financial accounting and reporting of income taxes. Current income tax expense (benefit) is the amount of income taxes expected to be payable (receivable) for the current year. A deferred tax asset and/or liability is computed for both the expected future impact of differences between the financial statement and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. Deferred income tax expense is generally the net change during the year in the deferred income tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be more likely than not realized in future tax returns. Tax rate changes and changes in tax law are reflected in income in the period such changes are enacted.
h. IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
The Company evaluates its long-lived assets for indicators of possible impairment. The intangible asset subject to amortization held and used by the Company is reviewed for impairment whenever events or changes in circumstances indicate that its net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their 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 and is recorded in the period in which the determination was made. The most important factor in the calculation of the fair value of the intangible asset is the projected sales derived from interactive media technology which are estimated by extrapolating the current growth trends of the product and applying judgment as to the appropriate future growth rate among other factors. We conducted a test for impairment which was triggered because the Company was currently unable to forecast sales of the fiscal year ended June 30, 2012. An impairment charge of $64,500,000 was recorded and included in the statement of operations from Inception (May 21, 2009) to September 30, 2012, respectively.
11
i. IMPACT OF NEW ACCOUNTING STANDARDS
There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the first quarter of fiscal 2013, or which are expected to impact future periods that were not already adopted and disclosed in prior periods.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates course of business. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Management plans to seek a strategic partner to assist in the development of the journal business, or a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders. Management has yet to identify any of these and there is no guarantee that the Company will be able to identify such opportunities in the future.
NOTE 4. FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1
inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2
inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The carrying value of the Companys financial assets and liabilities which consist of cash, accounts receivable, accounts payable and due to director in managements opinion approximate their fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
12
NOTE 5. INTERACTIVE MEDIA TECHNOLOGY SUBJECT TO AMORTIZATON, NET
Intangible assets represent interactive media technology acquired on May 28, 2012. Acquisition costs were $0 and $64,500,000 at September 30, 2012 and June 30, 2012, respectively. These costs are presented on the balance sheet net of impairment charge of $64,500,000 at September 30, 2012 and June 30, 2012, respectively. The Company issued 900,000,000 shares of common stock for interactive media technology valued at $64,500,000 ($0.072 per share).
NOTE 6. STOCKHOLDERS' EQUITY - COMMON STOCK
On April 24, 2012, the Company filed a Certificate of Designation creating a series of 1,000,000 shares of preferred stock, par value $0.01 per share, designated as Series A Convertible Preferred Stock.
On May 10, 2012, the Company filed a Certificate of Amendment to its Articles of Incorporation, increasing the number of authorized shares of common stock from 75,000,000 to 500,000,000 and adding 5,000,000 shares of blank check preferred stock, with a par value of $0.01 per share.
On July 20, 2012, the Companys Board of Directors adopted a resolution and the majority of the Companys stockholders approved an amendment to the Articles of Incorporation to (i) increase the number of authorized shares of common stock from 500,000,000 to 5,000,000,000 and increase the number of blank check preferred stock from 5,000,000 to 50,000,000 (ii) affect a thirty (30) to one (1) forward stock split of the outstanding shares of common stock, All share and per share information presented in these financial statements has been restated to retroactively reflect this stock split.
The authorized Series A Convertible Preferred Stock of the Company consists of 1,000,000 shares with $0.01 par value. As of September 30, 2012, there was no issued and outstanding Series A Convertible Preferred Stock.
The authorized common stock of the Company consists of 5,000,000,000 shares with $0.001 par value. As of September 30, 2012 and June 30, 2012 there were 1,781,550,000 common shares issued and outstanding.
NOTE 7. ADVANCES
Advances are non-interest bearing, unsecured and have no specific terms of repayment. Total advances due of $41,743, comprises of additional cash advances of $24,773 received during the three months ended September 30, 2012 and $16,970 of advances, due as of June 30, 2012, were applied against outstanding accounts receivable at September 30, 2012.
NOTE 8. RELATED PARTY TRANSACTIONS
Total amounts advanced by a director as of September 30, 2012 and June 30, 2012 is $49,000 and $49,000, respectively. Amounts due to director are unsecured, non-interest bearing and have no specific terms of repayment.
The Company neither owns nor leases any real or personal property. An officer of the corporation provides office services without charge. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
13
NOTE 9. WARRANTS AND OPTIONS
On May 21, 2009 (inception), the Company issued 5,000,000 warrants exercisable into 5,000,000 shares of the Company's common stock. These warrants were issued per order of the U.S. Bankruptcy Court in the matter of AP Corporate Services, Inc. ("AP") to the administrative creditors of AP. These creditors received an aggregate of 5,000,000 warrants consisting of 1,000,000 "A Warrants" each convertible into one share of common stock at an exercise price of $0.033; 1,000,000 "B Warrants" each convertible into one share of common stock at an exercise price of $0.067; 1,000,000 "C Warrants" each convertible into one share of common stock at an exercise price of $0.10; 1,000,000 "D Warrants" each convertible into one share of common stock at an exercise price of $0.133; and 1,000,000 "E Warrants" each convertible into one share of common stock at an exercise price of $0.167. All warrants are exercisable at any time prior to January 4, 2014. As of the date of this report, no warrants have been exercised.
The fair value of these warrants was estimated at the date of the Company's inception, May 21, 2009, which was also the date of the grant, using the Black-Scholes Option Pricing Model with current value of the stock at $0.001 (par value) since there is no market for the stock at the time; dividend yield of 0%; risk-free interest rate of 2.16% (5 year Treasury Note rate at the issue date); and expiration date of 5 years. Since the stock does not trade, and since its par value is $0.001, the fair value of the warrants came out to be zero.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 AND FROM INCEPTION (MAY 21, 2009) TO SEPTEMBER 30, 2012
Company Overview
Journal of Radiology, Inc. ("the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 2011 AND FROM INCEPTION (MAY 21, 2009) TO SEPTEMBER 30, 2012
REVENUES
For the three months ended September 30, 2012, we had revenues of $0 compared to $0 for the three months ended September 30, 2011. We recorded revenues of $105,000 for the cumulative period from Inception (May 21, 2009) through September 30, 2012.
We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer. The Company has been in the development stage since its formation and has not yet realized a profit from its planned operations.
COSTS OF GOODS SOLD
We did not incur cost of sales for the three month periods ended September 30, 2012 and 2011 and for the cumulative period from Inception (May 21, 2009) through September 30, 2012.
OPERATING COSTS
Administrative expenses were $11,989 for the three months ended September 30, 2012, compared to $283 for the three months ended September 30, 2011 and professional fees were $24,360 for the three months ended September 30, 2012, compared to $22,605 for the three months ended September 30, 2011, an increase of $1,755. The increase in professional fees primarily relates to an increase in legal fees. The comparative period had limited activity. Total operating expenses for the cumulative period from Inception (May 21, 2009) through September 30, 2012 was $109,342,250.
NET LOSS
Our net loss for the three months ended September 30, 2012 and the three months ended September 30, 2011 were $36,349 and $22,888, respectively. Our net losses are primarily attributed to costs for professional fees. Our net loss for the cumulative period from Inception (May 21, 2009) through September 30, 2012 was $109,237,250.
LIQUIDITY
Our financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. As of September 30, 2012, we had cash of $1,576 and total liabilities of $147,998. Our cash flows from operating activities for the three months ended September 30, 2012 resulted in cash used of $26,351. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. Our cash flow provided by financing activities for the three months ended September 30, 2012 and 2011 were $24,773 and $10,000, respectively. The Company has an accumulated deficit during development stage at September 30, 2012 of $109,237,250. The deficit reported at September 30, 2012 is largely a result of operating expenses for professional fees, impairment of licensing rights and stock-based compensation.
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Over the next 12 months we expect to expend approximately $30,000 in cash for legal, accounting and related services. Cash used for other expenditures is expected to be minimal. We hope to be able to attract suitable investors for our business plan, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.
We expect to be able to secure capital through advances from our Chief Executive Officer in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for acquiring suitable partners or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We funded our initial operations by issuing 180,000,000 shares of our common stock valued at $ 0.000033 per share to our Chief Executive Officer. We had hoped to be able to attract suitable publishing partners seeking the benefits of stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. Our Chief Executive Officer has committed to advancing us an additional $30,000 for certain operating costs in order to start implementing our business plan, the funds are loaned to the company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer. The loans from our Chief Executive Officer are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.
PLAN OF OPERATION AND FUNDING
We do not currently engage in enough business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with amounts to be loaned to or invested in us by our stockholders, management or other investors.
During the next twelve months we anticipate incurring costs related to:
(i) filing of Exchange Act reports, and
(ii) costs relating to developing our new business plan
We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors.
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Employees
Journal of Radiology, Inc. currently has no employees.
Office and Facilities
Our corporate headquarters are located at 2230 Michigan Avenue, Santa Monica, California 90404.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) that are designed to be effective in providing reasonable assurance that information required to be disclosed in the Companys reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (SEC), and that such information is accumulated and communicated to the Companys management to allow timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the Companys disclosure controls and procedures. Based on their evaluation, the principal executive officer and principal financial officer concluded that the Companys disclosure controls and procedures were adequately effective as of September 30, 2012 to cause the information required to be disclosed in reports that the Company files or submits under the Exchange Act to be recorded, processed, summarized and reported within the time periods prescribed by the SEC, and that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to ensure timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in the Companys internal control over financial reporting identified in connection with the requisite evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE.
ITEM 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our common stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occurs, our business, financial condition or results of operations could be seriously harmed.
RISK FACTORS CONCERNING OUR BUSINESS
Our business is subject to numerous risk factors, including the following:
We have had little operating history and no revenues or earnings from operations.
We have no assets. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in us incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business entity. There is no assurance that we can identify such a business entity and consummate such an agreement or combination.
Our auditor's going concern opinion and the notation in the financial statements indicate that we do not have significant cash or other material assets and we are relying on advances from stockholders, officers and directors to meet our limited operating expenses. We may become insolvent if we are unable to pay our debts in the ordinary course of business as they become due.
Our proposed plan of operation is speculative.
The success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the business opportunity which we identify, if any is identified. While management intends to seek business agreement(s) or combination(s) with entities having established operating histories, there can be no assurance that we will be successful in locating candidates meeting such criteria.
We face intense competition for business combination opportunities.
We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including venture capital firms, are active in mergers and acquisitions of companies that may be our desirable target candidates. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we have and, consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will also compete in seeking merger or acquisition candidates with numerous other small public companies.
We have no agreements for a business combination or licensing transaction and have established no standards for such transactions.
We have no arrangement, agreement or understanding with respect to entering into an agreement or engaging in a merger with, joint venture with or acquisition of, a private or public entity. There can be no assurance that we will be successful in identifying and evaluating suitable business opportunities or in concluding a business transaction. Management has not identified any particular business for our evaluation. There is no assurance that we will be able to negotiate a business combination on terms favorable to us. We have not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which we will require a target business opportunity to have achieved, and without which we would not consider a business transaction in any form with such business opportunity. Accordingly, we may enter into a business agreement or a business combination with a business having no significant operating history, losses, limited potential or no potential for earnings, limited assets, negative net worth or other negative characteristics.
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Our success is dependent on management that has other full time employment, has limited experience and will only devote limited time (part time) to working for the Company, all of which makes our future even more uncertain.
Aaron Shrira is the President and Chief Executive Officer of the Company and Elana Berman-Shrira is the Secretary and Treasurer and CFO of the Company. Both Mr. Shrira and Ms. Berman-Shrira will serve without pay while maintaining other employment. Although both Mr. Shrira and Ms. Berman-Shrira have considerable business and marketing experience, neither has any experience in the publishing industry or in mergers and acquisitions. Notwithstanding the limited experience and availability of management, loss of the services of either officer would adversely affect development of our business and its likelihood of continuing in operation.
The reporting requirements under federal securities law may delay or prevent us from making certain acquisitions.
Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, (the "1934 Act"), require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the 1934 Act are applicable.
In addition to the audited financial statements, the time and additional costs that may be incurred by some target entities to prepare and disclose such information may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company.
An acquisition could create a situation wherein we would be required to register under The Investment Company Act of 1940 and thus be required to incur substantial additional costs and expenses.
Although we will be subject to regulation under the 1934 Act, management believes the Company will not be subject to regulation under the Investment Company Act of 1940, insofar as we will not be engaged in the business of investing or trading in securities. In the event we engage in a business combination that results in us holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940. In such event, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the Securities and Exchange Commission as to the status of our Company under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject us to material adverse consequences.
A merger, acquisition, or licensing agreement would most likely be exclusive, resulting in a lack of diversification.
Management anticipates that it may be able to participate in only one potential business venture because a business partner might require exclusivity. This lack of diversification should be considered a substantial risk to our shareholders because it will not permit us to offset potential losses from one venture against gains from another.
If we do any business combination, each shareholder will most likely hold a substantially lesser percentage ownership in the Company.
If we enter a business combination with a private concern, that, in all likelihood, would result in the Company issuing securities to shareholders of any such private company. The issuance of our previously authorized and unissued Common Stock would result in reduction in percentage of shares owned by our present and prospective shareholders.
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The requirement of audited financial statements may disqualify some business opportunities seeking a business combination with us.
Our management believes that any potential business combination opportunity must provide audited financial statements for review, for the protection of all parties to the business combination. One or more attractive business opportunities may choose to forego the possibility of a business combination with us, rather than incur the expenses associated with preparing audited financial statements.
Our officers and directors are the principal shareholders and will be able to approve all corporate actions without shareholder consent and will control our Company.
Our principal shareholder, Aaron Shrira, currently owns approximately 85% of our Common Stock. He will have significant influence over all matters requiring approval by our shareholders, but not requiring the approval of the minority shareholders. In addition, he is now an officer and director. Because he is the majority shareholder, he will be able to elect all of the members of our board of directors, allowing him to exercise significant control of our affairs and management. In addition, he may transact most corporate matters requiring shareholder approval by written consent, without a duly-noticed and duly-held meeting of shareholders.
If our Common Stock does not meet blue sky resale requirements, certain shareholders may be unable to resell our Common Stock.
The resale of Common Stock must meet the blue sky resale requirements in the states in which the proposed purchasers reside. If we are unable to qualify the Common Stock and there is no exemption from qualification in certain states, the holders of the Common Stock or the purchasers of the Common Stock may be unable to sell them.
Our shareholders may face significant restrictions on the resale of our Common Stock due to state "blue sky" laws or if we are determined to be a "blank check" company.
There are state regulations that may adversely affect the transferability of our Common Stock. We have not registered our Common Stock for resale under the securities or "blue sky" laws of any state. We may seek qualification or advise our shareholders of the availability of an exemption. We are under no obligation to register or qualify our Common Stock in any state or to advise the shareholders of any exemptions.
Current shareholders, and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that there might be significant state restrictions upon the ability of new investors to purchase the Common Stock.
Blue sky laws, regulations, orders, or interpretations place limitations on offerings or sales of securities by "blank check" companies or in "blind-pool" offerings, or if such securities represent "cheap stock" previously issued to promoters or others. Our majority shareholder, because he received stock at a price of $.001 for each share, may be deemed to hold "cheap stock." These limitations typically provide, in the form of one or more of the following limitations, that such securities are:
(a) Not eligible for sale under exemption provisions permitting sales without registration to accredited investors or qualified purchasers;
(b) Not eligible for the transaction exemption from registration for non-issuer transactions by a registered broker-dealer;
(c) Not eligible for registration under the simplified small corporate offering registration (SCOR) form available in many states;
(d) Not eligible for the "solicitations of interest" exception to securities registration requirements available in many states;
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(e) Not permitted to be registered or exempted from registration, and thus not permitted to be sold in the state under any circumstances.
Virtually all 50 states have adopted one or more of these limitations, or other limitations or restrictions affecting the sale or resale of stock of blank check companies or securities sold in "blind pool" offerings or "cheap stock" issued to promoters or others. Specific limitations on such offerings have been adopted in:
Alaska | Nevada | Tennessee |
Arkansas | New Mexico | Texas |
California | Ohio | Utah |
Delaware | Oklahoma | Vermont |
Florida | Oregon | Washington |
Georgia | Pennsylvania |
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Idaho | Rhode Island |
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Indiana | South Carolina |
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Nebraska | South Dakota |
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Any secondary trading market which may develop may only be conducted in those jurisdictions where an applicable exemption is available or where the shares have been registered.
Current shareholders and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that we are under no obligation to register the shares on behalf of our shareholders under the Securities Act of 1933, as amended.
The Company's officers, directors and majority shareholders have expressed their intentions not to engage in any transactions with respect to the Company's Common Stock except in connection with or following a business combination resulting in us no longer being defined as a blank check issuer. Any transactions in our Common Stock by said shareholders will require compliance with the registration requirements under the Securities Act of 1933, as amended.
Our common stock may be difficult or impossible for you to sell for the foreseeable future.
Our shares are listed on the Over-the-Counter Bulletin Board, trading symbol JRRD.
Penny Stock rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our shares.
Trading in our securities is subject to the SEC's "penny stock" rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.
Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.
We cannot predict the extent to which a trading market will develop or how liquid that market might become. The selling stockholders will sell their shares at such prices and such times as they determine. It is possible that they may not sell their shares at all. The selling stockholders will sell at prevailing market prices or privately negotiated prices. The trading price of our common stock is therefore likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include:
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- Quarterly variations in our results of operations or those of our Competitors or target acquisition or merger.
- Announcements by us or our competitors of acquisitions, significant contracts, commercial relationships or capital
commitments.
- Our ability to find a suitable partner or acquisition on a timely basis.
- Commencement of, or our involvement in, litigation.
- Any major change in our board or management.
- General economic conditions and slow or negative growth of related markets.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.
We may issue additional shares of common stock which would reduce investors percentage of ownership, decrease the value of investors investment and may dilute our share value.
Our Certificate of Incorporation authorizes the issuance of 5,000,000,000 shares of common stock. In the past, we have been able to pay for some of the services we require through the issuance of our common stock. We may continue to compensate our consultants and other staff with common stock in order to preserve our cash for other uses. The future issuance of authorized common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the common stock held by our investors, may decrease the value of our investors' investment and might have an adverse effect on any trading market for our common stock, if one ever exists.
We do not plan to pay dividends in the foreseeable future, and, as a result, stockholders will need to sell shares to realize a return on their investment.
We have not declared or paid any cash dividends on our capital stock since inception. We intend to retain any future earnings to finance the operation and merger or acquisition of our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, stockholders will need to sell shares of common stock in order to realize a return on their investment, if any.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS.
Except as so indicated in Exhibits 32.1 and 32.2, the following exhibits are filed as part of, or incorporated by reference, to this Quarterly Report on Form 10-Q.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| JOURNAL OF RADIOLOGY, INC. | |
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Date: November 14, 2012 | By: | /s/ Aaron Shrira |
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| Aaron Shrira President and Director (Principal Executive Officer) |
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Date: November 14, 2012 | By: | /s/ Elana Berman-Shrira Elana Berman-Shrira Treasurer and Director (Principal Accounting and Financial Officer) |
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