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 November 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: 000-54440

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.)

 

23 Corporate Plaza Drive, Suite 150, Newport Beach, CA		92660
(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 Exchange Act). Yes o No x

 

As of January 22, 2013, 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 November 30, 2012

PART I	Financial Information	3
ITEM 1.	Unaudited Balance Sheets	3
	Unaudited Statements of Operations	4
	Unaudited Statements of Cash Flows	5
	Notes to the Unaudited Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	20
ITEM 4T.	Controls and Procedures	21
PART II	Other Information	21
ITEM 1.	Legal Proceedings	21
ITEM 1A.	Risk Factors	21
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
ITEM 3	Defaults Upon Senior Securities	21
ITEM 4	Submission of Matters to a Vote of Security Holders	21
ITEM 5	Other Information	21
ITEM 6	Exhibits	22
	SIGNATURES	23

2

 

PART I - FINANCIAL INFORMATION

Item I. Financial Statements.

CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

BALANCE SHEETS

(Unaudited)

 

	November 30, 2012		February 29, 2012
ASSETS
Current assets:
Cash	$               4,149		$           13,658
Deposits	300		-
Total current assets	4,449		13,658
Website and software costs, net	61,279		31,279
TOTAL ASSETS	$           65,728		$           44,937
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$           26,612		$                    -
Accrued payroll and related	-		100
Related party convertible note payable	-		100,000
Total liabilities	26,612		100,100
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued
and outstanding at November 30, 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 November 30, 2012 and February 29, 2012, respectively	97,200		60,000
Additional paid-in capital	226,721		15,000
Deficit accumulated during the development stage	(284,805)		(130,163)
Total stockholders' equity (deficit)	39,116		(55,163)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$           65,728		$           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 November 30, 2012		For the Period from October 17, 2011 ("Inception") to November 30, 2011		For the Nine Months Ended November 30, 2012		For the Period from October 17, 2011 ("Inception") to November 30, 2012
Revenue	$                       -		$                       -		$                             -		$                          -
General and administrative [a]	43,059		39,530		145,270		215,433
Loss from operations	(43,059)		(39,530)		(145,270)		(215,433)
Interest expense - related party	-		-		518		618
Net loss	$               (43,059)		$               (39,530)		$                   (145,788)		$            (216,051)
Weighted average shares basic and diluted	97,200,000		60,000,000		86,107,636
Weighted average basic and diluted loss    per common share	$                  (0.00)		$                  (0.00)		$                        (0.00)
[a] Includes stock-based compensation of $0, $0, $20,000, and $20,000 for three months ended November 30, 2012, period from October 17, 2011 ("Inception") to November 30, 2011, nine months ended November 30, 2012, and for the period from October 17, 2011 ("Inception") to November 30, 2012, respectively

 

 

See accompanying notes to unaudited financial statements.

4

CLOUD STAR CORPORATION

(FORMERLY ACCEND MEDIA)

(A DEVELOPMENT-STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(Unaudited)

 

	For the Nine Months Ended		For the Period from October 17, 2011 ("Inception") to		For the Period from October 17, 2011 ("Inception") to
	November 30, 2012		November 30, 2011		November 30, 2012
Cash flows from operating activities:
Net loss	$                                   (145,788)		$                                     (39,530)		$                                   (216,051)
Adjustments to reconcile net loss to net cash    used in operating activities:
Contributed services	75,150		7,500		90,150
Stock compensation	20,000		-		20,000
Changes in operating assets and liabilities:
Accounts payable	19,958		-		19,958
Accrued liabilities	(100)		-		-
Net cash used in operating activities	(30,780)		(32,030)		(85,943)
Cash flows from investing activities:
Deposits	(300)		-		(300)
Website and software costs	(30,000)		(10,000)		(61,279)
Net cash used in investing activities	(30,300)		(10,000)		(61,579)
Cash flows from financing activities:
Proceeds from issuance of founders shares	-		100		100
Contributed capital	25,975		-		25,975
Proceeds from related party convertible note payable	25,596		42,000		125,596
Net cash provided by financing activities	51,571		42,100		151,671
Net change in cash	(9,509)		70		4,149
Cash, beginning of period	13,658		-		-
Cash, end of period	$                                         4,149		$                                               70		$                                         4,149
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

5

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”) and additional cloud computing security technology products. The Company’s principal business has been the software development of the MyComputerKey. Cloud Star is currently developing the software infrastructure and interface for MyComputerKey, version #2 of MyComputerKey and additional cloud computing security applications.

 

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. The Company is also focusing on integrating security software features to its existing product, as well as other features in an effort to expand its product offerings. The Company recently filed another patent related to cloud computing security and intends to continue expanding it’s this cloud computing security product line in addition to other types of internet security.

 

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 following unaudited pro forma information was prepared as if the merger had taken place at the beginning of the period for the nine months ended November 30, 2012:

 

	Pro Forma Combined
	Nine Months Ended November 30, 2012
	(Unaudited)
Net loss	$                                           (145,788)
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. In addition, there have been no revenues earned during the nine months ended November 30, 2012.

 

6

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 nine months ended November 30, 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 $216,051 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 $151,671 in funding from inception to November 30, 2012 from a company controlled by a 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.

 

7

 

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 November 30, 2012, the Company had no 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. 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 November 30, 2012, the Company had capitalized internal use website and software costs of $61,279. Version #1 of MyComputerKey has been substantially completed as of November 30, 2012, and the Company is now in beta testing of this product with several corporations and is already developing version 2 of MyComputerKey. The Company is also working on MyMobileKey and MyTabletKey in addition to other cloud computing security products. As of November 30, 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.

8

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 $125,596 from Inception through November 30, 2012 to fund software and website development, and provide working capital. A convertible note was initially established which provided for interest at 1%, per annum, a conversion feature into shares of issued common stock at a rate of $0.10 per share. The note was 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 was recorded as contributed capital in the accompanying financial statements. Also see Notes 5 and 6 for discussion of additional advances accounted for as contributed capital.

 

Note 4 - Commitments and Contingencies

 

Operating Lease

On November 26, 2012, the Company entered into an operating lease with a relative of a Company Director for its corporate office on a month to month basis for $150 per month. There is a $300 deposit with the related party recorded on the accompanying balance sheet due to prepayment of rents.

 

When Accend Media and Cloud Star merged, Scott Gerardi, the 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. See Note 5 for waiver of all accrued salaries through November 30, 2012.

 

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.

 

9

 

 

 

 

During the period from Inception to November 30, 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.

 

Contributed Services

During the period from Inception to November 30, 2012, services were provided by Safa Movassaghi and Scott Gerardi. During this period, Safa Movassaghi waived portions of his salary during the commencement of operations, valued at $7,500 per month, plus accrued taxes. These unpaid services are considered contributed service to the Company. The fair value of contributed services were based on negotiated monthly salary and has been recognized in the accompanying statement of stockholders’ equity (deficit) as contributed services, and the accompanying statement of operations as general and administrative expense. Total salaries and accrued taxes waived during the nine months ended November 30, 2012 and since Inception by Mr. Movassaghi were $48,750 and $63,750, respectively.

 

During the nine months November 30, 2012, accrued salaries of $24,000, plus accrued taxes for Scott Gerardi pursuant to his employment contract were waived by his consent and board resolution in November 2012. Contributed services totaled $26,400 and have been recognized in the accompanying statement of stockholders’ equity (deficit) as contributed services, and the accompanying statement of operations as general and administrative expense.

 

Walter Grieves has agreed to privately pay the contributed services discussed above.

 

Contributed Capital

 

As of November 30, 2012, an additional $25,975 was advanced by Leeward Ventures in exchange for shares to be transferred from existing shareholders. Leeward Ventures has committed to advance a total of $375,000 subsequent to advances under the convertible notes described on Note 4 for which 3,750,000 shares will be transferred from existing shareholders to settle such advances. Accordingly, the advances have been recorded as contributed capital in the accompanying financial statements.

 

Note 6 – Subsequent Events

 

Subsequent to November 30, 2012, Leeward Ventures contributed capital of $5,500 to pay expenses on behalf of the Company.

 

10

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

 

Forward-Looking Information

 

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words "anticipate," "believe," "estimate," "will," "plan," "seeks," "intend," and "expect" and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions, or expectations may not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied, by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in this Quarterly Report on Form 10-Q. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this Quarterly Report on Form 10-Q. Except as required by federal securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

 

 

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.

 

11

 

 

 

 

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 recently filed a provisional patent for its new Secure IP to IP connection technology. 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.

 

12

 

 

 

 

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:

· Introduce new products and product upgrades.

· Protect and expand its intellectual property

· Initiate a direct marketing campaign

· Establish strategic alliances with key channel partners

· Establish a recognized position in the market

 

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.

 

13

 

 

 

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.

 

14

 

 

 

 

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.

 

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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

 

 

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2012 AND PERIOD FROM OCTOBER 17, 2011 (“INCEPTION”) TO NOVEMBER 30, 2011

 

For the three month period ended November 30, 2012 and period from October 17, 2011 (“Inception”) to November 30, 2011, the Company recognized no revenues. The Company focused its activities during the three month period ended November 30, 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 $43,059 and $39,530 during the three month period ended November 30, 2012 and period from October 17, 2011 (“Inception”) to November 30, 2011, respectively. The operating expenses consisted of general and administrative fees of $43,059 and $39,530 during the three month period ended November 30, 2012 and period from October 17, 2011 (“Inception”) to November 30, 2011, respectively. The major components of general and administrative expenses during the three month period ended November 30, 2012 included $586 in rent and $37,950 in payroll costs.

 

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 30, 2012

 

For the nine month period ended November 30, 2012, and for the period from October 17, 2011 (Inception) to November 30, 2012 the Company recognized no revenues. The Company focused its activities during the nine month period ended November 30, 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 $145,270 and $215,433 during the nine month period ended November 30, 2012 and the period from Inception to November 30, 2012, respectively. The operating expenses for the nine month period ended November 30, 2012 consisted of general and administrative fees of $145,270. The major components of general and administrative expenses during the nine month period ended November 30, 2012 included $20,000 in stock-based compensation, $14,653 in professional fees, and $5,072 in rent and $100,688 in payroll costs.

 

The Company used net cash in operations of $30,780 during the nine months ended November 30, 2012. The Company used cash in investing activities of $30,300, primarily for the development of software during the same period. Cash provided by financing activities was $51,571, and consisted of proceeds on convertible notes payable 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.

 

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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 $50,000 to release its flagship product. 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 fourth quarter of 2012-2013. 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 November 30, 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.

 

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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 November 30, 2012, our current assets were $4,449 and our current liabilities were $26,612. As of November 30, 2012, our total assets were $65,728 compared to total assets of $44,937 as of February 29, 2012. Total assets as of November 30, 2012 consisted of $4,149 in cash, $61,279 in website and internal use software costs incurred with the development of MyComputerKey, and $300 of deposits to a related party. As of November 30, 2012, our total liabilities were $26,612 compared to current and total liabilities of $100,100 as of February 29, 2012. Our liabilities consisted of 26,612 in accounts payable.

 

In an effort to improve our financial position, in November 2012, our officers waived all accrued salaries and related taxes totaling $75,150.

 

We have not generated positive cash flows from operating activities. For the nine months ended November 30, 2012, net cash flow used in operating activities was $30,780, our net cash flow used in investing activities was $30,300, and our net cash flows provided by financing activities was $51,571.

 

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.

 

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Critical Accounting Policies and Estimates

 

Revenue Recognition: The Company recognizes revenue related to product sales when (i) persuasive evidence of the arrangement exists, (ii) shipment has occurred, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. For the period from October 17, 2011 (inception) to November 30, 2012, the Company has not recognized any revenues.

 

Recent Pronouncements

 

The Company's management has evaluated all recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

Item 4T. Controls and Procedures

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our Chief Executive Officer and Principal Accounting & Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing evaluation, we have concluded that our disclosure controls and procedures were effective as of November 30, 2012 and that they do allow for information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the us in the reports that we file or submit under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive and Principal Accounting & Financial Officers as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting.

 

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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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

 

No shares of stock were issued during the Quarter ended November 30, 2012.

 

Item 3 - Defaults Upon Senior Securities

 

None.

 

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

 

None.

 

Item 5 - Other Information

 

None.

 

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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.

 

 

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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: January 22, 2013

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

 

 

 

 

 

 

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