Our primary competition comes from American Permalight, Jalite USA, Brady, Jessup, and Lunaplast, all of which offer PLM Exit Signs and Safety Way Guidance Systems in Canada and/or the United States. With the exception of Brady and Jessup, all of these competitors deal exclusively in PLM products like us.
Exit Signs must be approved by the Underwriters Laboratory in both Canada and the United States. MEA (Materials and Equipment Acceptance) approvals are required at the State level. We are also an Energy Star Partner in Canada and the United States. Our PLM formulation meets most current building code standards.
While there are relatively few competitors to date, ours is a highly competitive industry, based on maintaining standards and keeping ahead of government regulations and initiatives. Our failure to compete effectively could adversely affect our market share and results in operations.
There is also a significant learning curve and a certain level of acceptance of PLM Exit Signs, not only at all levels of government, but there is also a shift in thinking for our customers to accept them in place of traditional, electrically-powered signs. The status quo is difficult to change.change and the adoption for our product may be slow.
Similarly, despite increased awareness regarding safety measures in buildings, the acceptance and subsequent seriousness of installing Safety Way Guidance Systems to guide people to safety in the event of a blackout, fire or other emergency situation is not a foregone conclusion.
Due to the relative early stages of this industry, the authorities that create the guidelines are not always consistent in their standards. The Underwriters Laboratory seems to have some inconsistencies in its approval processes, the costs involved in getting approvals, the time required in testing and, more specifically, what they do, and do not accept with regard to PLM Exit Sign standards, possibly making it an uneven playing field in regards to the competitive landscape.
In addition, potential roadblocks could be created by differing interpretations of building and fire codes in a state or local code.
The financial statements have been prepared in accordance with generally accepted accounting principles in the United States.
The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policespolicies summarized below.below:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuerevenues and expenses during the reporting period. Actual results could differ from those estimates,estimates.
LUMONALL, INC.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009
(UNAUDITED)
Valuation of Warrants
The Company estimates that value of common share purchase warrants issued using the Black-Scholes pricing model.
Recent issued accounting standardsPronouncements
In February 2007,May 2008, the FASB issued FASB Statement NO. 159, “SFAS No. 162, "The Fair Value OptionHierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for Financial Assets and Financial Liabilities – Including an Amendmentselecting the principles used in the preparation of FASB Statement No. 115” (“financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. SFAS 159”). The fair value option established by SFAS 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains or loses on items for which the fair value option has been elected in earnings (or another performance indication if the business entity does not report earnings) at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. FASB No. 159162 is effective as60 days following the SEC’s approval of the beginningPublic Company Accounting Oversight Board amendments to AU Section 411, The Meaning of the fiscal years beginning after November 15, 2007. The Company is currently evaluating what impact, if any, SFAS 159 will have on its financial position or results of operations.
In December 2007, the FinancialPresent Fairly in Conformity With Generally Accepted Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 141(R), "Business Combinations”. SFAS 141(R) establishes principles and requirements for how the acquirer, recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, an any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended March 31, 2010.Principles. The Company is currently evaluating the impact of SFAS 141(R)162 on its consolidated financial statements [butbut does not expect it to have a material effect].effect.
In December 2007,May 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended March 31, 2010. The Company is currently evaluating the impact of SFAS 160 on its consolidated financial statements [but does not expect it to have a material effect].
In March 2008, FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments165, “Subsequent Events” (“FAS 165”). FAS 165 established general standards of accounting for and Hedging Activities” (“SFAS 161”). SFAS 161 is intendeddisclosure of events that occur after the balance sheet date but before financial statements are issued. FAS 165 will be effective in the second quarter of fiscal 2010. We do not expect the adoption of FAS 165 to improve financial reporting about derivative instruments and hedging activities by requiring companies to enhance disclosure about how these instruments and activities affect theirhave a material effect on our financial position, performancecash flows, or results of operations.
In June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards Codification and cash flows. SFAS 161 also improves the transparency aboutHierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162”, to formally establish the locationFASB Accounting Standards Codification as the single source of authoritative, nongovernmental U.S. GAAP, in addition to guidance issued by the SEC. On the effective date, the Codification will supersede existing non-SEC accounting and amountsreporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification becomes nonauthoritative. Therefore, from the effective date of derivative instruments in a company’s financial statementsthe Codification, there will no longer be levels of authoritative GAAP, rather there will only be authoritative and how they are accounted for under SFAS 133. SFAS 161 isnonauthoritative GAAP. All content within the Codification carries the same level of authority. The Statement makes the Codification effective for financial statements issued for fiscal years beginninginterim and annual periods ending after NovemberSeptember 15, 2008 and interim periods beginning after that date. As such, the Company is required to adopt these provisions beginning with the quarter ending in March 2009. The Company is currently evaluatingdoes not expect the adoptionimpact of this pronouncement and expects noSFAS No. 168 to have a material impacteffect on the Company’sits consolidated financial statements.
Reclassification of Prior Year Statement of Operations
For the three months ended June 30, 2008, the Company has reclassified foreign exchange loss from selling and administrative costs to other expenses, to facilitate a year over year comparison with three month period ended June 30, 2009.
Note 3 – Related Party Transactions
Periodically expenses of the Company are paid by related parties on behalf of the Company. These transactions result in non-interest and interest bearing payables to related parties with no specific terms of repayment other than as described below. At SeptemberJune 30, 20082009, amounts due to related parties amounted to $610,158.$965,811. Related parties of the Company include entities under common management.
Gamecorp Ltd. (formerly Eiger Technology, Inc.) a related party (due to common officers with the Company) agreed to provide up to $600,000 funding for the developmentmanagement and Officers and Directors of the Company’s business. The Company is obligated to pay a 5% commitment fee of the maximum amount funded plus interest at Prime + 3% per annum. During the three month period ended September 30, 2008 Company.
Newlook Industries Corp., a related party (due to common officers with the Company) agreed to further fund the development of the Company’s business at an interest rate of Prime + 3% per annum and assumedgeneral security over all the outstanding related party liability to Gamecorp Ltd. as settlementCompany’s assets in event of default. During the three month period ended June 30, 2009, amounts owed to Newlook increased $79,238, a result of $22,652 of cash advances, $8,165 of accrued interest and $48,421 relating to a foreign exchange loss. Amounts received from Gamecorp. DuringNewlook are recorded in Canadian Dollars and for the sixthree month period ended SeptemberJune 30, 2008,2009, the Company incurred $21,558Canadian dollar appreciated significantly in interest expense.
value to the U.S. Dollar which led to the foreign exchange loss.
The Company was obligated to pay $6,000 per month through June 2009 for financial and administrative services to Wireless Age Communications Inc. (“Wireless Age”).
LUMONALL, INC.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009
(UNAUDITED)
At SeptemberJune 30, 2008,2009 and March 31, 2009, the amounts due to related parties were:
| | | |
Newlook Industries Corp. | | $ | 527,252 | |
Officers and directors | | | 82,906 | |
| | | 610,158 | |
| | June 30, 2009 | | | March 31, 2009 | |
Newlook Industries Corp. | | $ | 644,741 | | | $ | 565,503 | |
Wireless Age Communications, Inc. | | | 51,147 | | | | 35,830 | |
Directors and/or Officers of the Company * | | | 269,923 | | | | 207,846 | |
| | $ | 965,811 | | | $ | 809,179 | |
* Including a former director and officer.
Note 4 – Unissued Share LiabilityDeposits
The Company agreed to issue 9,400,000 common shares valued at $136,860 in full repaymenthas entered into strategic partnerships for the distribution of PLM products across the North American market place. Deposits have been made by certain distribution partners for future royalties owed to Lumonall Canada Inc. In addition, the stock issued was in repaymentpurchase of a note payable of $50,000 and for payment of an intercompany liability of $86,860 owedPLM products. Deposits held by Lumonall Inc., to Lumonall Canada Inc. Lumonall Canada Inc. is a related party by virtue of common directors and officers. As of September 30, 2008, 300,000 shares had not yet been issued and the Company has recorded a $4,368 un-issued share liability representing the fair value of the un-issued shares.totalled $121,367 at June 30, 2009 and March 31, 2009.
Note 5 – Common Stock–Common stock Units SubscribedSubscribed.
On July 1, 2008, under a private placement the Company offeredIn fiscal 2009, 10,000,000 common sharestock units of which 8,500,000 unitswere subscribed for, valued at $255,000 were subscribed.$300,000. Each common stock unit consistsconsisted of one common stockshare and one warrant. The warrants expire inpurchase warrant exercisable at $0.05 for a duration of six months and can be exercised for $0.05 per share.months. As of Septemberat June 30, 2008, the common share units have not been issued and the Company has recorded $255,0002009 all common stock units subscribed, representingwere issued.
Note 6– Segment Data, Geographic Information and Significant Customers:
Lumonall products are currently sold through distribution agreements covering most regions of North America. Distributors include Willis Group of Companies in Canada, Designer Building Solutions, Butler-Johnson Corporation and Hallmark Building Supplies in the fair valueUnited States. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker who comprehensively manages the entire business. The Company does not operate any material separate lines of business or separate business entities. Accordingly, the un-issued units. Under the private placement 500,000 units were subscribed, valued at $15,000 for previous consulting services providedCompany does not accumulate discrete financial information, other than product revenue and 3,500,000 units were subscribed, valued at $105,000 for previous related party services provided.material costs, with respect to separate product lines and does not have separately reportable segments as defined by Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures about Segments of an Enterprise and Related Information.
For the three months ended June 30, 2009 and 2008, Willis Group of Companies and Hallmark Building Supplies accounted for approximately 100% and 70% of sales, respectively.
Item 2. Management’sManagements Discussion and Analysis or Plan of Operation.
FORWARD-LOOKING STATEMENTS
Certain matters discussedThe following discussion should be read in this Annual Report may constitute forward-lookingconjunction with our financial statements withinand notes thereto included herein. In connection with, and because we desire to take advantage of, the meaning"safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and as such may involve riskselsewhere in this report and uncertainties. These forward-lookingin any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to amongfuture operations, strategies, financial results or other things, expectationsdevelopments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of thewhich are beyond our control and many of which, with respect to future business environment in which the Company operates, projections of future performance, perceived opportunities in the marketdecisions, are subject to change. These uncertainties and statements regarding the Company's goals. The Company'scontingencies can affect actual results performance,and could cause actual results to differ materially from those expressed in any forward looking statements made by, or achievements expressed or implied in such forward-looking statements may differ.
BACKGROUND
The Company was incorporated in the State of Colorado on May 1, 1996 as Grand Canyon Ventures Two, Incorporated. The Company changed its nameour behalf. We disclaim any obligation to Azonic Engineering Corporation on September 23, 1998. On November 12, 1999, it was re-domiciled to the State of Nevada by merging into its wholly owned subsidiary Azonic Corporation ("Company"), a Nevada corporation. On July 21, 2005 the Company officially changed its name to Midland International Corporation (“Midland”). During fiscal 2008, in order to accurately reflect the nature of the Company’s business, the Company changed its name from Midland International Corporation to Lumonall, Inc., effective August 16, 2007.update forward looking statements.
Description of Current Business Plan
Pursuant to management initiatives and strategic partnerships the Company holds a domestic source for photo luminescent signs and safety guidance systems at a lower cost and more efficient route to market.
With a North American distribution network in place, we have means to capitalize on the world wide market for photo luminescent product. Looking forward, the keys to success will be to further train and equip that network for anticipated sales, expand our product categories, and continue to develop awareness and educate the public on the benefits of PLM with regard to safety and energy conservation.
We continue to ramp up our media strategy to improve awareness regarding PLM Exit Signs and Safety Way Guidance Systems (“SWGS”), as well as lobbying all levels of government to further effect both energy saving legislation, in addition to building safety requirements.
Our online presence will also be growing, aidingpresent business strategy and direction is to distribute of photoluminescent (PLM) emergency egress systems.
Lumonall is committed to the development and distribution of applied photoluminescent technologies. Through a network of industrial designers, manufacturing and sales professionals, Lumonall brings to market products that leverage the inherent characteristics of photoluminescence to enhance safety, reduce energy consumption and improve the environment.
Improving emergency egress is currently the focus of the company's efforts, providing systems that prevent injuries by providing critical illumination along exit pathways. These efforts are timed to coincide with changes to building codes in various markets that address the need for improved emergency egress. The systems Lumonall develops not only meet the standards established in these codes, but offer additional options that further promote safe egress.
Concurrent with these efforts, the Company is engaged in the education processdevelopment of applications of photoluminescent technology for both our distributorsother markets including transportation industries, residential safety and the general public. The new site will provide improved services for our distribution network, as well as the general public. This will likely include streaming video demonstrations (for both Exit Signs and SWGS), an on-line product catalogue, product FAQs, and a marketing materials database.
These measures, in the short term, address the North American marketplace and our presence here. As we develop our infrastructure and grow in sales, we will start capitalizing on our worldwide opportunities.
Following that, we are continuing with research and development in order to further identify other products and applications for PLM as well as expand our product categories.decorative uses.
RESULTS OF OPERATION
Comparison of Results of Operations for the Three Month PeriodMonths Ended SeptemberJune 30, 20082009 and 20072008
We generated $90,146$3,970 in revenues duringfrom the sale of PLM product in the three-month period ended SeptemberJune 30, 20082009, compared to nil duringrevenues of $76,208 in the same three month period ended September 30, 2007. The new PLM business plan was begun during the fourth quarter of fiscalfor 2008. Gross profit on sales during the current quarterthree month period was $37,252. Gross profits are expected$1,800 in comparison to rise as volumes increase.$15,788 in the prior year. Year over year for the three months ended June 30, 2009 revenues declined $72,238. The reduction in sales is a result of the Company performing a complete analysis of the business including reviewing and reconsidering our channels to market.
We incurred management fees of $96,660$53,117 in the three-month period ended SeptemberJune 30, 2008,2009, compared to $55,000$95,288 in the same period ended SeptemberJune 30, 2007. Accrued or paid management2008. Management fees, during the currentthree month period were for the servicesended June 30, 2009 accrued and/or paid consisted of Mike Hetherman, our$15,750 to John Simmonds, CEO, $11,025 to Carrie Weiler, Corporate Secretary, and $11,025 to Gary Hokkanen, our CFO and Carrie Weiler, our Corporate Secretary.CFO. In addition, management fees included an amount$15,317 was paid to Wireless Age Communications, Inc., a related party due to certain common officers, directors and ownership, for the services of managerial level accounting and finance personnel. Year over year management fees decreased $42,171 primarily a result in a change in management. Management fees during the three-month period ended June 30, 2008 were for the services of Mike Hetherman, CEO; Carrie Weiler, our Corporate Secretary; Gary Hokkanen, our CFO; and a related party due to certain common officers, directors and ownership for the service of managerial level accounting and finance personnel.
We incurred office and general expenses of $47,728$41,364 in the three-month period ended SeptemberJune 30, 20082009, compared to $102,920$67,233 in the same period ended SeptemberJune 30, 2007,2008, a decrease of approximately $55,192.$25,869. During the three month period ended June 30, 2008 the new PLM business plan was initiated and required significantly more resources during the Company’s current state of evolution. In addition, during the three month period ended June 30, 2009 the Company has focused on strict cost control measures to address the global financial crisis. Office and general expenses include travel, and auto, occupancy and communications and other similar costs associated with operating the business in its current state of evolution. The higher costs for the three month period end September 30, 2007 are a result of the incremental start up costs incurred for the new business plan. During the three month period ended SeptemberJune 30, 2008 travel2009, wages and entertainmentconsulting costs totaled $41,542, advertisingaccounted for $30,889, and promotion totaled $4,308, foreign exchange gain totaled $22,501general office and other miscellaneous expenses $10,475. The costs totaling $24,379.are primarily related to management’s strategy to improve awareness of PLM Exit Signs and Safety Way Guidance Systems in order to develop and exploit the North American market place. We expect operating costs to increase as volumes under thewe pursue new business plan arise.business.
We also incurred professional and consulting fees of $93,075$11,449 in the three-month period ended SeptemberJune 30, 20082009, compared to $386,125$99,797 in the same period ended SeptemberJune 30, 2007. Professional2008 a decrease of $88,348. Higher costs during fiscal 2009 are a result of the Company’s initial development of the Company’s business and consulting fees during the current period included various fees associated with the new business opportunity, including general management, technical, political lobbyist and marketing functions.strategy.
We incurred interest expense of $8,753$8,165 during the period ended June 30, 2009, compared to $12,804 during the three month period ended SeptemberJune 30, 2008 compared to nil duringarising from related party liabilities.
We recorded a foreign currency loss of $57,795 for the three month period ended SeptemberJune 30, 2007. Interest expense arose from2009 in comparison to a related party liability from whichloss of $1,086 for the Company is obligated to pay a 5% commitment feecomparative period ended June 30, 2008. A substantial portion of the maximum amount funded plus interest at Prime + 3% per annum.Company’s liabilities and
expenses are recorded in Canadian Dollars. For the three month period ended June 30, 2009, the Canadian Dollar appreciated significantly in value to the U.S. Dollar which led to the foreign exchange loss.
As a result, we incurred a net loss of ($208,964)170,090) during the three month period ended SeptemberJune 30, 2008,2009, (approximately $0.002$0.001 per share) compared to a net loss of ($549,045)260,420) in the same period ended SeptemberJune 30, 20072008 (approximately $0.005$0.002 per share)
Management expects the operating losses to continue until breakeven operations are achieved under the PLM business plan. Additional financing will be required in order to offset pre-breakeven operating losses.
Comparison of Results of Operations for the Six Month Period Ended September 30, 2008 and 2007
We generated $166,354 in revenues during the six-month period ended September 30, 2008 compared to nil during the six month period ended September 30, 2007. The new PLM business plan was begun during the fourth quarter of fiscal 2008. Gross profit on sales during the six months ended September 30,2008 was $53,040. Gross profits are expected to rise as volumes increase.
We incurred management fees of $191,948 in the six-month period ended September 30, 2008, compared to $115,000 in the same period ended September 30, 2007. Accrued or paid management fees during the current period
were for the services of Mike Hetherman, our CEO, Gary Hokkanen, our CFO and Carrie Weiler, our Corporate Secretary. In addition, management fees included an amount paid to Wireless Age Communications, Inc., a related party due to certain common officers, directors and ownership for the services of managerial level accounting and finance personnel.
We incurred office and general expenses of $116,047 in the six-month period ended September 30, 2008 compared to $344,351 in the same period ended September 30, 2007, a decrease of approximately $228,304. Office and general expenses include travel and auto, occupancy and communications and other similar costs associated with operating the business in its current state of evolution. The higher costs for the six month period end September 30, 2007 are a result of the incremental start up costs incurred for the new business plan. During the six month period ended September 30, 2008 travel and entertainment costs totaled $65,791, advertising and promotion totaled $20,906, administrative services totaling $9,767, foreign exchange gain totaling $20,255 and other miscellaneous costs totaling $39,838. We expect operating costs to increase as volumes under the new business plan arise.
We also incurred professional and consulting fees of $192,872 in the six-month period ended, September 30, 2008 compared to $538,415 in the same period ended September 30, 2007. Professional and consulting fees during the current period included various fees associated with the new business opportunity, including general management, technical, political lobbyist and marketing functions.
We incurred interest expense of $21,558 during the six month period ended September 30, 2008 compared to nil during the six month period ended September 30, 2007. Interest expense arose from a related party liability from which the Company is obligated to pay a 5% commitment fee of the maximum amount funded plus interest at Prime + 3% per annum.
As a result, we incurred a net loss of ($469,385) during the six month period ended September 30, 2008, (approximately $0.004 per share) compared to a net loss of ($1,008,389) in the same period ended September 30, 2007 (approximately $0.010 per share)
Management expects the operating losses to continue until breakeven operations are achieved under the PLM business plan. Additional financing will be required in order to offset pre-breakeven operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Our total assets increaseddecreased from $37,178$129,448 at March 31, 20082009 to $59,507$127,754 at SeptemberJune 30, 2008. The increase is primarily the result of increased activity associated with the PLM business.2009.
Our total liabilities increased from $1,063,402$1,308,409 at March 31, 20082009 to $1,082,000$1,476,805 at SeptemberJune 30, 2008.2009, an increase of $168,396. Accounts payable increased to $386,414 from $377,863, an increase of $8,551, amounts of which are primarily due to costs incurred for professional and accrued liabilitiesconsulting services. At June 30, 2009, due to related parties balance increased from $273,919$809,171 at the beginning of the yearMarch 31, 2009 to $343,180$965,811 at the end of the current quarter.June 30, 2009. Due to related parties increased from $418,994party amounts do not have specific repayment terms and it is expected that these amounts will be repaid as the financial position of the Company improves. Distributor deposits for the future purchase of photo luminescent products remained unchanged at $121,367. At June 30, 2009 bank indebtedness was $3,213 compared to $Nil at March 31, 2008 to $610,158 at September 30, 2008. Deposits declined from $221,131 at the beginning of the year to $124,294 at September 30, 2008. Unissued share liability declined to $4,368 at September 30, 2008 from $149,358 at March 31, 2008.2009.
The stockholders’ deficiency decreasedincreased from ($1,026,224)1,178,961) at March 31, 20082009 to ($1,022,493)1,349,051) at SeptemberJune 30, 2008. Operating losses were offset with an2009. The increase is attributable to private placements generating net proceedsour loss of $205,000 during$170,090 for the six month period ended September 30, 2008, and issuance of 9,100,000 common shares, valued at $132,490 as consideration for settlement in certain related party liabilities. In addition, during the sixthree months ended SeptemberJune 30, 2008, 500,000 units were subscribed for valued at $15,000 as payment of prior consulting services and 3,500,000 units were subscribed for valued at $105,000 as payment for prior services provided by related parties. (Note 5) (See Statement of Stockholders’ Deficiency contained in the financial statements).2009.
At SeptemberJune 30, 2008,2009, we had a working capital deficit of $1,022,493.$ 1,349,051. We had cash balances of $6,094$Nil at SeptemberJune 30, 20082009 and we are largely reliant upon our ability to arrange equity private placements or alternatively advances from related parties to pay expenses as incurred. In addition to normal accounts payable and accrued liabilities of $343,180$386,414 we also owe related parties $610,158.$965,811 without specific repayment terms and $121,367 in distributor deposits. Our only current source for capital are related partycould be loans or private placements of common stock.
During the six month periodthree months ended SeptemberJune 30, 20082009 we; 1) used $504,406$160,046 in cash in operating activities arising
primarily from operating losses, and 2) generated $501,165$159,845 in cash from financing activities. Financing activities included cash proceeds$156,632 funded from related parties.
For the three month period ended June 30, 2009, the Company’s operations were substantially funded by related parties. In order to ensure the success of $205,000 from private placements of common stockthe business, the Company will have to raise additional financing to satisfy existing liabilities and amountsto provide the necessary funding for future operations.
The Company heavily relies upon loans from related parties, specifically Newlook, to further provide capital contributions. As at June 30, 2009 the Company was indebted to Newlook in the amount of $296,165.$644,741. During the three month period ended June 30, 2009, amounts owed to Newlook increased $79,238, a result of $22,652 of cash advances, $8,165 of accrued interest and $48,421 relating to a foreign exchange loss. Amounts received from Newlook are recorded in Canadian Dollars and for the three month period ended June 30, 2009, the Canadian dollar appreciated significantly in value to the U.S. Dollar which led to the foreign exchange loss.
Newlook is an investment and merchant banking enterprise focused on the development of its technology investments. Newlook’s investments have suffered due to unforeseen events and the global financial crisis. Newlook may not be able to provide additional capital over the next year to the Company in order to satisfy existing liabilities and make further capital contributions. Failure to obtain such capital could adversely impact the Company’s operations.
Our current cash resources are not sufficientinsufficient to support the business over the next 12 months and we are unable to carry out any plan of businesscontinue toward attaining break even operations without funding. We will need additional debt or equity capital to fully implement our business plan in the future and there are no assurances that we will be able to raise this capital when needed. However, as of the date of this report, we have been successful in arranging incremental financing through equity private placements and anticipate continued success in this area.funding. The inability to obtain sufficient funds from external sources when needed will have a material adverse affect on our results of operations and financial condition.
In light of general economic conditions and the Company’s current financial performance and financial position we are performing a complete analysis of the business including reviewing and reconsidering our channel to market; sharing of gross margin with distributors and various other business processes. We cannot predict to what extent our current lack of liquidity and capital resources will impair our new business operations. However management does believe we will incur further operating losses. There is no assurance that we can continue as a going concern without continuedincremental funding. Management has taken steps to begin sourcing the necessary funding to begin to execute the business plan.
We estimate itIt will require additional financing to cover legal, accounting, transfer, consulting, management fees and the miscellaneous costs of being a reporting company in the next fiscal year. We do not intend to pursue or fund any research or development activities during the coming year. We do not intend to add any additional part-time or full-time employees until our activities can support it. Our business plan calls for us to not make any large capital expenditures in the coming year.
Going concern qualification: We have incurred significant losses from operations for the six month periodthree months ended SeptemberJune 30, 2007,2009, and such losses are expected to continue until we can attain higher levels of revenue.continue. In addition, we have a working capital deficit of $1,022,493$1,349,051 and an accumulated deficit of $4,333,454.$4,728,130. The foregoing raises substantial doubt about the Company's ability to continue as a going concern. Management's plans include seeking additional capital and/or debt financing. There is no guarantee that additional capital and/or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
We hold deposits of $124,294 from our distributors for future orders of PLM products.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
a) Evaluation of Disclosure Controls and Procedures:
Disclosure controls and procedures
Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of such period, are designedeffective to ensure that information required to be disclosed by us in the reports filedthat we file or submittedsubmit under the Exchange Act is recorded, processed, summarized and reported within the time periodperiods specified in the SEC'sSecurities and Exchange Commission rules and forms. Disclosure
There have been no significant changes in our internal controls and proceduresover financial reporting during the first quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
This Quarterly Report does not include without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Asan attestation report of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.
b) Changes in Internal Control over Financial Reporting:
There were no changes in the Company'sCompany’s registered public accounting firm regarding internal control over financial reporting identified in connection withreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company evaluation of these controls as of the end of the period covered byto provide only management’s report in this report that could have significantly affected those controls subsequent to the date of the valuation referred to in the previous paragraph, including any correction action with regard to significant deficiencies and material weakness.
Quarterly Report.
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. Those rules define internal control over financial reporting as a process designed 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 and includes those policies and procedures that:
• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2009. In making this assessment, our management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
PART II. Other Information
On October 29, 2008, the Company received a Statement of Claim, in the amount of approximately $296,000 (CAD$315,000), filed by Edward Oliver and Derin Enterprises Inc. in the Ontario Superior Court of Justice. The legal proceeding alleges a breach of contract. The Company has not made a loss provision with respect to the claim, as management believes that the lawsuit is without merit and that a successful claim is unlikely. The Company has engaged counsel to file a statement of defence.None
NoneDate | Issued To: | | # of Shares | |
| | | | |
April 8, 2009 | Katemy Holdings Inc. | | 1,500,000 | |
| | | | |
April 8, 2009 | Carrie Weiler | | 1,000,000 | |
| | | | |
April 8, 2009 | Adam Sykes | | 500,000 | |
| | | | |
April 8, 2009 | John Simmonds | | 1,500,000 | |
| | | | |
April 8, 2009 | Bram Potechin Holdings Ltd. | | 1,500,000 | |
| | | | |
April 8, 2009 | Chuckfam Holdings Ltd. | | 1,500,000 | |
| | | | |
April 8, 2009 | Linda Hoffer | | 1,500,000 | |
| | | | |
April 8, 2009 | Gary Hokkanen | | 1,000,000 | |
| | | | |
None
None
None
(a)Exhibits
Exhibit 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer. * |
| |
Exhibit 31.2 | Rule 13a-14(a) Certification of Chief Financial Officer. * |
| |
Exhibit 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * |
| |
Exhibit 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * |
* Filed herein.
(b)Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Lumonall Inc. | |
| | | |
Date: November 13, 2008August 12, 2009 | By: | /s/ Michael HethermanJohn Simmonds | |
| | Name: Michael HethermanJohn Simmonds | |
| | Title: Chief Executive Officer and DirectorChairman | |
| | | |
| By: | /s/ Gary N.N Hokkanen | |
| | Name: Gary N. Hokkanen | |
| | Title: Chief Financial Officer | |
| | | |