UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED: March 31, 2012

 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

 

For the transition period from ______ to_______

 

Commission file number 333-153589

EXERCISE FOR LIFE SYSTEMS, INC.

(Name of small business issuer in its charter)

 

NORTH CAROLINA	22-3464709
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
POB 17 STN Site 24 De Winton, AB	T0L 0X0
(Address of principal executive offices)	(Zip Code)

 

Registrant’s telephone number, including area code:  (403) 992-3161

 

Securities registered under Section 12(b) of the Exchange Act:		None
Securities registered under Section 12(g) of the Exchange Act:		Common stock, par value $0.0001 per share
		(Title of Class)

  

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 [x]  No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]

 

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

 

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	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 [ ] No [x]

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of March 31, 2012, the issuer had 40,000,000 shares of its common stock issued and outstanding.

  

  

INDEX TO FORM 10-Q

PART I	Page No.
Item 1.  Financial Statements	F-1
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	4
Item 4. Controls and Procedures	4
PART II
Item 1.  Legal Proceedings	5
Item 1A. Risk Factors	5
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	5
Item 3.  Defaults Upon Senior Securities	5
Item 4.  Mining Safety Disclosures	6
Item 5.  Other Information	6
Item 6.  Exhibits	6
Signatures	6

 

 

  PART 1 – FINANCIAL INFORMATION

 

 Item 1. Financial Statements

 

Index to Unaudited Financial Statements

 

		Pages
Unaudited Balance Sheets		F-2
Unaudited Statements of Income and Comprehensive Income		F-3
Unaudited Statements of Cash Flows		F-4
Notes to Financial Statements (Unaudited)		F-5 – F-12

  

  

Exercise For Life Systems, Inc.
Unaudited Balance Sheets
As of March 31, 2012 and December 31, 2011
		March 31, 2012				December 31, 2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	—			$	—
Accounts receivable			—				—
Inventories			—				—
Investment in MMV			—				—
TOTAL CURRENT ASSETS			—				—
FIXED ASSETS
Property, plant, and equipment			13,763				13,763
Accumulated depreciation			(13,763	)			(13,763	)
NET FIXED ASSETS			—				—
TOTAL ASSETS		$	—			$	—
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	100,000			$	100,000
Notes payable			—				—
Notes payable - related parties			—				—
Due to related parties			—				—
Interest payable			—				—
Taxes payable			—				—
Contingent liability			—				—
TOTAL CURRENT LIABILITIES			100,000				100,000
TOTAL LIABILITIES			100,000				100,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock ($.0001 par value, 100,000,000 authorized, 40,000,000 and 40,000,000 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively)			4,000				4,000
Additional paid in capital			743,665				743,665
Accumulated deficit			(847,665	)			(847,665	)
TOTAL STOCKHOLDERS' EQUITY			(100,000	)			(100,000	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	—			$	—
See accompanying notes to these financial statements

 

 

Exercise For Life Systems, Inc.
Unaudited Statements of Income and Comprehensive Income
For the three months ended March 31, 2012 and 2011
			For the three months ended
			March 31, 2012				March 31, 2011
							(restated)
Revenues
Sales			$	—			—
Cost of sales				—			—
Gross profit				—			—
Operating expenses
Selling, general and administrative expenses				—			309
Professional and consulting fee				—			483,029
Total Operating Expenses				—			483,338
Loss from operations				—			(483,338	)
Other income (expenses)
Interest expense				—			—
(Loss) on extinguishment of convertible debt				—			(21,000	)
Total other income (expenses)				—			(21,000	)
Loss before income taxes				—			(504,338	)
Income taxes				—			—
Net (Loss)			$	—			(504,338	)
Other comprehensive income
Foreign currency translation adjustment				—			—
Comprehensive income			$	—			—
Earnings per common share
Basic			$	**			(0.02	)
Weighted average common shares outstanding
Basic				40,000,000			25,776,025
** Less than $.01 per share

 

See accompanying notes to these financial statements

  

 

Exercise For Life Systems, Inc.
Unaudited Statements of Cash Flows
For the three months ended March 31, 2012 And 2011
		For the three months ended
		March 31, 2012				March 31, 2011
						(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income			—				(504,338	)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation			—				309
Stock based compensation, non-cash			—				502,880
(Loss) on extinguishment of convertible debt			—				—
Changes in operating assets and liabilities:
Inventories			—				—
Accounts payable			—				—
Interest payable			—				—
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			—				(1,149	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipt from due from related party			—				—
Purchase of property, plant, and equipment			—				—
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable			—				—
Due to related party			—				—
Contribution in additional paid in capital			—				—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			—				—
Foreign currency adjustment			—				—
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			—				(1,149	)
CASH AND CASH EQUIVALENTS:
Beginning of period			—				1,149
End of period		$	—			$	—
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Conversion of Accounts Payable to Notes Payable for consulting services		$	—			$	—
See accompanying notes to these financial statements

  

 

Exercise For Life Systems, Inc.

Notes To Financial Statements

March 31, 2012

(Unaudited)

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

  

2. ORGANIZATION AND BUSINESS BACKGROUND

 

Exercise For Life Systems Inc. (the “Company”) was originally incorporated in the State of North Carolina on October 2, 2006 as A.J. Glaser, Inc. On June 12, 2008, the Company filed Articles of Amendment to change the name of the Company to Exercise For Life Systems Inc.

 

On February 10, 2011, the Company entered into a Plan of Exchange agreement with MediaMatic Ventures Inc., a privately-held company incorporated under the laws of the Province of Alberta, Canada (“MMV”), and the shareholders of MMV (“MMV Shareholders”). Pursuant to the agreement, the Company purchased all 15,685,692 of the issued and outstanding common shares of MMV from the MMV shareholders in exchange for issuing 28,000,000 shares of the Company’s common stock to MMV shareholders, which gave MMV shareholders an interest in the Company representing approximately 70% of the then issued and outstanding shares of the Company. However the deal was recinded and cancelled and hence the merger was never consummated and the financials have been restated not to include the merger.

  

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) under the accrual basis of accounting.

 

Use of Estimates

 

Financial statements prepared in accordance with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

 

Cash and Cash Equivalents

 

Cash equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits.

  

Equipment, net

 

Equipment is stated at cost. Capital expenditures for improvements and upgrades to existing equipment are also capitalized. Maintenance and repairs are expensed as incurred. Equipment is depreciated over the estimated useful life of five years on straight-line basis.  

 

Long-Lived Assets

 

In accordance with ASC 350-30 (formerly SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets), the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their then carrying values may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s management currently believes there is no impairment of its long-lived assets. There can be no assurance however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

 

Fair Value of Financial Instruments

 

ASC 820-10 (formerly SFAS No. 157, Fair Value Measurements) requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2012 and December 31, 2011, the carrying value of certain financial instruments such as accounts receivable, accounts payable, accrued expenses, and amounts due to/from related party approximates fair value due to the short-term nature of such instruments.

 

Revenue Recognition

 

The Company recognizes net revenue from DVD movie rentals on a ratable basis during the term of a consumer’s rental transaction. Revenue from a direct sale out of the kiosk of previously rented movies is recognized at the time of sale. On rental transactions for which the related DVDs have not yet been returned to the kiosk at month-end, revenue is recognized with a corresponding receivable recorded in the balance sheet, net of a reserve for potentially uncollectible amounts. We record revenue net of refunds and applicable sales taxes collected from consumers.

 

 

Income taxes

 

As a result of the implementation of certain provisions of ASC 740, Income   Taxes, (formerly FIN 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109) , (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined.  ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes.  We adopted the provisions of ASC 740 as of January 1, 2007, and have analyzed filing positions in the Canadian jurisdiction where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions.  We have identified Alberta, Canada as our "major" tax jurisdictions.  Generally, we remain subject to Canadian examination of our income tax returns.

 

We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position.  Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.  In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740.  Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.

 

Our tax provision for interim periods is determined using an estimate of our annual effective tax rate based on rates established within Canada and, adjusted for discrete items, if any, that are taken into account in the relevant period.  Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.  The 2011 annual effective tax rate is estimated to be 28% Canadian.

 

Net (Loss) Income per Common Share – Basic and Diluted

 

Net (loss) income per common share is computed based on the weighted average number of shares outstanding for the period. As of March 31, 2012 and December 31, 2011, the Company had 40,000,000 shares outstanding. Additionally, there were no adjustments to net income to determine net income available to common stockholders.  As such, basic net income per common share equals net income, as reported, divided by the weighted average common shares outstanding for the respective periods.  There were no dilutive common stock equivalents as of March 31, 2012 and December 31, 2011.

 

Related parties

 

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence. A material related party transaction has been identified in Note 8 in the financial statements.

 

Recent Accounting Pronouncements

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

 

 

Credit Quality of Financing Receivables and the Allowance for Credit Losses

 

In July 2010, the Financial Accounting Standards Board (“FASB”) amended the requirements for Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are effective for the fiscal year ending December 31, 2010, while the disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter of 2011. The adoption of this guidance did not impact the Company’s consolidated results of operations or financial position.

 

Fair Value Measurements and Disclosures

 

In January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value roll forward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance did not impact the Company’s consolidated results of operations or financial position.

 

4. COMMON STOCK

 

Overall the Company issued in 2011 28,447,950 shares .

 

Common stock issued to settle convertible loan

 

On February 10, 2011, the Company issued 2,100,000 shares of its common stock to settle the loan of $21,000 from a third party, which were accrued expenses due to the services rendered in connection with a reverse merger transaction and SEC compliance 10-K, 10-Q and Edgarization.

 

The loan holder had the option to convert the loan into common stock of the Company at the price of $.01 per share by August 2, 2011.

 

The fair value of this stock issuance was $42,000 determined using the fair value of the Company’s common stock on the grant date, at a market quoted price of $.02. The difference between the fair market value and the conversion price of $.01 per share was recognized as loss on extinguishment of convertible debt.

 

In February the Company issued 18,115,270 shares @.02 the market price for a failed merger resulting in an expense of $362,305. The shares issued were later transferred to the new president and the Company has expensed these as stock for services.

 

In February the Company issued 3,375,734 shares to pay off accrued liabilities of $45,079 and pay $22,436 in consulting fees.

 

 

Finally, the Company issued 4,856,946 for services valued at market @..02 cents per share resulting in an expense of $97,139.

  

5. GOING CONCERN UNCERTAINTIES

 

These financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

As of March 31, 2012, the Company had an accumulated deficit of $847,665. Management has taken certain action and continues to implement changes designed to improve the Company’s financial results and operating cash flows.  The actions involve certain cost-saving initiatives and growing strategies, including (a) reductions in headcount and corporate overhead expenses; and (b) expansion into new market.  Management believes that these actions will enable the Company to improve future profitability and cash flow in its continuing operations through December 31, 2012.  As a result, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.

 

6: CORRECTION OF ERRORS AND RESTATEMENT

 

Due to a recission, by The Company, of the Plan of Exchange agreement with MediaMatic Ventures Inc., a privately-held company incorporated under the laws of the Province of Alberta, Canada (“MMV”), the agreement both consummated and rescinded in the 1^st Qtr of 2011, the March 31, 2011 balance sheet, income statement and statement of cash flows have been restated to reflect The Company’s financials absent any impact of the Plan of Exchange Agreement.

 

 

EXERCISE FOR LIFE SYSTEMS, INC.

BALANCE SHEET

 

		As of March 31, 2011
		Restated				Adjustments				As Filed
ASSETS
CURRENT ASSETS
Cash and Cash Equivalent			—				(23,410	)			23,410
Accounts Receivable			—				(54,154	)			54,154
Inventories			—				(1,261,100	)			1,261,100
Prepaid expenses			—				(21,961	)			21,961
TOTAL CURRENT ASSETS			—				(1,360,625	)			1,360,625
FIXED ASSETS
Property, plant & equipment			13,763				(4,822,142	)			4,835,905
Accumulated depreciation			(13,763	)			986,229				(999,992	)
NET FIXED ASSETS			—				(3,835,913	)			3,835,913
TOTAL ASSETS			—				(5,196,538	)			5,196,538
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts Payable			—				(797,319	)			797,319
Notes Payable			—				(525,000	)			525,000
Notes Payable – related parties			—				(506,035	)			506,035
Due to related parties			—				(136,631	)			136,631
Interest Payable			—				(38,966	)			38,966
Taxes Payable			—				(38,171	)			38,171
Contingent Liability			—				(3,107,301	)			3,107,301
TOTAL CURRENT LIABILITIES			—				(5,149,423	)			5,149,423
TOTAL LIABILITIES			—				(5,149,423	)			5,149,423
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock ($.0001 par value, 100,000,000  authorized, 40,000,000 and 11,552,050 shares issued and outstanding as of March 31, 2011 and December 31, 2010 respectively)			4,000				—				4,000
Additional Paid in Capital			743,685				(1,777,202	)			2,120,887
Accumulated Other Comprehensive Income			—				(131,649	)			131,649
Accumulated Deficit			(747,685	)			1,461,736				(2,209,421	)
TOTAL STOCKHOLDERS’ EQUITY			—				(47,115	)			47,115
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			—				(5,196,538	)			5,196,538

  

 

 

EXERCISE FOR LIFE SYSTEMS, INC.

STATEMENT OF OPERATIONS

 

		For The Three Months Ended March 31, 2011
		Restated				Adjustments				As Filed
REVENUES
Sales			—				(1,081,265	)			1,081,265
Cost of Sales			—				406,882				(406,882	)
GROSS PROFITS			—				(674,383	)			674,383
OPERATING EXPENSES
Selling, general and administrative expenses			309				(781,159	)			781,468
Professional and consulting fee			483,029				363,454				119,575
TOTAL OPERATING EXPENSES			483,338				(417,705	)			901,043
INCOME FROM OPERATIONS			(483,338	)			(256,678	)			(226,660	)
OTHER INCOME (EXPENSES)
Finance income (expenses)			—				21,697				(21,697	)
(Loss) on extinguishment of convertible debt			(21,000	)			—				(21,000	)
TOTAL OTHER INCOME (EXPENSES)			(21,000	)			21,697				(42,697	)
INCOME (LOSS) BEFORE TAXES			(504,338	)			(234,981	)			(269,357	)
INCOME TAXES			—				—				—
NET (LOSS)			(504,338	)			(234,981	)			(269,357	)
Earnings per common share
Basic			(0.01	)			—				(0.01	)
Weighted average common shares outstanding
Basic			40,000,000				—				40,000,000

 

EXERCISE FOR LIFE SYSTEMS, INC.

STATEMENT OF CASH FLOWS

 

		For The Three Months Ended March 31, 2011
		Restated				Adjustments				As Filed
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income			(504,338	)			(234,981	)			(269,357	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			309				(263,849	)			264,158
Stock based compensation, non-cash			502,880				383,305				119,575
(Loss) on extinguishment of Convertible debt			—				(21,000	)			21,000
Changes in operating assets and liabilities			—				—				—
Inventories			—				378,328				(378,328	)
Interest payable			—				(21,695	)			21,695
NET CASH PROVIDED BY OPERATING ACTIVITIES			(1,149	)			222,406				221,257
CASH FLOWS FROM INVESTING ACTIVITIES:
NET CASH PROVIDED BY (USED IN ) INVESTING ACTIVITIES			—				—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable			—				(175,000	)			175,000
Due to related party			—				(20,414	)			20,414
Contribution in additional paid in capital			—				(5,040	)			5,040
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			—				(200,454	)			200,454
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS		$	(1,149	)		$	19,654			$	(20,803	)
CASH AND CASH EQUIVALENTS:
Beginning of period		$	1,149			$	(43,064	)		$	44,213
End of period			—				(23,410	)			23,410

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward Looking Statements

 

Certain statements in this report, including statements of our expectations, intentions, plans and beliefs, including those contained in or implied by "Management's Discussion and Analysis" and the Notes to Financial Statements, are "forward-looking statements", within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are subject to certain events, risks and uncertainties that may be outside our control. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”, “will”, and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. These forward-looking statements include statements of management's plans and objectives for our future operations and statements of future economic performance, information regarding our expansion and possible results from expansion, our expected growth, our capital budget and future capital requirements, the availability of funds and our ability to meet future capital needs, the realization of our deferred tax assets, and the assumptions described in this report underlying such forward-looking statements. Actual results and developments could differ materially from those expressed in or implied by such statements due to a number of factors, including, without limitation, those described in the context of such forward-looking statements, our expansion strategy, our ability to achieve operating efficiencies, our dependence on distributors, capacity, suppliers, industry pricing and industry trends, evolving industry standards, domestic and international regulatory matters, general economic and business conditions, the strength and financial resources of our competitors, our ability to find and retain skilled personnel, the political and economic climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed with the Securities and Exchange Commission (the "Commission"). Additional factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to: 1) our ability to successfully develop and deliver our products on a timely basis and in the prescribed condition; 2) our ability to compete effectively with other companies in the same industry; 3) our ability to raise sufficient capital in order to effectuate our business plan; and 4) our ability to retain our key executives.

 

Overview

 

As used herein the terms "We", the "Company", "EFLS", the "Registrant," or the "Issuer" refers to Exercise For Life Systems Inc. We were originally incorporated in the State of North Carolina on October 2, 2006 as A.J. Glaser, Inc. On June 12, 2008, the Company filed Articles of Amendment to change the name of the Company to Exercise For Life Systems Inc.

 

Plan of Operations

 

Our strategy is to pursue selected opportunities that are characterized by reasonable entry costs within locations, favorable economic terms and the availability of existing technological data that may be further developed using current technology.  

 

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

 

Revenues

 

We generated no revenues in 2012 or 2011.

 

Cost of Revenues

 

We had no cost of revenues in 2012 and 2011. .  

 

Total operating expenses

 

During the three months ended March 31, 2012 AND 2011, total operating expenses were approximately $0 and $483,338 respectively.  The increase by $483,338 in the first quarter of 2012 was primarily attributable to the non-cash compensation, which was $481,880 for the three months ended March 31, 2012.

 

Total other expenses

 

During the three months ended March 31, 2012 AND 2011, total other expenses were approximately $0 and $21,000, respectively.  The increase related to other expense was due to debt cost.

 

On February 10, 2011, we issued 2,100,000 shares of our common stock to settle the loan of $21,000 from a third party, which were accrued expenses due to the services rendered in connection with a reverse merger transaction and SEC compliance 10-K, 10-Q and Edgarization. The fair value of this stock issuance was $42,000 determined using the fair value of the Company’s common stock on the grant date, at a market quoted price of $.02. The difference between the fair market value and the conversion price of $.01 per share was recognized as loss on extinguishment of convertible debt.

 

Net (loss)/income

 

During the three months ended March 31, 2011, we had net loss of $504,338 compared to net loss of $0 during the comparable period in 2012.  

  

Liquidity and Capital Resources

 

Cash flows used in operating activities were $1,149 for the three months ended March 31, 2011, compared to cash flows of $0 used by the operating activities during the comparable period in 2012. Negative cash flows from operations for the three months ended March 31, 2011 were due primarily to the net loss of $504,338 caused by Stock based compensation of $502,880 including debt retirement.

 

Off-balance sheet arrangements

 

We have no off-balance sheet arrangements.

 

  

Critical Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts during the reporting periods.  Actual results could differ from those estimates. Significant estimates and assumptions included in our financial statements relate to estimate of loss contingencies and accrued other liabilities.

 

Fair Value of Financial Instruments

 

ASC 820-10 (formerly SFAS No. 157, Fair Value Measurements) requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2011and December 31, 2010, the carrying value of certain financial instruments such as accounts receivable, accounts payable, accrued expenses, and amounts due to/from related party approximates fair value due to the short-term nature of such instruments.

 

Impairment of Long-Lived Assets

 

In accordance with ASC 350-30 (formerly SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets), the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their then carrying values may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s management currently believes there is no impairment of its long-lived assets. There can be no assurance however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.

 

ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK RISKS RELATED TO OUR BUSINESS

 

The information to be reported under this item is not required of smaller reporting companies.

  

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

 

 

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures are effective as of March 31, 2012 to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal controls over financial reporting identified in connection with the requisite evaluation that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II  

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

The information to be reported under this item has not changed since the previously filed 10K, for the year ended December 31, 2011.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None during the three months ended March 31, 2012.

  

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

 

ITEM 4. MINING SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

			Incorporated by reference
Exhibit	Exhibit Description	Filed herewith	Form	Period ending	Exhibit	Filing date
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	EXERCISE FOR LIFE SYSTEMS INC.
	(Registrant)
Date:  April 30, 2014	By: /s/ John Newman John Newman   (On behalf of the Registrant and as Principal Executive Officer)