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EX-31.1 - CERTIFICATION OF THE COMPANY?S PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002, WITH RESPECT TO THE REGISTRANT?S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED FEBRUARY 28, 2013 - DIGILITI MONEY GROUP, INC.f10k2013ex31i_deacquisition.htm
EX-32.1 - CERTIFICATION OF THE COMPANY?S PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002 - DIGILITI MONEY GROUP, INC.f10k2013ex32i_deacquisition.htm
EX-31.2 - CERTIFICATION OF THE COMPANY?S PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002, WITH RESPECT TO THE REGISTRANT?S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED FEBRUARY 28, 2013 - DIGILITI MONEY GROUP, INC.f10k2013ex31ii_deacquisition.htm
EXCEL - IDEA: XBRL DOCUMENT - DIGILITI MONEY GROUP, INC.Financial_Report.xls
EX-32.2 - CERTIFICATION OF THE COMPANY?S PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002 - DIGILITI MONEY GROUP, INC.f10k2013ex32ii_deacquisition.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

x          ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                       
For the fiscal year ended February 28, 2013
                       
o          TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                       
               For the transition period from _________ to ________
                       
Commission file number: 000-53925
 
DE ACQUISITION 2, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
27-2205650
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
3017 W. 97th St., Suite 117
Minneapolis, MN
 
 
55431
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number:  (612) 889-8729
   
     
Securities registered under Section 12(b) of the Exchange Act:
   
     
Title of each class of common stock
 
Name of each exchange on which registered
None
 
not applicable
     
Securities registered under Section 12(g) of the Exchange Act:
   
     
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $0.0001
 
not applicable
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No x

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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 o No x
 
 
 

 
 
Check whether the registrant has submitted electronically and posted on its corporate website, 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 o    No x
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes x     No o

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.

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 x   No o

The aggregate market value of the common stock held by non-affiliates of the registrant as of August 31, 2012 was approximately $0.  All executive officers, directors and 10% or more beneficial owners of the registrant’s common stock have been deemed, solely for the purpose of the foregoing calculation, “affiliates” of the registrant.

As of July 2, 2013, there were 5,000,000 shares of common stock, par value $.0001 per share, outstanding.
 
 
 

 
 
PART I
4
Item 1.      Business
4
Item 1A.   Risk Factors
7
Item 1B.   Unresolved Staff Comments
7
Item 2.      Properties
8
Item 3.      Legal Proceedings
8
Item 4.      Mine Safety Disclosures
8
PART II
9
Item 5.      Market for Registrant’s Common Equity and Related Stockholder Matters and IssuerPurchases of Equity Securities
9
Item 6.      Selected Financial Data
9
Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations
10
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk
13
Item 8.      Financial Statements and Supplementary Data
13
Item 9.      Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
25
Item 9A.   Controls and Procedures
25
Item 9B.   Other Information
26
Item 10.    Directors, Executive Officers and Corporate Governance
26
Item 11.    Executive Compensation
28
Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
30
Item 13.    Certain Relationships and Related Transactions, and Director Independence
31
Item 14.    Principal Accounting Fees and Services
31
PART IV
32
Item 15.   Exhibits
32
SIGNATURES
33
 
 
 

 
 
FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of DE Acquisition 2, Inc. (the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
 
PART I
 
Item 1.   Description of Business
 
Company Overview

DE Acquisition 2, Inc. (a development stage company) (the “Company”) was incorporated in Delaware on February 24, 2010, with an objective to acquire, or merge with, an operating business.  The Company has not conducted any active operations since inception and through the date of this filing.  The Company selected February 28 as its fiscal year end.

The Company is currently considered to be a "blank check" company.  The U.S. Securities and Exchange Commission (the “SEC”) defines those companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies."  Under SEC Rule 12b-2 under the Exchange Act, the Company also qualifies as a “shell company,” because it has no or nominal assets (other than cash) and no or nominal operations.  Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination.  The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements.

The Company was organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation and, to a lesser extent that desires to employ the Company’s funds in its business.  The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business (“Business Combination”) rather than immediate, short-term earnings.  The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.  The analysis of new business opportunities will be undertaken by or under the supervision of the officers and directors of the Company.
 
 
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The analysis of new business opportunities is being undertaken by or under the supervision of our management.  As of the date of this filing, we have not entered into any definitive agreement with any party, nor have there been any specific discussions with any potential business combination candidate regarding business opportunities for us.  We have unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In our efforts to analyze potential acquisition targets, we will consider the following kinds of factors:

  ●
Potential for growth, indicated by new technology, anticipated market expansion or new products;

  ●
Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;

  ●
Strength and diversity of management, either in place or scheduled for recruitment;

  ●
Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

  ●
The cost of participation as compared to the perceived tangible and intangible values and potentials;

  ●
The extent to which the business opportunity can be advanced; and

  ●
The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items.

In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data.  Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.  Due to the Company's limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.  In evaluating a prospective business combination, we will conduct as extensive a due diligence review of potential targets as possible given the lack of information which may be available regarding private companies, our limited personnel and financial resources and the inexperience of our management with respect to such activities.  We expect that our due diligence will encompass, among other things, meetings with the target business’s incumbent management and inspection of its facilities, as necessary, as well as a review of financial and other information which is made available to us.  This due diligence review will be conducted either by our management or by unaffiliated third parties we may engage, including but not limited to attorneys, accountants, consultants or such other professionals.  At this time the Company has not specifically identified any third parties that it may engage.  The costs associated with hiring third parties to complete a business combination target may be significant and are difficult to determine as such costs may vary depending on a variety of factors, including the amount of time it takes to complete a business combination, the location of the target company and the size and the complexity of the target company.  Our limited funds and the lack of full-time management will likely make it impracticable to conduct a complete and exhaustive investigation and analysis of a target business before we consummate a business combination.  Management decisions, therefore, will likely be made without detailed feasibility studies, independent analysis, market surveys and the like which, if we had more funds available to us, would be desirable.  We will be particularly dependent in making decisions upon information provided by the promoters, owners, sponsors or other associated with the target business seeking our participation.

The time and costs required to select and evaluate a target business and to structure and complete a business combination cannot presently be ascertained with any degree of certainty.  The amount of time it takes to complete a business combination, the location of the target company and the size and complexity of the business of the target company are all factors that determine the costs associated with completing a business combination transaction.  The time and costs required to complete a business combination transaction can be ascertained once a business combination target has been identified.  Any costs incurred with respect to evaluation of a prospective business combination that is not ultimately completed will result in a loss to us.
 
 
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Competition

In identifying, evaluating and selecting a target business, we may encounter intense competition from other entities having a business objective similar to ours.  There are numerous “public shell” companies either actively or passively seeking operating businesses with which to merge in addition to a large number of “blank check” companies formed and capitalized specifically to acquire operating businesses.  Additionally, we are subject to competition from other companies looking to expand their operations through the acquisition of a target business.  Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates.  Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors.  Our ability to compete in acquiring certain sizable target businesses is limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of a target business.
 
Any of these factors may place us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities with a business objective similar to ours to acquire a target business on favorable terms.
 
If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the target business.  Many of our target business’ competitors are likely to be significantly larger and have far greater financial and other resources than we will.  Some of these competitors may be divisions or subsidiaries of large, diversified companies that have access to financial resources of their respective parent companies.  Our target business may not be able to compete effectively with these companies or maintain them as customers while competing with them on other projects. In addition, it is likely that our target business will face significant competition from smaller companies that have specialized capabilities in similar areas.  We cannot accurately predict how our target business’ competitive position may be affected by changing economic conditions, customer requirements or technical developments.  We cannot assure you that, subsequent to a business combination, we will have the resources to compete effectively.

Form of Acquisition

The manner in which the Company participates in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of the Company and the promoters of the opportunity, and the relative negotiating strength of the Company and such promoters.

It is likely that the Company will acquire its participation in a business opportunity through the issuance of common stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code") depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares of the surviving entity. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization.

The stockholders of the Company will likely not have control of a majority of the voting securities of the Company following a reorganization transaction. As part of such a transaction, all or a majority of the Company's directors may resign and one or more new directors may be appointed without any vote by stockholders.

In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding securities. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval.
 
 
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It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation might not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred.

We presently have no employees apart from our management. Our officers and directors are engaged in outside business activities and anticipate that they will devote very limited time to our business until the acquisition of a successful business opportunity has been identified. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination.

Emerging Growth Company
 
The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act, and exemptions from the requirements of Sections 14A(a) and (b) of the Securities Exchange Act of 1934 to hold a nonbinding advisory vote of shareholders on executive compensation and any golden parachute payments not previously approved.

The Company has also elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

We will remain an “emerging growth company” until the earliest of (1) the last day of the fiscal year during which our revenues exceed $1 billion, (2) the date on which we issue more than $1 billion in non-convertible debt in a three year period, (3) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, or (4) when the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter. To the extent that we continue to qualify as a “smaller reporting company”, as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years.

Item 1A.        Risk Factors.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 1B.        Unresolved Staff Comments.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
 
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Item 2.           Properties
 
The Company neither rents nor owns any properties. The Company utilizes the office space and equipment of its management at no cost. The Company currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.
 
Item 3.           Legal Proceedings
 
There are presently no material pending legal proceedings to which the Company, any of its subsidiaries, any executive officer, any owner of record or beneficially of more than five percent of any class of voting securities is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

Item 4.           Mine Safety Disclosures.
 
Not applicable.
 
 
8

 
 
PART II
 
Item 5.           Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information

We do not have a trading symbol, and our common stock is not trading on any stock exchange. We are not aware of any market activity in our stock since its inception and through the date of this filing.

Common Stock

Our Certificate of Incorporation authorizes the issuance of up to 500,000,000 shares of common stock, par value $.0001 per share (the “Common Stock”).  The Common Stock is not listed on a publicly-traded market.  As of July 2, 2013, there were 4 holders of record of the Common Stock.

Preferred Stock

Our Certificate of Incorporation authorizes the issuance of up to 20,000,000 shares of preferred stock, par value $.0001 per share (the “Preferred Stock”).  The Company has not yet issued any of its preferred stock.
 
Dividend Policy

The Company has not declared or paid any cash dividends on its common stock and does not intend to declare or pay any cash dividend in the foreseeable future.  The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on the Company’s earnings, if any, its capital requirements and financial condition and such other factors as the Board of Directors may consider.
  
Securities Authorized for Issuance under Equity Compensation Plans

The Company does not have any equity compensation plans or any individual compensation arrangements with respect to its common stock or preferred stock.  The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval.

Recent Sales of Unregistered Securities

The Company did not sell any equity securities that were not registered under the Securities Act during the period covered by this report.

No securities have been issued for services during the period covered by this report.  Neither the Company nor any person acting on its behalf offered or sold the securities by means of any form of general solicitation or general advertising.  No services were performed by any purchaser as consideration for the shares issued.

Issuer Purchases of Equity Securities

None.
 
Item 6.           Selected Financial Data
 
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company  is not required to provide this information.
 
 
9

 

Item 7.           Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

We were organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
 
We do not currently engage in any business activities that provide cash flow. During the next twelve months we anticipate incurring costs related to:

 
(i)
filing Exchange Act reports, and
 
(ii)
investigating, analyzing and consummating an acquisition.
 
We believe we will be able to meet these costs through use of funds in our treasury, through deferral of fees by certain service providers and additional amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors. As of the date of the period covered by this report, the Company had no cash. There are no assurances that the Company will be able to secure any additional funding as needed. Currently, however our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going concern is also dependant on our ability to find a suitable target company and enter into a possible reverse merger with such company. Management’s plan includes obtaining additional funds by equity financing through a reverse merger transaction and/or related party advances, however there is no assurance of additional funding being available.
  
Our management has not had any contact or discussions with representatives of other entities regarding a business combination with us. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks. Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.
 
 
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The Company anticipates that the selection of a business combination will be complex and extremely risky. Through information obtained from industry professionals, including attorneys, investment bankers, and other consultants with significant experience in the reverse merger industry and publications such as the Reverse Merger Report, our management believes that there are numerous firms seeking the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

Liquidity and Capital Resources
 
As of February 28, 2013, the Company had no assets. This compares with assets equal to $1,230 as of February 29, 2012.  As of February 28, 2013 the Company had $46,146 of liabilities comprised of notes and interest payable.  As of February 29, 2012, the Company’s liabilities totaled $54,525, comprised of accrued expenses and notes and interest payable  The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.

We currently do not engage nor intend to engage in any business activities that provide cash flow until we enter into a successful business combination.

Results of Operations

The Company has not conducted any active operations since inception, except for its efforts to locate suitable acquisition candidates.  No revenue has been generated by the Company from February 24, 2010 (Inception) to February 28, 2013.  It is unlikely the Company will have any revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance.  It is management's assertion that these circumstances may hinder the Company's ability to continue as a going concern.  The Company’s plan of operation for the next twelve months shall be to continue its efforts to locate suitable acquisition candidates.
 
For the fiscal year ended February 28, 2013, the Company had a net loss of $577, consisting primarily of professional service fees of $2,084 incurred in relation to the preparation and filing of the Company’s periodic reports, interest expense of $3,054 and taxes and other miscellaneous expenses of $589.  These expenses were partially offset by the forgiveness of previously billed auditing expenses of $5,150.  For the fiscal year ended February 29, 2012, the Company had a net loss of $30,306, consisting primarily of legal, accounting, audit, and other professional service fees of $27,243 incurred in relation to the preparation and filing of the Company’s periodic reports and interest expense of $3,063.

For the cumulative period from February 24, 2010 (Inception) to February 28, 2013, the Company had a net loss of $69,380, consisting primarily of compensation expense related to the repurchase of common stock of $34,228, interest expense of $6,452, and legal, accounting, audit, and other professional service fees of $28,700 incurred in relation to the formation of the Company, the preparation and filing of the Company’s Registration Statement on Form 10 in April 2010 and the Company’s periodic reports.
 
Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s 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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Going Concern

Our financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  We have had no revenues and have generated no operations.

In order to continue as a going concern and achieve a profitable level of operation, we will need, among other things, additional capital resources and to develop a consistent source of revenues.  Management's plans include seeking a merger with an existing operating company.

Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations.  The accompanying financial statements in this report do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis.  The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There are no critical accounting policies.

Recently Issued Accounting Pronouncements

The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.
 
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.  Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods, and requires increased disclosures.  The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
 
12

 

Item 7A.        Quantitative and Qualitative Disclosures about Market Risk
 
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
Item 8.           Financial Statements and Supplementary Data
 
Audited financial statements begin on the following page of this report.
 
 
13

 
 
INDEX TO FINANCIAL STATEMENTS
 
Financial Statements
 
Page*
     
Report of Independent Registered Public Accounting Firm
 
15
     
Balance Sheets as of February 28, 2013 and February 29, 2012
 
16
     
Statements of Operations for the years ended February 28, 2013 and February 29, 2012, and the period from inception (February 24, 2010) to February 28, 2013
 
17
     
Statement of Stockholders’ Deficit for period from inception (February 24, 2010) to February 28, 2013
 
18
     
Statements of Cash Flows for the years ended February 28, 2013 and February 29, 2012, and the period from inception (February 24, 2010) to February 28, 2013
 
19
     
Notes to Financial Statements
 
20
 
 
14

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders, Audit Committee and Board of Directors
DE Acquisition 2, Inc.
Minneapolis, MN

We have audited the accompanying balance sheets of DE Acquisition 2, Inc. as of February 28, 2013 and February 29, 2012, and the related statements of operations, shareholders' deficit and cash flows for the years then ended.  These financial statements are the responsibility of the company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.  The financial statements for the period from February 24, 2010 (inception) through February 28, 2010 were audited by other auditors whose report dated March 5, 2010, expressed an unqualified opinion.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of DE Acquisition 2, Inc. as of February 28, 2013 and February 29, 2012 and the results of its operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the company will continue as a going concern.  As discussed in Note 3 to the financial statements, the company has suffered recurring losses from operations and has a shareholders' deficit and needs additional working capital.  These factors raise substantial doubt about its ability to continue as a going concern.  Management's plans in regard to these matters are also described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Baker Tilly Virchow Krause, LLP

Minneapolis, MN
July 2, 2013
 
 
15

 
 
DE ACQUISITION 2, INC.
(A Development Stage Company)
Balance Sheets

   
February 28,
2013
   
February 29,
2012
 
             
ASSETS
           
Cash and cash equivalents
  $ -     $ 1,230  
                 
TOTAL ASSETS
  $ -     $ 1,230  
                 
LIABILITIES
               
Accrued expenses
  $ -     $ 5,150  
Loan payable - related parties
    2,673       7,956  
Loan payable
    -       1,000  
                 
Total current liabilities
    2,673       14,106  
                 
Notes and interest payable - related parties
    43,473       40,419  
                 
TOTAL LIABILITIES
    46,146       54,525  
                 
SHAREHOLDERS' DEFICIT
               
Preferred stock: $0.0001 par value; 20,000,000 shares authorized; no shares issued or outstanding
    -       -  
Common stock: $0.0001 par value; 500,000,000 shares authorized; 5,000,000 shares issued and outstanding at February 28, 2013 and February 29, 2012
    500       500  
Additional paid-in capital
    22,734       15,008  
Deficit accumulated during the development phase
    (69,380 )     (68,803 )
TOTAL SHAREHOLDERS' DEFICIT
    (46,146 )     (53,295 )
                 
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
  $ -     $ 1,230  
 
The accompanying notes are an integral part of these financial statements.
 
 
16

 
 
DE ACQUISITION 2, INC.
(A Development Stage Company)
Statements of Operations

   
Year Ended
February 28,
2013
   
Year Ended
February 29,
2012
   
From
Inception
(February 24,
2010) to
February 28,
2013
 
                   
                   
Revenues
  $ -     $ -     $ -  
                         
OPERATING EXPENSES
                       
General and administrative expenses
    (2,477 )     27,243       62,928  
                         
Net operating income (loss)
    2,477       (27,243 )     (62,928 )
                         
Interest expense
    3,054       3,063       6,452  
                         
NET LOSS
  $ (577 )   $ (30,306 )   $ (69,380 )
                         
Net loss per share, basic and fully diluted
  $ (0.00 )   $ (0.01 )   $ (0.02 )
Weighted average number of shares outstanding
    5,000,000       5,000,000       3,508,892  
 
The accompanying notes are an integral part of these financial statements.
 
 
17

 

DE ACQUISITION 2, INC.
(A Development Stage Company)
Statements of Shareholders' Deficit
 
     
Common Stock
   
Additional
Paid In
   
Deficit
Accumulated
During the Development
   
Total
Shareholders'
 
 
Date
 
Shares
   
Amount
    Capital     Stage     Deficit  
                                 
February 24, 2010 (inception)
02/25/10
    10,000     $ 1     $ 999     $ -     $ 1,000  
                                           
Net loss
      -       -       -       (1,139 )     (1,139 )
                                           
Balance, February 28, 2010
      10,000       1       999       (1,139 )     (139 )
                                           
Expenses paid by affiliates
      -       -       2,793       -       2,793  
                                           
Repurchase shares to treasury
01/19/11
    (10,000 )     (1 )     (5,771 )     -       (5,772 )
Issue new shares to investors
01/19/11
    5,000,000       500       2,479       -       2,979  
                                           
Net loss
      -       -       -       (37,358 )     (37,358 )
                                           
Balances, February 28, 2011
      5,000,000       500       500       (38,497 )     (37,497 )
                                           
Expenses paid by affiliates
      -       -       14,508       -       14,508  
Net loss
      -       -       -       (30,306 )     (30,306 )
                                           
Balances, February 29, 2012
      5,000,000       500       15,008       (68,803 )     (53,295 )
                                           
Loan forgiveness
      -       -       7,726       -       7,726  
Net loss
      -       -       -       (577 )     (577 )
                                           
Balances, February 28, 2013
      5,000,000     $ 500     $ 22,734     $ (69,380 )   $ (46,146 )
 
The accompanying notes are an integral part of these financial statements.
 
 
18

 
 
DE ACQUISITION 2, INC.
(A Development Stage Company)
Statements of Cash Flows

   
Year Ended
February 28,
2013
   
Year Ended
February 29,
2012
   
From
Inception
(February 24,
2010) to
February 29,
2013
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net loss
  $ (577 )   $ (30,306 )   $ (69,380 )
                         
Adjustments to reconcile net loss with cash used in operations:
                       
Common stock issued for services
    -       -       1,000  
Reimbursement of expenses by affiliate
    -       14,508       17,301  
Compensation expense related to stock repurchase
    -       -       34,228  
                         
Changes in operating assets and liabilities:
                       
Accrued expenses
    (5,150     5,009       -  
Related-party interest
    3,054       3,063       6,452  
                         
Net cash used in operating activities
    (2,673 )     (7,726 )     (10,399 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
                         
Net cash provided by / used in investing activities
    -       -       -  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
  Proceeds from loans payable - related parties
    2,673       7,956       10,629  
  Repayment of loans from related parties
    (291 )     -       (291 )
  Proceeds from loans payable
    -       1,000       1,000  
  Repayment of loans payable
    (939 )     -       (939 )
                         
Net cash provided by financing activities
    1,443       8,956       10,399  
                         
NET INCREASE / (DECREASE) IN CASH
    (1,230 )     1,230       -  
                         
Cash and cash equivalent at beginning of period
    1,230       -       -  
Cash and cash equivalent at end of period
  $ -     $ 1,230     $ -  
                         
SUPPLEMENTAL CASH FLOW DISCLOSURES
                       
Cash paid for interest
  $ -     $ -     $ -  
Cash paid for income taxes
  $ -     $ -     $ -  
                         
NON-CASH FINANCING ACTIVITIES
                       
Reimbursement of expenses by affiliate
  $ -     $ 14,508     $ 17,301  
                         
 
The accompanying notes are an integral part of these financial statements.

 
19

 
 
DE ACQUISITION 2, INC.
(A Development Stage Company)
Notes to Financial Statements
February 28, 2013 and February 29, 2012

NOTE 1 – NATURE OF ORGANIZATION

Business and Organization

DE Acquisition 2, Inc., a development stage company (the “Company”), was incorporated under the laws of the State of Delaware on February 24, 2010.  The financial statements represent only those transactions of DE Acquisition 2, Inc.  The Company is looking to merge with or acquire an existing company or acquire the technology to begin operations.

As a blank check company, the Company’s business is to pursue a business combination through acquisition, or merger with, an existing company. As of the date of the financial statements, the Company is not conducting negotiations with any target business.  No assurances can be given that the Company will be successful in locating or negotiating with any target company.
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company follows accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.

Use of Estimates

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company will consider all highly liquid debt instruments and other short-term investments with a maturity of three months or less, when purchased, to be cash equivalents. There are no cash equivalents at February 28, 2013.

Equity Issued for Services

The Company accounts for equity instruments issued for services and goods to non-employees under “FASB ASC 505-50-1” Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services and “FASB ASC 505-50-25” Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees. Generally, the equity instruments issued for services and goods are shares of the Company’s common stock, warrants or options to purchase shares of the Company’s common stock. These shares, warrants or options are either fully-vested and exercisable at the date of grant or vest over a certain period during which services are provided. The Company expenses the fair market value of these securities over the period in which the related services are received.

Revenue Recognition

The Company will recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collection is reasonable assured.
 
 
20

 
 
Basic and Diluted Net Loss Per Share

The Company follows ASC No. 260, “Earnings Per Share” (ASC No. 260) that requires the reporting of both basic and diluted earnings (loss) per share.  Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  The calculation of diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  In accordance with ASC No. 260, any anti-dilutive effects on net earnings (loss) per share are excluded.  For the years ended February 28, 2013 and February 29, 2012 and the period from inception (February24, 2010) to February 28,2013, there were no common stock equivalents.
 
Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered.  The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely.

The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.  Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods, and requires increased disclosures.  The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

NOTE 3 - GOING CONCERN
 
The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has had no revenues and has generated from operations an accumulated loss of $69,380 from February 24, 2010 (inception) to February 28, 2013.

In order to continue as a going concern and achieve a profitable level of operations, the Company will need, among other things, additional capital resources and developing a consistent source of revenues.  Management's plans include seeking a merger with an existing operating company.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually 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.

 
21

 

NOTE 4 – COMMON STOCK

Holders of shares of common stock, the only class of stock registered under the Company’s Form 10-12G, shall be entitled to cast one vote for each common share held at all stockholder meetings for all purposes, including the election of directors.  The common stock does not have cumulative voting rights.

On February 25, 2010, the Company issued 10,000 shares to Ruth Shepley.

As is explained in Note 6, the Company acquired Ms. Shepley’s shares in return for $40,000 in cash and simultaneously entered into an agreement with five accredited investors to issue 5,000,000 shares for a total of $2,979.
 
NOTE 5 – INCOME TAXES

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities.  Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return.  Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the periods ended February 28, 2013 and February 29, 2012 due to the following:

   
February 28, 2013
   
February 29, 2012
 
Estimated tax benefit
 
$
13,709
   
$
13,484
 
Valuation allowance
   
(13,709
)
   
(13,484
)
Net deferred tax asset
 
$
-
   
$
-
 
 
At February 28, 2013, the Company had net operating loss carry- forwards of approximately $35,152 that may be offset against future taxable income through 2032.  No tax benefit has been reported in the February 28, 2013 or February 29, 2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.  For tax positions meeting the more-likely-than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.  The Company had no significant unrecognized tax benefits as of February 28, 2013, likewise, no significant unrecognized tax benefits that, if recognized, would affect the effective future tax rate.

The Company is subject to U.S. federal, state or local income tax examination by authorities since inception.  The Company is not currently under examination by any taxing jurisdiction.  In event of any future tax assessments, the Company has elected to record the income taxes and any related interest and penalties as income tax expense on the statements of operations.

NOTE 6 – CHANGE IN CONTROL

On January 19, 2011, the Company entered into an arrangement with our previous sole shareholder, Ruth Shepley, to acquire all 10,000 of her shares in exchange for $40,000 in cash.  Simultaneously, the Company entered into an agreement with five accredited investors to issue 5,000,000 shares for a total of $2,979.  In addition, these investors loaned the Company $37,021 in order to affect the transaction with Ms. Shepley.  See Note 7 for additional information on these investor loans.  We accounted for the repurchase of the 10,000 shares as a reduction in Additional Paid-in Capital in the amount of $5,771, a reduction in common stock of $1 and compensation expense of $34,228.
 
 
22

 

Concurrent with the change of control, Ruth Shepley, the Company’s previous sole officer and director prior to the closing date appointed Dennis Nguyen to serve as the President and Treasurer and Todd Vollmers to serve as the Vice President and Secretary of the Company, effective upon Ms. Shepley’s resignation from all officer positions held with the Company immediately after the consummation of the transactions contemplated by the purchase agreement.  Additionally, Ms. Shepley appointed Mr. Nguyen to serve as the sole director of the Company effective immediately upon Ms. Shepley’s resignation as director, such resignation to be effective ten days following the filing of the Company’s Schedule 14f-1 with the Securities and Exchange Commission on January 19, 2011 (the “Effective Date”).  Mr. Nguyen is the Chairman of New Asia Partners, LLC (“NAP”), with voting and investment control over 90% of the shares of common stock owned by NAP and therefore may be deemed to beneficially own 3,776,850 of the Company’s common stock, representing 75.53% of the issued and outstanding common stock of the Company as of January 19, 2011. Mr. Vollmers serves as General Counsel to NAP with voting and investment control over 10% of the shares of Common Stock owned of record by NAP and therefore, may be deemed to beneficially own 419,650 of the Company’s common stock, representing 8.39% of the issued and outstanding shares of the Company’s common stock as of January 19, 2011.

On September 27, 2012, Pinnacle Investment Group, LLC ("Pinnacle"), an existing stockholder of the Company purchased an aggregate of 4,196,500 shares (the "Shares") of the Company's common stock, par value $0.0001 per share (the "Common Stock") from New Asia Partners, LLC (the "Seller" or "NAP") for an aggregate purchase price equal to $15,000 (the "Purchase Price") pursuant to the terms and conditions of a securities purchase agreement (the "Purchase Agreement") dated as of such date. On October 10, 2012, upon the closing of the transactions set forth in the Purchase Agreement (the "Closing"), and as a result of the acquisition by Pinnacle of the Shares, it owns an aggregate of 4,839,500 shares of the Company's Common Stock, representing 96.79% of the total issued and outstanding Common Stock of the Company.
 
Concurrent with this transaction:
 
NAP forgave loans due to them in the amount of $7,665.  This was recorded as additional paid in capital.
 
Outstanding accrued expenses of $5,150 were forgiven and recorded as a part of general and administrative expenses.

NOTE 7 – RELATED PARTY NOTES PAYABLE AND LOANS PAYABLE

On January 19, 2011, the Company issued promissory notes payable to four new shareholders of the Company (see Note 6) in the amount of $37,021 in exchange for those investors’ paying Ms. Shepley for her outstanding shares, thereby affecting a change in control of the Company.

These notes bear interest at 8.25% annually and are due at the earlier of (a) January 19, 2016 or (b) the date that the Company, or any wholly-owned subsidiary of the Company, consummates a business combination with an operating company in a reverse merger or reverse takeover transaction, or enters into any transaction that would cause the Company to cease being a shell as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.  In addition to the principal amount of $37,021, as of February 28, 2013 and February 29, 2012 there was $6,452 and $3,398, respectively, of accrued interest on these notes.

During the year ended February 29, 2012, a shareholder paid expenses on behalf of the Company of $7,956.  During the three months ended May 31, 2012, the Company repaid $291 of the loan.  The loan had a balance of $7,665 when it was forgiven by the shareholder in October 2012. The loan had a balance of $7,956 as of February 29, 2012.  This loan was unsecured, non-interest bearing and payable on demand.

During the year ended February 28, 2013, a shareholder paid expenses on behalf of the Company of $2,673.  The Company has recorded a liability as of February 28, 2013 of $2,673.  This loan is unsecured, non-interest bearing and payable on demand.
 
 
23

 

NOTE 8 - LOANS PAYABLE

The Company had an unsecured loan payable of $1,000 at February 29, 2012.  The Company repaid $939 of this loan in the April 2012 and the remaining $61 was forgiven in October 2012.  The loan was due upon demand and was non-interest bearing.

NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these financial statements were issued and determined there were none.
 
 
24

 
 
Item 9.           Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
 
Not Applicable

Item 9A.        Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of the Company’s management, including the Company’s President, Principal Financial Officer and Secretary, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report.  Based on that evaluation, the Company’s management including the Principal Executive Officer and Principal Financial Officer, concluded that the Company’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms.

Evaluation of Internal Controls and Procedures

Management is also responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
 
 
 
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions;
 
 
 
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and
 
 
 
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

As of the end the period covered by this report, the Company had not filed annual or quarterly reports within the time periods specified in the SEC’s rules, regulations and related forms since its quarterly report on Form 10-Q for the fiscal quarter ended November 30, 2011 filed with the SEC on January 9, 2012.  As of February 28, 2013, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organization of the Treadway Commission.   Based on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of February 28, 2013 as we do not have the systems and controls in place to timely produce financial statements.   
 
 
25

 
 
This annual report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act that permits us to provide only management’s report in this annual report.

Changes in Internal Controls over Financial Reporting

There have been no significant changes to the Company’s internal controls over financial reporting that occurred during our last fiscal quarter of the year ended February 28, 2013 that materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B.        Other Information

None
 
PART III
 
Item 10.         Directors, Executive Officers and Corporate Governance
 
(a) Identification of Directors and Executive Officers.

Todd Vollmers resigned as the Vice President and Secretary of the Company on May 24, 2012.
 
On October 10, 2012 (the “Closing Date”), the Company experienced a change in control and change in its board of directors and management pursuant to the terms and conditions of a securities purchase agreement, dated September 27, 2012(the “Purchase Agreement”). Pursuant to the Purchase Agreement, Dennis Nguyen, the Company’s sole officer and director immediately prior to the Closing Date, appointed Terril Peterson to serve as the President, Secretary and Treasurer of the Company, effective upon Mr. Nguyen’s resignation from all officer positions held with the Company immediately after the consummation of the transactions contemplated by the Purchase Agreement. Additionally, Mr. Nguyen appointed Mr. Peterson to serve as the sole director of the Company, effective immediately upon Mr. Nguyen’s resignation on the Closing Date.

The following table sets forth certain information regarding the Company’s sole director and executive officer:
 
Name
 
Age
 
Position Held with the Company
Terril Peterson
 
65
 
President, Secretary, Treasurer and Sole Director
 
Set forth below is a brief description of the background and business experience of our sole officer and director.
 
Terril H. Peterson, the President, Secretary, Treasurer and sole director of the Company as of October 10, 2012. Since April 2011, Mr. Terril Peterson has served as General Partner of Pinnacle Investment Group, which is an alternative asset management firm that invests in private, micro-cap and small-cap emerging growth companies. Between July 2007 and April 2011, Mr. Peterson served as the Vice President and General Manager of SoftBrands, an international software business that sells and services ERP solutions to global manufacturing companies. Prior to SoftBrands, Mr. Peterson also served as Executive Director of Manufacturing Systems for Control Data Corporations manufacturing. Mr. Peterson earned a Bachelor of Science degree in Mathematics and Computer Science from Colorado State University and a Masters in Business Administration from the University of St. Thomas.

When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Board of Directors focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated with a director.  With regard to Mr. Peterson, the Board of Directors considered his experience evaluating investments as General Partner at Pinnacle Investment Group.
 
 
26

 
 

(b)  
Significant Employees.
 
As of the date hereof, the Company has no significant employees.
 
(c)  
 Family Relationships.

There are no family relationships among directors, executive officers, or persons nominated or chosen by the issuer to become directors or executive officers.

(d)  
Involvement in Certain Legal Proceedings.
 
There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of Registrant during the past ten years.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on the Company’s review of the copies of the forms received by it during the fiscal year ended February 28, 2013, the Company believes that the following person(s) who, at any time during such fiscal year, was a director, officer or beneficial owner of more than 10% of Common Stock failed to comply with all Section 16(a) filing requirements during such fiscal year.
 
 Name
 
Number of Late Reports
 
Number of Transaction not
Reported on a Timely Basis
 
Late Report
New Asia Partners, LLC
 
1
 
1
 
Form 4
Dennis Nguyen
 
1
 
1
 
Form 4

Code of Ethics

On May 24, 2011 we adopted a formal Code of Business Conduct and Ethics that applies to our senior officers and directors (the “Code of Ethics”) that is designed to deter wrongdoing and to promote ethical conduct and full, fair, accurate timely and understandable reports that the Company files or submits to the Securities and Exchange Commission and others.  A form of the Code of Ethics was filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed with the SEC on May 31, 2011 and is incorporated herein by reference.
 
Nominating Committee

We have not adopted any procedures by which security holders may recommend nominees to our Board of Directors.
 
 
27

 

Audit Committee
 
The Board of Directors acts as the audit committee. The Company does not have a qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert.  The Company intends to continue search for a qualified individual for hire.
 
Item 11.          Executive Compensation
 
Summary Compensation Table
 
The following table sets forth the cash and other compensation paid by the Company to its officers and directors during the fiscal years ended February 29, 2012 and February 28, 2013 and through the date of this filing.

SUMMARY COMPENSATION TABLE
 
Name
 
Year
   
Salary
($)
   
Bonus
($)
   
 
Stock
Awards
($)
   
Option
Awards
($)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings
($)
   
All Other
Compensation
($)
   
Total
($)
 
Dennis Nguyen (1)
 
2013
      -       -       -       -       -       -       -       -  
Todd Vollmers (2)
 
2012
2013
2012
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
 
Terril Peterson (3)
 
2013
2012
     
-
-
     
-
-
     
-
-
     
-
-
     
-
-
     
-
-
     
-
-
     
-
-
 
 
1.  
Dennis Nguyen was appointed to serve as President and Treasurer of the Company on January 19, 2011 and as sole director effective upon the resignation of Ruth Shepley ten days later. Mr. Nguyen resigned from all officer and director positions held with the Company, effective as of October 10, 2012.
 
2.  
Todd Vollmers was appointed to serve as Vice President and Secretary of the Company on January 19, 2011. Mr. Vollmers resigned from all officer positions held with the Company on May 24, 2012.
 
3.  
Terril Peterson was appointed to serve as President, Secretary, Treasurer and sole director of the Company, effective upon Mr. Nguyen’s resignation on October 10, 2012.

Narrative Disclosure to the Summary Compensation Table

We have not entered into any employment agreement or consulting agreement with our executive officers or directors.  There are no arrangements or plans in which we provide pension, retirement or similar benefits for executive officers or directors.

Except as disclosed herein, we have not reimbursed our directors for expenses incurred in connection with attending board meetings nor have we paid any directors fees or other cash compensation for services rendered as a director in the years ended  February 28, 2013 and February 29, 2012 and through the date of this filing.

Except as disclosed herein, we do not currently compensate our officers or directors with cash, stock, options or some combination of the above, we reserve the right to provide compensation at some time in the future.  Our decision to compensate officers or directors depends on the availability of our cash resources with respect to the need for cash to further our business purposes.

 
28

 

Outstanding Equity Awards at Fiscal Year-End

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of the date of this filing.
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
OPTION AWARDS
   
STOCK AWARDS
 
 
 
 
 
 
 
 
 
 
 
 
Name
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
   
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
   
 
 
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
   
 
 
 
 
 
 
Option
Exercise
Price
($)
   
 
 
 
 
 
 
 
 
Option
Expiration
Date
   
 
 
 
Number
of
Shares
or Units
of
Stock That
Have
Not
Vested
(#)
   
 
 
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
   
 
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
   
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
 
Dennis Nguyen
    -       -       -       -       -       -       -       -       -  
Todd Vollmers
    -       -       -       -       -       -       -       -       -  
Terril Peterson
    -       -       -       -       -       -       -       -       -  

Stock Option Grants

We have not granted any stock options to the executive officers or directors since our inception.

Stock Option Plans

We did not have a stock option plan during the fiscal years ended February 28, 2013 and February 29, 2012 and through the date of this filing.
 
Compensation Committee and Insider Participation

We do not have a standing compensation committee or a committee performing similar functions, since the Board of Directors has determined not to compensate the officers and directors until such time that the Company completes a reverse merger or business combination.

Compensation Committee Report

We do not have a standing compensation committee or a committee performing similar function, and therefore do not have a compensation committee report.
 
 
29

 
 
Item 12.          Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
On the Closing Date, Pinnacle Investment Group, LLC (“Pinnacle”), an existing stockholder of the Company purchased an aggregate of 4,196,500 shares of the Company’s common stock from New Asia Partners, LLC (“NAP”) pursuant to the terms and conditions of the Purchase Agreement. Upon the closing of the transactions contemplated by the Purchase Agreement, there was a change in control of the Company on the Closing Date (the “Transaction”).

Security Ownership of Certain Beneficial Owners and Management

The following table set forth certain information with respect to the beneficial ownership of the Company’s common stock as of July 2, 2013 for (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director, nominee and executive officer of the Company and (iii) all officers and directors as a group.

Unless otherwise specified, the address of each of the beneficial owners set forth below is c/o Pinnacle Investment Group, LLC, 3017 West 97th Street, Bloomington, MN 55431.

Name and Address
 
Amount and 
Nature of
Beneficial 
Ownership (1)
   
Percentage
of Class (2)
 
Pinnacle Investment Group, LLC
   
4,839,500 
     
96.79%
 
                 
Terril H. Peterson (3)
   
4,839,500 (4)
     
96.79%
 
Ellen M. Peterson
   
4,839,500 (5)
     
96.79%
 
                 
Jeffrey Peterson
   
4,839,500 (6)
     
96.79%
 
                 
All Directors and Officers as a Group
(1 individual)
   
4,839,500 
     
96.79%
 

(1)
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise specified, each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to our common stock.
(2)
Based on 5,000,000 shares of common stock issued and outstanding
(3)
Terril Peterson serves as the President, Secretary, Treasurer and sole director of the Company.
(4)
Represents the 4,839,500 shares of common stock owned of record by Pinnacle. Mr. Terril Peterson serves as the General Partner of Pinnacle and has shared voting and investment power with respect to shares of common stock of the Company owned by Pinnacle.  Therefore Mr. Terril Peterson may be deemed to beneficially own the 4,839,500 shares of common stock owned by Pinnacle, representing 96.79% of the Company.
(5)
Represents the 4,839,500 shares of common stock owned of record by Pinnacle. Ellen Peterson serves as the General Partner of Pinnacle and has shared voting and investment power with respect to shares of common stock of the Company owned by Pinnacle. Therefore, Ellen Peterson may be deemed to beneficially own the 4,839,500 shares of common stock owned by Pinnacle, representing 96.79% of the Company.
(6)
Represents the 4,839,500 shares of common stock owned of record by Pinnacle. Mr. Jeffrey Peterson serves as the Managing Partner of Pinnacle and has shared voting and investment power with respect to shares of common stock of the Company owned by Pinnacle. Therefore, Mr. Jeffrey Peterson may be deemed to beneficially own the 4,839,500 shares of common stock owned by Pinnacle, representing 96.79% of the Company.
 
 
30

 
 
Securities Authorized for Issuance Under Equity Compensation Plans

The Company currently has not authorized any compensation plans or individual compensation arrangements.
 
Item 13.          Certain Relationships and Related Transactions, and Director Independence
 
The following includes a summary of transactions since the beginning of our 2013 fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest other than compensation, as described under Item 11 of this Annual Report.

We utilize the office space and equipment of our management at no cost.

Except as otherwise indicated herein, there have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 and Item 407(a) of Regulation S-K.

Director Independence

The Company is not a listed issuer whose securities are listed on a national securities exchange, or an inter-dealer quotation system which has requirements that a majority of the board of directors be independent.  Under NASDAQ Rule 5605(a)(2)(A), a director is not considered to be independent if he or she also is an executive officer or employee of the corporation.  Under such definition, Dennis Nguyen, our sole director from January 29, 2011 to October 10, 2012, and the director who succeeded him, Terril Peterson, would not be considered independent as they have also served as officers of the Company.
 
Item 14.          Principal Accounting Fees and Services
 
Below is the table of audit fees billed by Baker Tilly Virchow Krause, LLP "(BTVK")in connection with the audit of the Company’s annual financial statements and quarterly reviews for the year ended:

   
Audit Services
   
Audit Related Fees
   
Tax Fees
   
Other Fees
 
February 29, 2012
  $ 5,150 (1)     -       -       -  
February 28, 2013
  $ -       -       -       -  

(1) During the year ended February 28, 2013 BTVK forgave these fees as a result of the change of control of the Company described in Item 12.

Audit Committee’s Pre-Approval Process

The Board of Directors acts as the audit committee of the Company, and accordingly, all services are approved by all the members of the Board of Directors
 
 
31

 
 
PART IV
 
Item 15.          Exhibits, Financial Statements Schedules
 
(a) We set forth below a list of our audited financial statements included in Item 8 of this annual report on Form 10-K.

Statement
 
Page*
     
Report of Independent Registered Public Accounting Firm
 
15
     
Balance Sheets as of February 28, 2013 and February 29, 2012
 
16
     
Statements of Operations for the years ended February 28, 2013 and February 29, 2012, and the period from inception (February 24, 2010) to February 28, 2013
 
17
     
Statement of Stockholders’ Deficit for period from inception (February 24, 2010) to February 28, 2013
 
18
     
Statements of Cash Flows for the years ended February 28, 2013 and February 29, 2012, and the period from inception (February 24, 2010) to February 28, 2013
 
19
     
Notes to Financial Statements
 
20
 
__________
*Page F-1 follows page 11 to this annual report on Form 10-K.
 
(b) Index to Exhibits required by Item 601 of Regulation S-K.
 
Exhibit
 
Description
     
*3.1
 
Articles of Incorporation
     
*3.2
 
By-laws
     
**4.1
 
Form of Promissory Note, dated January 19, 2011, issued to Purchasers
     
**10.1
 
Securities Purchase Agreement, dated January 19, 2011
     
**10.2 
 
Repurchase Agreement, dated January 19, 2011
     
***14.1   
 
Code of Ethics
     
31.1
 
Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Annual Report on Form 10-K for the year ended February 28, 2013
     
31.2
 
Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Annual Report on Form 10-K for the year ended February 28, 2013
     
32.1
 
Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
32.2
 
Certification of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
     
101.INS
 
XBRL INSTANCE DOCUMENT
     
101.SCH
 
XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
     
101.CAL
 
XBRL TAXONOMY CALCULATION LINKBASE DOCUMENT
     
101.DEF
 
XBRL TAXONOMY DEFINITION LINKBASE DOCUMENT
     
101.LAB
 
XBRL TAXONOMY LABEL LINKBASE DOCUMENT
     
101.PRE
 
XBRL TAXONOMY PRESENTATION LINKBASE DOCUMENT

*
Filed as an exhibit to the Company's registration statement on Form 10, as filed with the SEC on April 6, 2010, and incorporated herein by this reference.

**
Filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on January 25, 2011, and incorporated herein by this reference.

***
Filed as an exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on May 31, 2011, and incorporated herein by this reference.

 
32

 
 
SIGNATURES
 
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: July 2, 2013
 
DE ACQUISIITON 2, INC.
 
/s/ Terril Peterson        
 
Terril Peterson
 
Principal Executive Officer
 
Principal Financial Officer

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
   
Title
 
Date
         
/s/ Terril Peterson
 
President, Secretary, Treasurer and Sole Director  
 
July 2, 2013
Terril Peterson  
       
         
 
 
33