UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30,
2014
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ___________
to ___________
Commission File No. 000-53286
CENTAURUS
DIAMOND TECHNOLOGIES, INC. |
(Exact name of registrant as
specified in its charter) |
Nevada |
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71-1050559 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
1000 W. Bonanza Rd.
Las Vegas, Nevada 89106
(Address of principal executive offices, zip
code)
(702) 382-3385
(Registrant’s telephone number, including
area code)
____________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the issuer
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes [ ] No [x]
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. (check one):
Large accelerated filer |
[ ] |
Accelerated filer |
[ ] |
Non-accelerated filer |
[ ] |
Smaller reporting company |
[x] |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2 of the Exchange Act): Yes [ ] No [x]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 2014, there were 73,000,000
shares of common stock, $0.001 par value per share, outstanding.
CENTAURUS DIAMOND TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED September 30, 2014
INDEX
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Part I. Financial Information |
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Item 1. |
Financial Statements |
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Consolidated Condensed Balance Sheets as of September 30, 2014 (unaudited) and
March 31, 2014. |
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F-1 |
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Consolidated Condensed Statements of Operations for the three and six months ended September
30, 2014 and 2013.(Unaudited) |
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F-2 |
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Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2014
and 2013.( Unaudited) |
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F-3 |
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Notes to Unaudited Consolidated Condensed Financial Statements |
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F-4 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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3 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk. |
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13 |
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Item 4. |
Controls and Procedures. |
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14 |
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Part II. Other Information |
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Item 1. |
Legal Proceedings. |
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15 |
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Item 1A. |
Risk Factors. |
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15 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
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15 |
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Item 3. |
Defaults Upon Senior Securities. |
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15 |
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Item 4. |
Mine Safety Disclosures. |
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15 |
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Item 5. |
Other Information. |
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15 |
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Item 6. |
Exhibits. |
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15 |
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Signatures |
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16 |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Centaurus
Diamond Technologies, Inc., a Nevada corporation, contains “forward-looking statements,” as defined in the United
States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology
such as “may”, “will”, “should”, “could”, “expects”, “plans”,
“intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”
or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements
include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures
as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements.
The economic environment within which we operate could materially affect our actual results.
Our management has included projections and
estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results
of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC
or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated
events.
All references in this Form 10-Q to the “Company”, “Centaurus
Diamond Technologies, Inc.”, “Centaurus Diamond Technologies,” “we”, “us,” or “our”
are to Centaurus Diamond Technologies, Inc.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
Centaurus Diamond Technologies, Inc.
Consolidated Balance Sheets
| |
September 30, 2014 | |
March 31, 2014 |
ASSETS | |
| | | |
| | |
CURRENT ASSETS: | |
| | | |
| | |
Cash | |
$ | 1,743 | | |
$ | 303 | |
Prepayments and other current assets | |
| — | | |
| — | |
| |
| | | |
| | |
Total Current Assets | |
| 1,743 | | |
| 303 | |
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| | | |
| | |
PROPERTY AND EQUIPMENT | |
| | | |
| | |
Property and equipment | |
| 8,000 | | |
| 8,000 | |
Accumulated depreciation | |
| (3,600 | ) | |
| (2,800 | ) |
| |
| | | |
| | |
Property and equipment, net | |
| 4,400 | | |
| 5,200 | |
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PATENT | |
| | | |
| | |
Patent | |
| 6,982 | | |
| 6,982 | |
Accumulated amortization | |
| (1,305 | ) | |
| (1,131 | ) |
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| | |
Patent, net | |
| 5,677 | | |
| 5,851 | |
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| | | |
| | |
Total Assets | |
$ | 11,820 | | |
$ | 11,354 | |
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LIABILITIES AND STOCKHOLDERS' DEFICIT | |
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CURRENT LIABILITIES: | |
| | | |
| | |
Accrued expenses and other current liabilities | |
$ | 5,000 | | |
$ | 4,749 | |
Advances from stockholders | |
| 91,510 | | |
| 47,994 | |
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| | | |
| | |
Total Current Liabilities | |
| 96,510 | | |
| 52,743 | |
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Total Liabilities | |
| 96,510 | | |
| 52,743 | |
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STOCKHOLDERS' DEFICIT: | |
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Preferred stock par value $0.001: 10,000,000 shares authorized; none issued
or outstanding | |
| — | | |
| — | |
Common stock par value $0.001: 450,000,000 shares authorized; 73,000,000
shares issued and outstanding | |
| 73,000 | | |
| 73,000 | |
Additional paid-in capital | |
| 429,033 | | |
| 429,033 | |
Accumulated deficit | |
| (586,723 | ) | |
| (543,422 | ) |
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Total Stockholders' Deficit | |
| (84,690 | ) | |
| (41,389 | ) |
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Total Liabilities and Stockholders' Deficit | |
$ | 11,820 | | |
$ | 11,354 | |
See accompanying notes to the consolidated financial statements.
Centaurus Diamond Technologies, Inc. |
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Consolidated Condensed Statements of Operations |
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For the Three Months | |
For the Three Months | |
For the Six Months | |
For the Six Months |
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Ended | |
Ended | |
Ended | |
Ended |
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September 30, 2014 | |
September 30, 2013 | |
September 30, 2014 | |
September 30, 2013 |
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(unaudited) | |
(unaudited) | |
(unaudited) | |
(unaudited) |
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Revenue | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
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Operating Expenses | |
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Consulting fees | |
| 5,000 | | |
| 2,300 | | |
| 11,000 | | |
| 6,300 | |
Professional fees | |
| 6,825 | | |
| 4,550 | | |
| 6,975 | | |
| 9,275 | |
Rent - related party | |
| 2,880 | | |
| — | | |
| 3,855 | | |
| 5,000 | |
General and administrative expenses | |
| 12,602 | | |
| 5,023 | | |
| 21,471 | | |
| 15,189 | |
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Total operating expenses | |
| 27,307 | | |
| 11,873 | | |
| 43,301 | | |
| 35,764 | |
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Loss from Operations and before Income Tax Provision | |
| (27,307 | ) | |
| (11,873 | ) | |
| (43,301 | ) | |
| (35,764 | ) |
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Income Tax Provision | |
| — | | |
| — | | |
| — | | |
| — | |
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Net Loss | |
$ | (27,307 | ) | |
$ | (11,873 | ) | |
$ | (43,301 | ) | |
$ | (35,764 | ) |
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Net Loss per Common Share - basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
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Weighted average common shares outstanding: | |
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| | | |
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- basic and diluted | |
| 73,000,000 | | |
| 73,000,000 | | |
| 73,000,000 | | |
| 73,000,000 | |
See accompanying notes to the consolidated financial statements.
Centaurus Diamond Technologies, Inc.
Consolidated Statements of Cash Flows
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For the Six Months Ended September 30, 2014 | |
For the Six Months Ended September 30, 2013 |
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(Unaudited) | |
(unaudited) |
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CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (43,301 | ) | |
$ | (35,764 | ) |
Adjustments to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
Depreciation expense | |
| 800 | | |
| 800 | |
Amortization expense | |
| 174 | | |
| 174 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepayments and other current assets | |
| — | | |
| 2,500 | |
Accrued expenses and other current liabilities | |
| 251 | | |
| — | |
Net cash used in operating activities | |
| (42,076 | ) | |
| (32,290 | ) |
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CASH FLOWS FROM FINANCING ACTIVITIES: | |
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Amounts from (repayment to) stockholders | |
| 43,516 | | |
| 10,264 | |
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Net cash provided by financing activities | |
| 43,516 | | |
| 10,264 | |
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Net change in cash | |
| 1,440 | | |
| (22,026 | ) |
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Cash at beginning of the reporting period | |
| 303 | | |
| 22,832 | |
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| | | |
| | |
Cash at end of the reporting period | |
$ | 1,743 | | |
$ | 806 | |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | |
| | | |
| | |
Interest paid | |
$ | — | | |
$ | — | |
Income tax paid | |
$ | — | | |
$ | — | |
See accompanying notes to the consolidated financial statements.
Centaurus Diamond Technologies, Inc.
June 30, 2014 and 2013
Notes to Unaudited Consolidated Condensed
Financial Statements
Note 1 – Organization and Operations
Centaurus Diamond Technologies, Inc.
(Formerly Sweetwater Resources, Inc.)
Sweetwater Resources, Inc. ("Sweeter")
was incorporated under the laws of the State of Nevada on July 24, 2007.
On July 9, 2012, Sweetwater amended its Articles
of Incorporation and changed its name to Centaurus Diamond Technologies, Inc. (“Centaurus” or the “Company”).
Innovative Sales
Innovative Sales (“Innovative”)
was incorporated on July 27, 2001 under the laws of the State of Nevada. The Company engages in the business of research and development
of industrial grade cultured diamonds that are chemically, optically and physically the same as their natural counterparts .
Acquisition of Innovative Sales
Treated as a Reverse Acquisition
On June 5, 2012 (the "Closing Date"),
the Company closed an asset acquisition pursuant to the terms of the Asset Acquisition Agreement (the "Acquisition Agreement")
by and between the Company and Innovative, whereby the Company acquired all of the assets of Innovative consisting of a cultured
diamond technology patent and related intellectual property (the "Assets") in exchange for: (a) 43,850,000 shares (the
"Consideration Shares") of Centaurus's restricted common stock (the "Acquisition") (these shares were issued
on June 7, 2012), (b) Centaurus's assumption of certain debt of Innovative in an amount not to exceed $100,000, (c) the satisfaction
of all of Centaurus's debts and liabilities as of the Closing Date, and (d) Centaurus's simultaneous close on a private placement
(the "Private Placement") of Centaurus's common stock and warrants to purchase shares of Centaurus's common stock for
gross proceeds of at least $500,000, plus the amount necessary to pay any of Centaurus's remaining pre-closing debts, including,
but not limited to, all legal and accounting costs associated with the preparation and filing of Centaurus's Annual Report on
Form 10-K for the fiscal year ended March 31, 2012. The shares issued represented approximately 60.1% of the issued and outstanding
common stock immediately after the consummation of the Acquisition Agreement.
As a result of the controlling financial interest
of the former stockholder of Innovative, for financial statement reporting purposes, the merger between the Company and Innovative
has been treated as a reverse acquisition with Innovative deemed the accounting acquirer and the Company deemed the accounting
acquiree under the acquisition method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification.
The reverse acquisition is deemed a capital transaction and the net assets of Innovative (the accounting acquirer) are carried
forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the acquisition. The acquisition
process utilizes the capital structure of the Company and the assets and liabilities of Innovative which are recorded at their
historical cost. The equity of the Company is the historical equity of Innovative retroactively restated to reflect the number
of shares issued by the Company in the transaction.
Note 2 – Significant and Critical
Accounting Policies and Practices
The Management of the Company is responsible
for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application.
Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial
condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the
need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical
accounting policies and practices are disclosed below as required by generally accepted accounting principles.
Basis of Presentation - Unaudited Interim Financial Information
The accompanying unaudited interim consolidated financial statements
and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) for the interim financial information, and with the rules and regulations of the United States Securities
and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial
statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management,
necessary to a fair statement of the results for the interim period presented. Unaudited consolidated interim results are not
necessarily indicative of the results for the full fiscal year. These unaudited condensed consolidated financial statements should
be read in conjunction with the audited financial statements of the Company for the reporting period ended March 31, 2014 and
notes thereto contained in the information filed as part of the Company’s Form 10-K, which was filed on July 14, 2014.
Principles of Consolidation
The Company applies the guidance of Topic
810 “Consolidation” of the FASB Accounting Standards Codification to determine
whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all
majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated
except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope
of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of
a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8 the usual condition
for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by
one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a
condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example,
by contract, lease, agreement with other stockholders, or by court decree . The Company consolidates all
less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.
The Company's consolidated subsidiary
and/or entity is as follows:
Name of consolidated subsidiary or entity | |
State or other jurisdiction of incorporation or organization | |
Date
of incorporation or formation (date of acquisition, if applicable) | |
Attributable interest |
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| |
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| | |
Innovative Sales | |
The State of Nevada | |
July 27, 2001 | |
| 100 | % |
The consolidated financial statements include
all accounts of the Company and Innovative Sales as of June 30, 2014 and 2013 and for the reporting periods then ended.
All inter-company balances and transactions
have been eliminated.
Development Stage Company
The Company is a development stage company
as defined by section 915-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
. The Company is still devoting substantially all of its efforts on establishing the business and still qualifies as a development
stage company. All losses accumulated since inception have been considered as part of the Company’s development stage activities.
The Company is considered a development stage
company . The Company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities
(Topic 915): Elimination of Certain Financial Reporting Requirements. Upon adoption, the Company no longer presents or discloses
inception-to-date information and other remaining disclosure requirements of Topic 915.
Use of Estimates and Assumptions
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical accounting estimates are estimates
for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly
uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or
operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements
were:
(i) | | Assumption as a going concern : Management assumes that the Company will continue
as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the
normal course of business. |
(ii) | | Fair value of long-lived assets : Fair value is generally determined using
the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined
to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book
values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers
the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance
or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the
manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or
changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased
competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory
changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon
the occurrence of such events. |
(iii) | | Valuation allowance for deferred tax assets : Management assumes that the realization
of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards
for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly,
the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption
based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional
funds to support its daily operations by way of a public or private offering , among other factors. |
These significant accounting estimates or assumptions bear
the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates
or assumptions are difficult to measure or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.
Management regularly evaluates the key factors
and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical
experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph
820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of
its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring
fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting
Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure
fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value
hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level 1 |
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Quoted market prices available in active
markets for identical assets or liabilities as of the reporting date. |
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Level 2 |
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Pricing inputs other than quoted prices in active
markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
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Level 3 |
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Pricing inputs that are generally observable inputs
and not corroborated by market data. |
Financial assets are considered
Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and
at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepayments and other current assets, and accrued expenses and other current liabilities
approximate their fair values because of the short maturity of the instruments.
Transactions involving related parties cannot
be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not
exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were
consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
Carrying Value, Recoverability and Impairment
of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17
of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include
property and equipment, and patent, are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of
its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group
of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any,
is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the
asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined
to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book
values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important
indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected
historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s
overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy;
(iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) regulatory
changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon
the occurrence of such events.
The impairment charges, if any, is included
in operating expenses in the accompanying statements of operations.
Fiscal Year End
The Company elected March 31 as its fiscal
year ending date.
Cash Equivalents
The Company considers all highly liquid investments
with maturities of three months or less at the time of purchase to be cash equivalents.
Property and Equipment
Property and equipment is recorded at cost.
Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred.
Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated
residual values) over the assets estimated useful life of five years. Upon sale or retirement of property and equipment, the related
cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.
Patent
The Company follows the guidelines as set
out in paragraph 350-30-25-3 and paragraph 350-30-35-6 of the FASB Accounting Standards Codification for patent. For acquired
patents the Company records the costs to acquire patents as patent and amortizes the patent acquisition cost over its remaining
legal life, or estimated useful life, or the term of the contract, whichever is shorter. For internal developed patents, all costs
incurred to the point when a patent application is to be filed are expended as incurred as research and development expense; patent
application costs, generally legal costs, thereafter incurred are capitalized, which are to be amortized once the patents are
granted or expended if the patent application is rejected. The Company amortizes the internal developed patents over the shorter
of the expected useful lives or the legal lives of the patents, which are generally 17 to 20 years for domestic patents and 5
to 20 years for foreign patents from the date when the patents are granted. The costs of defending and maintaining patents are
expended as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.
Related Parties
The Company follows subtopic 850-10 of the
FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related
parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required,
absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted
for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing
trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the
Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management
or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its
own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting
parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material
related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary
course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial
statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved;
b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of
the periods for which income statements are presented, and such other information deemed necessary to an understanding of the
effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for
which income statements are presented and the effects of any change in the method of establishing the terms from that used in
the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if
not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the
FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the
consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one
or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings
or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature
of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based
upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated
financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially
and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Income Tax Provision
The Company follows paragraph 740-10-30-2
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 the provisions of paragraph 740-10-25-13 of
the FASB Accounting Standards Codification . Paragraph 740-10-25-13 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 paragraph 740-10-25-13 , 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. Paragraph 740-10-25-13 also provides guidance on de-recognition,
classification, interest and penalties on income taxes, 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 paragraph
740-10-25-13.
The estimated future tax effects of temporary
differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well
as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded
on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition,
the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s
opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies
from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax
positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for
the reporting period ended September 30, 2014 or 2013.
Limitation on Utilization
of NOLs due to Change in Control
Pursuant to the Internal Revenue Code Section
382 (“Section 382”), certain ownership changes may subject the NOL’s to annual limitations which could reduce
or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership
change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders
in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change,
utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its
stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried
over to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause
the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire
unused, reducing or eliminating the benefit of such NOLs.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common
stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur
from common shares issuable through stock options and warrants.
The following table shows the number of potentially outstanding
dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:
| |
Potentially Outstanding Dilutive Common Shares |
| |
For Reporting Period Ended September 30, 2014 | |
For Reporting Period Ended March 31, 2014 |
| |
| | | |
| | |
Warrant Shares | |
| | | |
| | |
| |
| | | |
| | |
Warrants issued on June 5, 2012 to an institutional investor in connection with the Company’s June 5, 2012 equity financing with an exercise price of $0.75 per share expiring two (2) years from the date of issuance | |
| 1,200,000 | | |
| 1,200,000 | |
| |
| | | |
| | |
Total potentially outstanding dilutive common shares | |
| 1,200,000 | | |
| 1,200,000 | |
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24
of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether
they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect
or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards
Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating
activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected
future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash
receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current
exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported
as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides
information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph
830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent Events
The Company follows the guidance in Section
855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent
events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards
Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users,
such as through filing them on EDGAR.
Recently Issued Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08,
Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations
and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued
operations in Subtopic 205-20.
Under the new guidance, a discontinued operation
is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents
a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU
states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business,
(iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the
standard provides examples of when a disposal qualifies as a discontinued operation.
The ASU also requires additional disclosures about discontinued
operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In
addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant
component of an entity that does not qualify for discontinued operations presentation in the financial statements.
The ASU is effective for public business entities
for annual periods beginning on or after December 15, 2014, and interim periods within those years.
In May 2014, the FASB issued the FASB Accounting
Standards Update No. 2014-09 “ Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”)
This guidance amends the existing FASB Accounting
Standards Codification, creating a new Topic 606, Revenue from Contracts with Customer.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services.
To achieve that core principle, an entity
should apply the following steps:
1. | | Identify the contract(s) with the customer |
2. | | Identify the performance obligations in the contract |
3. | | Determine the transaction price |
4. | | Allocate the transaction price to the performance obligations in the contract |
5. | | Recognize revenue when (or as) the entity satisfies a performance obligations |
The ASU also provides guidance on disclosures
that should be provided to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue
recognition and cash flows arising from contracts with customers. Qualitative and quantitative information is required about the
following:
1. | | Contracts with customers – including revenue and impairments recognized,
disaggregation of revenue, and information about contract balances and performance obligations (including the transaction price
allocated to the remaining performance obligations) |
2. | | Significant judgments and changes in judgments – determining the
timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and
amounts allocated to performance obligations |
3. | | Assets recognized from the costs to obtain or fulfill a contract. |
ASU 2014-09 is effective for periods beginning after December 15, 2016, including interim reporting periods within that reporting
period for all public entities. Early application is not permitted.
In June 2014, the FASB issued ASU No. 2014-10,
Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation.
The amendments in this Update remove the definition
of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial
reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments
eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income,
cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a
description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the
entity is no longer a development stage entity that in prior years it had been in the development stage.
The amendments also clarify that the guidance in Topic 275, Risks
and Uncertainties, is applicable to entities that have not commenced planned principal operations.
Finally, the amendments remove paragraph 810-10-15-16.
Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a
variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit
it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements
allow additional equity investments.
The amendments in this Update also eliminate
an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable
interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify
U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided
to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination
of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity
that has an interest in an entity in the development stage.
The amendments related to the elimination
of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively
except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments
are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.
Early application of each of the amendments
is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet
been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer
present or disclose any information required by Topic 915.
In June 2014, the FASB issued the FASB Accounting
Standards Update No. 2014-12 “ Compensation—Stock Compensation (Topic 718) : Accounting for Share-Based
Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”
(“ASU 2014-12”).
The amendments clarify the proper method of
accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite
service period. The Update requires that a performance target that affects vesting and that could be achieved after the requisite
service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date
fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance
target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service
has already been rendered.
The amendments in this Update are effective
for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted.
Management does not believe that any other
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
Note 3 – Going Concern
The consolidated financial statements have
been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business .
As reflected in the consolidated financial
statements, the Company had an accumulated deficit at September 30, 2014, a net loss and net cash used in operating activities
for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a
going concern.
The Company is attempting to commence operations, further implement
its business plan and generate sufficient revenue; however, the Company’s cash position, if any, may not be sufficient to
support its daily operations. While the Company believes in the viability of its strategy to commence explorations, further implement
its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private
offering, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon
its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by
way of a public or private offering.
The consolidated financial statements do not
include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 – Property and Equipment
Property and equipment, stated at cost, less accumulated depreciation,
consisted of the following:
| |
September 30, 2014 | |
March 31, 2014 |
| |
| | | |
| | |
Property and equipment | |
$ | 8,000 | | |
$ | 8,000 | |
| |
| | | |
| | |
Accumulated depreciation | |
| (3,600 | ) | |
| (2,800 | ) |
| |
| | | |
| | |
| |
$ | 4,400 | | |
$ | 5,200 | |
The Company acquired property and equipment on June 27,
2012 and started to depreciate as of July 1, 2012. Depreciation expense was $400 each for the reporting period ended September
30, 2014 and 2013, respectively.
Note 5 – Patent
The Company started its U.S. patent application
process on June 20, 2006 and obtained the U.S. patent (U.S. Patent No.: 007854823B2) on December 21, 2010. Patent application
costs of $6,982, primarily legal costs, incurred during the patent application process were capitalized and are being amortized
over the expected useful life of 20 years as of January 1, 2011.
Patent, stated at cost, less accumulated amortization,
consisted of the following:
| |
September 30, 2014 | |
March 31, 2014 |
| |
| | | |
| | |
Patent | |
$ | 6,982 | | |
$ | 6,982 | |
| |
| | | |
| | |
Accumulated amortization | |
| (1,305 | ) | |
| (1,131 | ) |
| |
| | | |
| | |
| |
$ | 5,677 | | |
$ | 5,851 | |
Amortization expense was $87 each for the
reporting period ended September 30, 2014 and 2013, respectively.
Note 6 – Related Party Transactions
Related Parties
Related parties with whom the Company had
transactions are:
Related Parties | |
Relationship |
| |
|
Alvin Snaper | |
Chairman, CEO and majority stockholder of the Company |
Advances from Chairman, CEO and Majority
Stockholder
From time to time, the chairman, CEO and majority
stockholder of the Company advances funds to the Company for working capital purposes. Those advances are unsecured, non-interest
bearing and due on demand.
Note 7 – Stockholders'
Deficit
Shares Authorized
Upon formation the total number of shares
of all classes of capital stock which the Company is authorized to issue is four hundred fifty million (450,000,000) shares with
a par value of $0.001, all of which are designated as Common Stock.
Warrants
June 5, 2012 Issuances
On June 5, 2012, the Company issued (i) warrants to purchase 1,200,000
shares of the Company’s common stock to an institutional investor with an exercise price of $0.75 per share expiring two
(2) years from the date of issuance in connection with the sale of common shares.
The Company estimated the relative fair value of the warrants on
the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
| |
June 5, 2012 |
| |
| | |
Expected life (year) | |
| 2 | |
| |
| | |
Expected volatility (*) | |
| 69.96 | % |
| |
| | |
Expected annual rate of quarterly dividends | |
| 0.00 | % |
| |
| | |
Risk-free rate(s) | |
| 0.68 | % |
* | | As a thinly traded stock it is not practicable for the Company to estimate the expected
volatility of its share price. The Company selected all of the three (3) comparable public companies listed on NYSE MKT and NASDAQ
Capital Market within the synthetic or cultured diamond manufacturing industry which the Company engages in to calculate the expected
volatility. The Company calculated those three (3) comparable companies’ historical volatility over the expected life of
the options or warrants and averaged them as its expected volatility. |
The aggregate relative fair value of the warrants issued in March
2012 using the Black-Scholes Option Pricing Model was $124,800 at the date of issuance.
Summary of the Company’s Warrants Activities
The table below summarizes the Company’s warrants activities:
| |
Number of Warrant
Shares | |
Exercise
Price Range Per Share | |
Weighted Average Exercise Price | |
Fair Value at Date of Issuance | |
Aggregate
Intrinsic
Value |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, March 31, 2012 | | |
| — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Granted | | |
| 1,200,000 | | |
| 0.75 | | |
| 0.75 | | |
| 124,800 | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Canceled | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercised | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Expired | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, March 31, 2013 | | |
| 1,200,000 | | |
$ | 0.75 | | |
$ | 0.75 | | |
$ | 124,800 | | |
$ | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Granted | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Canceled | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercised | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Expired | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, March 31, 2014 | | |
| 1,200,000 | | |
| 0.75 | | |
| 0.75 | | |
| 124,800 | | |
$ | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Expired | | |
| (1,200,000 | ) | |
| 0.75 | | |
| 0.75 | | |
| 124,800 | | |
$ | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, September 30, 2014 | | |
| — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Centaurus Diamond Technologies, Inc. was incorporated
in the State of Nevada on July 24, 2007 and has a fiscal year end of March 31. We are a development stage Company.
Implementing our planned business operation is dependent on our ability to raise approximately $3,000,000.
Going Concern
To date the Company has little operations
and no revenues, and consequently has incurred recurring losses from operations. No revenues are anticipated until
we complete the implement our initial business plan, as described in this Form 10-Q. The ability of the Company to
continue as a going concern is dependent on raising capital to fund our business plan and ultimately to attain profitable operations. Accordingly,
these factors raise substantial doubt as to the Company’s ability to continue as a going concern.
Our activities have been financed primarily
from the proceeds of share subscriptions. For the fiscal year ended March 31, 2014, we raised a total of $600,000 from private
offerings of our common stock.
The Company plans to raise additional funds
through debt or equity offerings. There is no guarantee that the Company will be able to raise any capital through
this or any other offerings.
PLAN OF OPERATION
To date we have not generated any revenue.
The operations of Innovative have historically been funded by its founder and sole shareholder, Alvin A. Snaper, through advances
from Mr. Snaper. From time to time, Mr. Snaper has advanced funds to Innovative for working capital purposes.
Our current cash requirements are moderate
and will be used for development, and we anticipate generating losses. In order to execute on our business strategy,
we will require additional working capital, commensurate with the operational needs of our planned marketing, development and
production efforts. We believe that our cash on hand and working capital will be sufficient to meet our anticipated
cash requirements for the next eight (8) months and we have no short term plans to raise additional funds. We are currently
focused on developing a prototype process for our technology. As we proceed to commercialize our product, we may seek
additional debt or equity financing to assist with manufacturing and distribution. There is no guarantee we will be successful
in raising capital or obtaining loans in the future, or upon terms that are favorable or satisfactory to us, and any failure could
have a material adverse effect on our business objectives and operations.
Since inception, Innovative has had on-going
operations, including creating a strategic plan, identifying significant employees and management, drafting and filing a patent,
negotiating terms with manufacturers and designers and developing a marketing plan.
Our current and future operations are and
will be focused on researching and developing our technology for the manufacture of industrial grade cultured diamonds that are
chemically, optically and physically the same as their natural counterparts, the integration of the intellectual property we have
acquired through the Acquisition, and the continued evaluation of potential strategic acquisitions and/or partnerships.
Our first year after Closing will be dedicated
to research and development, with the goal being the creation of a commercially viable production process derived from our proprietary
technology.
We intend to lease the equipment and space
necessary for us to conduct the next stage of research and development into our technologies. We have begun negotiations
with the owners of the required equipment and facilities but do not, at present, have any such lease agreements in place. We
anticipate that the cost of leasing the equipment and space necessary for our research and development efforts to cost approximately
$130,000 over the next twelve months.
Provided our research and development activities are successful,
we will thereafter seek to develop the equipment, protocols and systems for ongoing batch production of industrial cultured diamonds
on a volume basis. Upon completion of the development phase, we anticipate we will need to relocate because we believe we will
need approximately 10,000 square feet to house our employees and production machines.
RESULTS OF OPERATIONS
For the three months ended September 30, 2014 (unaudited)
and 2013.
We have generated no revenues since inception.
For the three months ended September 30, 2014,
we incurred $27,682 in operating expenses, comprised of $0 in consulting fees, $7,200 in professional fees, $2,880 of rent paid
to our President, $256 in research and development, and $17,346 in general and administrative expenses. For the
three months ended September 30, 2013, we incurred $11,873 in operating expenses, comprised of $2,300 in consulting fees, $4,550
in professional fees, and $5,023 in general and administrative expenses.
The following table
provides selected financial data about our company for the quarters ended September and March 31, 2014.
Balance Sheet Data | |
September 30, 2014 | |
March 31, 2014 |
| |
| | | |
| | |
Cash | |
$ | 1,743 | | |
$ | 303 | |
Total Assets | |
$ | 11,820 | | |
$ | 303 | |
Total Liabilities | |
$ | 96,510 | | |
$ | 52,743 | |
Shareholders’ Deficit | |
$ | (84,690 | ) | |
$ | (41,389 | ) |
GOING CONCERN
Although we have recognized some nominal amount
of revenues since inception, we are still devoting substantially all of our efforts on establishing the business and, therefore,
still qualifies as a development stage company. From inception to September 30, 2014, the Company had accumulated losses of $587,098.
Our independent public accounting firm included an explanatory paragraph in their report on the accompanying financial statements
regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures
describing the circumstances that lead to this disclosure by our independent public accounting firm. Our financial statements
do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classifications
of liabilities that may result should the Company be unable to continue as a going concern.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2014, we had a cash balance
of $1,443. Our expenditures over the next 12 months are expected to be approximately $60,000, unless we raise $3,000,000 to fund
our 12-month plan of operation.
We must raise approximately $3,000,000, to complete our plan of
operation for the next 12 months. Additionally, we anticipate spending an additional $60,000 on general and administration
expenses and complying with reporting obligations, and general administrative costs. Additional funding will likely come
from equity financing from the sale of our common stock, if we are able to sell such stock. If we are successful in completing
an equity financing, existing stockholders will experience dilution of their interest in our Company. We do not have any financing
arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of
our common stock to fund our plan of operation. In the absence of such financing, our business will fail.
There are no assurances that we will be able
to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing
necessary to continue our plan of operations, then we will not be able to continue our business and our business will fail.
OFF BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements
including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other
benefits.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s unaudited interim consolidated
financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) for the interim financial information, and with the rules and regulations of the United
States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The
unaudited interim consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. Unaudited
consolidated interim results are not necessarily indicative of the results for the full fiscal year. These consolidated
financial statements should be read in conjunction with the consolidated financial statements of the Company for the period from
July 27, 2001 (inception) through March 31, 2014 and notes thereto contained in the information filed as part of the Company’s
Form 10-K, which was filed on July 15, 2013.
Principles of Consolidation
The Company applies the guidance of Topic
810 “Consolidation” of the FASB Accounting Standards Codification to determine
whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all
majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated
except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope
of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of
a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8 the usual
condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership
by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is
a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership,
for example, by contract, lease, agreement with other stockholders, or by court decree . The Company consolidates all
less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.
The Company's consolidated subsidiary
and/or entity is as follows:
Name of consolidated subsidiary or entity | |
State or other jurisdiction of incorporation or organization | |
Date of incorporation or formation (date of acquisition, if applicable) | |
Attributable interest |
| |
| |
| |
| | |
Innovative Sales | |
The State of Nevada | |
July 27, 2001 | |
| 100 | % |
The consolidated financial statements include all accounts
of the Company as of September 30, 2014 and for the period from June 5, 2012 (date of acquisition) through September 30, 2014
and Innovative Sales as of September 30, 2014 and 2012 and for the periods then ended.
All inter-company balances and transactions
have been eliminated.
Development Stage Company
The Company is a development stage company
as defined by section 915-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification. The
Company is still devoting substantially all of its efforts on establishing the business and still qualifies as a development stage
company. All losses accumulated since inception have been considered as part of the Company’s development stage
activities.
Use of Estimates and Assumptions
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The Company’s significant estimates
include the fair value of financial instruments; the carrying value and recoverability of long-lived assets, including the values
assigned to and the estimated useful lives of property and equipment and patent; expected term of
share options and similar instruments , expected volatility of the entity’s common shares and the method used to
estimate it, expected annual rate of quarterly dividends, and risk free rate(s) ; income tax
rate, income tax provision and valuation allowance of deferred tax assets; and the assumption that the Company will continue as
a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that
there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure
or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly reviews its estimates
utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.
After such reviews, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph
820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of
its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework
for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.
To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB
Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used
to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The
three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described
below:
Level 1 |
|
Quoted market prices available in active
markets for identical assets or liabilities as of the reporting date. |
|
|
|
Level 2 |
|
Pricing inputs other than quoted prices in active
markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
|
|
Level 3 |
|
Pricing inputs that are generally observable inputs
and not corroborated by market data. |
Financial assets are considered Level 3 when
their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one
significant model assumption or input is unobservable.
The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s financial assets and
liabilities, such as cash, and prepayments and other current assets, approximate their fair values because of the short maturity
of the instrument.
Transactions involving related parties cannot
be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not
exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were
consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not, however, practical to determine
the fair value of advances from stockholder, if any, due to their related party nature.
Carrying Value, Recoverability and Impairment
of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17
of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include
property and equipment, and patent, are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of
its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group
of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any,
is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined
using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived
assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally
estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be
some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses
of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or
use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in
the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased
competitive pressures; and (v) regulatory changes. The Company evaluates acquired assets for potential impairment
indicators at least annually and more frequently upon the occurrence of such events.
The impairment charges, if any, is included
in operating expenses in the accompanying statements of operations.
Fiscal Year End
The Company elected March 31st as its fiscal
year ending date.
Cash Equivalents
The Company considers all highly liquid investments
with maturities of three months or less at the time of purchase to be cash equivalents.
Property and Equipment
Property and equipment is recorded at cost. Expenditures
for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation
of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual
values) over the assets estimated useful life of five (5) to seven (7) years. Upon sale or retirement of property and
equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the
statements of operations.
Patent
The Company follows the guidelines as set
out in paragraph 350-30-25-3 and paragraph 350-30-35-6 of the FASB Accounting Standards Codification for patent. For
acquired patents the Company records the costs to acquire patents as patent and amortizes the patent acquisition cost over its
remaining legal life, or estimated useful life, or the term of the contract, whichever is shorter. For internal developed patents,
all costs incurred to the point when a patent application is to be filed are expended as incurred as research and development
expense; patent application costs, generally legal costs, thereafter incurred are capitalized, which are to be amortized once
the patents are granted or expended if the patent application is rejected. The Company amortizes the internal developed patents
over the shorter of the expected useful lives or the legal lives of the patents, which are generally 17 to 20 years for domestic
patents and 5 to 20 years for foreign patents from the date when the patents are granted. The costs of defending and maintaining
patents are expended as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from
the accounts.
Related Parties
The Company follows subtopic 850-10 of the
FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related
parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required,
absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted
for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing
trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the
Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management
or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its
own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting
parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures
of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the
ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall include: a) the nature of the
relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts
were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary
to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions
for each of the periods for which income statements are presented and the effects of any change in the method of establishing
the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance
sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the
FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the
consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one
or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are
pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits
of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be
sought therein.
If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be
accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material
loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not
believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s
consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not
materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue Recognition
The Company applies paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized
or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following
criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been
rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company will derive its revenue from sales
contracts with customers with revenues being generated upon the shipment of products upon commencing operations. Persuasive
evidence of an arrangement is demonstrated via invoice, product delivery is evidenced by warehouse shipping log as well as a signed
bill of lading from the trucking company or third party carrier and title transfers upon shipment, based on free on board (“FOB”)
warehouse ; the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate,
discount, or volume incentive.
Equity Instruments Issued to Parties
Other Than Employees for Acquiring Goods or Services
The Company accounts for equity instruments
issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting
Standards Codification (“Sub-topic 505-50”).
Pursuant to ASC Section 505-50-30, all transactions in which goods
or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of
the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The
measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance
is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation
or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement
memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily
price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack
of consistent trading in the market.
The fair value of share options and similar
instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions
for inputs are as follows:
· | | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i)
of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period
of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of
the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The
Company uses historical data to estimate holder’s expected exercise behavior . If
the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options
and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient
historical exercise data to provide a reasonable basis upon which to estimate expected term. |
· | | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant
to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose
the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate
industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical
volatility using that index. The Company uses the average historical volatility of the comparable companies over the
expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company
are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price
observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger
spread between the bid and asked quotes and lack of consistent trading in the market. |
· | | Expected annual rate of quarterly dividends. An entity that uses a method
that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the
weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield
as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. |
· | | Risk-free rate(s). An entity that uses a method that employs different risk-free rates
shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve
in effect at the time of grant for periods within the expected term of the share options and similar instruments. |
Pursuant to ASC paragraph 505-50-25-7, if
fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods
or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination
of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor
shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding
cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements
of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may
conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity
instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific
performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity
by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the
balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other
than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement
date for transactions that are within the scope of this Subtopic.
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9,
an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified
period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance
conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity
had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity
instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that
the counterparty has the right to exercise expires unexercised.
Pursuant to ASC paragraph 505-50-30-S99-1,
if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity
instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are
not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should
be recorded.
Income Tax Provision
T he Company follows paragraph 740-10-30-2
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 the provisions of paragraph
740-10-25-13 of the FASB Accounting Standards Codification . Paragraph 740-10-25-13 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 paragraph
740-10-25-13 , 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. Paragraph 740-10-25-13
also provides guidance on de-recognition, classification, interest and penalties on income taxes, 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 paragraph 740-10-25-13 .
The estimated future tax effects of temporary
differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well
as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded
on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition,
the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s
opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies
from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax
positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for
the interim period ended June 30, 2014 or 2012.
Limitation on Utilization of NOLs due
to Change in Control
Pursuant to the Internal Revenue Code Section
382 (“Section 382”), certain ownership changes may subject the NOL’s to annual limitations which could reduce
or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences
an “ownership change.” In general terms, an ownership change may result from transactions increasing the
ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In
the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined
by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused
annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the NOLs
to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were
not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share
is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common
stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur
from common shares issuable through stock options and warrants .
The following table shows the number of potentially
outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:
| |
Potentially Outstanding Dilutive Common Shares |
| |
For Three Months Ended June 30, 2014 | |
For Three Months Ended June 30, 2012 |
Warrant Shares | |
| | | |
| | |
Warrants issued on June 5, 2012 to an institutional investor in connection with the Company’s June 5, 2012 equity financing with an exercise price of $0.75 per share expiring two (2) years from the date of issuance | |
| 1,200,000 | | |
| 1,200,000 | |
Total potentially outstanding dilutive common shares | |
| 1,200,000 | | |
| 1,200,000 | |
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24
of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether
they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect
or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards
Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating
activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected
future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash
receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using
the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies
is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately
provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant
to paragraph 830-230-45-1 of the FASB Accounting Standards Codification .
Subsequent Events
The Company follows the guidance in Section
855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent
events through the date when the financial statements were issued . Pursuant to ASU 2010-09 of the FASB Accounting
Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed
to users, such as through filing them on EDGAR.
Recently Issued Accounting
Pronouncements
In January 2013, the FASB issued ASU No. 2013-01,
" Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities ". This
ASU clarifies that the scope of ASU No. 2011-11, " Balance Sheet (Topic 210):
Disclosures about Offsetting Assets and Liabilities. " applies only to derivatives, repurchase agreements and reverse
purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific
criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement.
The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning on or after January
1, 2013.
In February 2013, the FASB issued ASU No. 2013-02, " Comprehensive
Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. " The ASU
adds new disclosure requirements for items reclassified out of accumulated other comprehensive income by component and their corresponding
effect on net income. The ASU is effective for public entities for fiscal years beginning after December 15, 2013.
In February 2013, the Financial Accounting
Standards Board, or FASB, issued ASU No. 2013-04, " Liabilities (Topic 405): Obligations Resulting from Joint and Several
Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date ." This
ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements
including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective
for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013.
In March 2013, the FASB issued ASU No. 2013-05,
" Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition
of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ." This ASU
addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment
in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit
activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should
be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective
prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013.
In March 2013, the FASB issued ASU 2013-07,
“Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require
an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation
is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is
approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution
of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary
bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception
(for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for
liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial
statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected
resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The
entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects
to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities
that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting
periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption
is permitted.
Management does not believe that any other
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company (as defined
in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.
ITEM 4. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS
AND PROCEDURES
Under the supervision and with the participation
of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation
of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure
controls and procedures means that the material information required to be included in our Securities and Exchange Commission
reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our
company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during
the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal
financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of June
30, 2014.
There were no changes in the Company’s
internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or
are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not currently subject to any
legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with
its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company
is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial
condition or results of operations.
ITEM 1A. RISK FACTORS
As a smaller reporting company (as defined
in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.
ITEM 2. UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.
None.
ITEM 4. MINE
SAFETY DISCLOSURES.
None.
ITEM 5. OTHER
INFORMATION.
None.
ITEM 6. EXHIBITS.
(a) | | Exhibits required by Item 601 of Regulation SK |
* | | XBRL (Extensible Business Reporting Language) information is furnished and not filed
or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended,
is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject
to liability under these sections. |
(1) | | Filed and incorporated by reference to the Company’s Registration Statement
on Form S-1 (File No. 333-151339), as filed with the Securities and Exchange Commission on June 2, 2008. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
CENTAURUS DIAMOND TECHNOLOGIES, INC. |
|
|
|
(Name of Registrant) |
|
|
|
|
|
Date: |
August 14, 2015 |
|
By: |
/s/ Alvin Snaper |
|
|
|
Name: |
Alvin Snaper |
|
|
|
Title |
President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT INDEX
* | | XBRL (Extensible Business Reporting Language) information is furnished and not filed
or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended,
is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject
to liability under these sections. |
(1) | | Filed and incorporated by reference to the Company’s Registration Statement
on Form S-1 (File No. 333-151339), as filed with the Securities and Exchange Commission on June 2, 2008. |
EXHIBIT 31.1
SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF CENTAURUS
DIAMOND TECHNOLOGIES, INC.
I, Alvin Snaper, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Centaurus
Diamond Technologies, Inc.; |
2. |
Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly
report; |
3. |
Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. |
The registrant’s other certifying officer(s) and I
are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e)
and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f))
for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 14, 2015 |
By: |
/s/ Alvin Snaper |
|
|
Alvin Snaper |
|
|
President and Chief Executive Officer (principal executive officer, principal financial officer
and principal accounting officer) |
EXHIBIT 31.2
SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF CENTAURUS
DIAMOND TECHNOLOGIES, INC.
I, Alvin Snaper, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Centaurus
Diamond Technologies, Inc.; |
2. |
Based on my knowledge, this quarterly report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. |
Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the
registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability
to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 14, 2015 |
By: |
/s/ Alvin Snaper |
|
|
Alvin Snaper |
|
|
President and Chief Executive Officer (principal executive officer, principal financial officer
and principal accounting officer) |
EXHIBIT 32.1
SECTION 906 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
FINANCIAL OFFICER OF CENTAURUS DIAMOND TECHNOLOGIES, INC.
In connection with the accompanying Quarterly
Report on Form 10-Q of Centaurus Diamond Technologies, Inc. for the quarter ended June 30, 2014, the undersigned, Alvin Snaper,
President and Chief Executive Officer of Centaurus Diamond Technologies, Inc., does hereby certify pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
such Quarterly Report on Form 10-Q for the quarter ended
September 30, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and |
(2) |
the information contained in such Quarterly Report on Form
10-Q for the quarter ended September 30, 2014 fairly presents, in all material respects, the financial condition and results
of operations of Centaurus Diamond Technologies, Inc. |
Date: August 14, 2015 |
By: |
/s/ Alvin Snaper |
|
|
|
Alvin Snaper |
|
|
|
President and Chief Executive Officer (principal executive officer, principal financial officer
and principal accounting officer) |
|
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