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 |
For the quarterly period ended October 31, 2005
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
For the transition period from _______to________
Commission file number 000-50612
INNOCAP, INC.
(Exact name of registrant as specified in its charter)
Nevada | 01-0721929 |
(State or other jurisdiction | (IRS Employer |
of incorporation or organization) | Identification Number) |
5675B Baldwin Court
Norcross, GA 30071
(Address of principal executive offices)
770-378-4180
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes o No x
Large Accelerated Filer o Accelerated Filer o Non-accelerated filer x
Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act) Yes oNo x
At January 31, 2006 the number of shares of the registrant’s common stock outstanding was 68,000,000.
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INNOCAP, INC.
INDEX
PART I | ||
ITEM 1 | FINANCIAL STATEMENTS | 4 |
ITEM 2 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 11 |
ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 13 |
ITEM 4 | CONTROLS AND PROCEDURES | 14 |
PART II | ||
ITEM I | LEGAL PROCEEDINGS | 14 |
ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 14 |
ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 14 |
ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 14 |
ITEM 5 | OTHER INFORMATION | 14 |
ITEM 6 | EXHIBITS | 14 |
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PART I
This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management's beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company's future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
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ITEM 1
FINANCIAL STATEMENTS
INNOCAP, INC
(A development stage company)
Balance Sheets
October 31, 2005 | January 31, 2005 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash | $ | - | $ | - | |||
TOTAL ASSETS | $ | - | $ | - | |||
LIABILITIES AND STOCKHOLDERS’DEFICIT | |||||||
CURRENT LIABILITIES: | |||||||
Accrued expenses | $ | 51,500 | $ | 40,000 | |||
STOCKHOLDERS’ DEFICIT | |||||||
Preferred stock, $0.001 par value; 1,000,000 shares authorized, none outstanding at either date | |||||||
Common stock, $0.001 par value; 190,000,000 shares authorized; 68,000,000 shares issued and outstanding in both periods | 68,000 | 68,000 | |||||
Additional paid-in capital | 1,600 | 1,600 | |||||
Deficit accumulated during development stage | (121,100 | ) | (109,600 | ) | |||
Stockholders’ Deficit | (51,500 | ) | (40,000 | ) | |||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | - | $ | - |
See notes to financial statements.
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INNOCAP, INC.
(A development stage company)
Statements of Operations
Three Months Ended October 31, 2005 and 2004
(Unaudited)
2005 | 2004 | ||||||
Revenue | $ | - | $ | - | |||
General and administrative | 5,000 | 10,100 | |||||
Net loss | $ | (5,000 | ) | $ | (10,100 | ) | |
Basic and diluted loss per share | $ | * | $ | * | |||
Weighted average number of common shares outstanding | 68,000,000 | 65,260,870 | |||||
*Less than $(.01) |
See notes to financial statements.
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INNOCAP, INC.
(A development stage company)
Statements of Operations
(Unaudited)
Nine Months Ended | Nine Months Ended | Period From January 23, 2004 (Inception) to | ||||||||
October 31, 2005 | October 31, 2004 | October 31, 2005 | ||||||||
Revenue | $ | - | $ | - | $ | - | ||||
General and administrative | 11,500 | 26,600 | 121,100 | |||||||
Net loss | $ | (11,500 | ) | $ | (26,600 | ) | $ | (121,100 | ) | |
Basic and diluted loss per share | $ | * | $ | * | $ | * | ||||
Weighted average number of common shares outstanding | 68,000,000 | 51,081,272 | 62,305,556 | |||||||
*Less than $(.01) |
See notes to financial statements.
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INNOCAP, INC
(a development stage company)
Statement of Stockholders’ Deficit
Common stock | ||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Deficit Accumulated During Development Stage | Total | ||||||||||||
Inception | - | $ | - | $ | - | $ | - | $ | - | |||||||
Common stock issued for services at $0.001 per share, January 23, 2004 | 50,000,000 | 50,000 | - | - | 50,000 | |||||||||||
Net loss for the period | - | - | - | (50,000 | ) | (50,000 | ) | |||||||||
Balance, January 31, 2004 | 50,000,000 | 50,000 | - | (50,000 | ) | - | ||||||||||
Issuance of stock options | - | - | 1,600 | - | 1,600 | |||||||||||
Exercise of stock options | 18,000,000 | 18,000 | - | - | 18,000 | |||||||||||
Net loss for the year | - | - | - | (59,600 | ) | (59,600 | ) | |||||||||
Balance, January 31, 2005 | 68,000,000 | 68,000 | 1,600 | (109,600 | ) | (40,000 | ) | |||||||||
Net loss for the period | - | - | - | (11,500 | ) | (11,500 | ) | |||||||||
Balance, October 31, 2005 | 68,000,000 | $ | 68,000 | $ | 1,600 | $ | (121,100 | ) | $ | (51,500 | ) |
See notes to financial statements.
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INNOCAP, INC.
(A development stage company)
Statements of Cash Flows
(Unaudited)
Nine Months Ended | Nine Months Ended | Period From January 23, 2004 (Inception) to | ||||||||
October 31, 2005 | October 31, 2004 | October 31, 2005 | ||||||||
OPERATING ACTIVITIES: | ||||||||||
Net loss | $ | (11,500 | ) | $ | (26,600 | ) | $ | (121,100 | ) | |
Stock-based compensation | - | 1,600 | 51,600 | |||||||
Net change in accrued liabilities | 11,500 | 25,000 | 51,500 | |||||||
Net Cash Used by Operating Activities | - | - | (18,000 | ) | ||||||
FINANCING ACTIVITIES: | ||||||||||
Proceeds from exercise of stock options | - | - | 18,000 | |||||||
INCREASE IN CASH | - | - | - | |||||||
CASH BEGINNING OF PERIOD | - | - | - | |||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | - | $ | - | $ | - | ||||
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES: | ||||||||||
Cash Paid For: | ||||||||||
Interest | $ | - | $ | - | $ | - | ||||
Income taxes | $ | - | $ | - | $ | - | ||||
See notes to financial statements.
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INNOCAP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine-month period ended October 31, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2006. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended January 31, 2005.
NOTE 2 -- ORGANIZATION
Innocap, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on January 23, 2004. In June 2004, it filed a notice with the Securities and Exchange Commission of its intent to elect in good faith, within 90 days from the date of such filing, to be regulated as a Business Development Company under the Investment Company Act of 1940 and be subject to Sections 54 through 65 of said Act. In February 2006, the Company decided to take the steps necessary to cease being a BDC and become a consulting firm. The 1940 Act provides that the Company may not change the nature of its business so as to cease to be, or to withdraw its election as, a business development company unless approved by a majority of its outstanding voting securities.
NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Year-end
The Company has elected a fiscal year ending on January 31.
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
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c. Estimates
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
d. Basic Loss Per Common Share
Basic loss per common share has been calculated based on the weighted average number of shares outstanding during the period after giving retroactive effect to stock splits.
e. Impact Of New Accounting Standards
In June 2003, the Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Commencing with the Company’s Annual Report for the year ended January 31, 2007, the Company is required to include a report of management on the Company’s internal control over financial reporting. The internal control report must include a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the Company; of management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of year end; of the framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting; and that the Company’s independent accounting firm has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting, which report is also required to be filed as part of the Annual Report on Form 10-K.
In December 2005 the SEC's advisory committee on small business recommended that the SEC allow most companies with market values of less than $700 million to avoid having their internal controls certified by auditors. The advisory committee recommended that most companies with market capitalizations under $100 million be exempted totally. It further recommended that companies with market capitalizations of $100 million to $700 million not face audits of internal controls. Some companies with large revenues but low market values would still be required to comply with the act. There can be no assurances that these proposals or similar proposals will be adopted.
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The Financial Accountings Standards Board has issued FASB Statement No. 154, "Accounting Changes and Error Corrections", which changes the requirements for the accounting for and reporting accounting changes and error corrections for both annual and interim financial statements, effective for 2006 financial statements. The Company has not determined the effect, if any, will be on Company's financial statements.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
NOTE 4 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At October 31, 2005, the Company had no working capital and no revenues. These factors, among others, indicate that the Company's continuation as a going concern is dependent upon its ability to achieve profitable operations or obtain adequate financing. The 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 in existence.
The Company will engage in very limited activities without incurring any liabilities that must be satisfied in cash until a source of cash or financing is secured and will offer noncash consideration wherever possible. The Company is actively seeking consulting engagements. It has obtained its first such engagement as a subcontractor to another consulting firm to assist an unrelated client in Florida. It is not possible at this time to estimate the amount of fees to be realized from this engagement.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain matters discussed in this interim report on Form 10-Q are forward-looking statements. Such forward-looking statements contained in this annual report involve risks and uncertainties, including statements as to:
· | our future operating results, |
· | our business prospects, |
· | our contractual arrangements and relationships with third parties, |
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· | the dependence of our future success on the general economy and its impact on the industries in which we may be involved, |
· | the adequacy of our cash resources and working capital, and |
· | other factors identified in our filings with the SEC, press releases and other public communications. |
These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe," “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Operations
To date, our efforts have been limited primarily to organizational activities and preparation of documents to be filed with the Securities and Exchange Commission and in our efforts to becoming a business development company. In June 2004, we filed a notice with the Securities and Exchange Commission of its intent to elect in good faith, within 90 days from the date of such filing, to be regulated as a Business Development Company under the Investment Company Act of 1940 and be subject to Sections 54 through 65 of said Act. In February 2006, we decided to take the steps necessary to cease being a BDC and becoming a consulting firm. The 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a business development company unless approved by a majority of its outstanding voting securities. We have no resources and have realized no revenues to date.
Liquidity
We will engage in very limited activities without incurring any liabilities that must be satisfied in cash until a source of cash or financing is secured and will offer noncash consideration wherever possible. We are actively seeking consulting engagements and have obtained our first such engagement as a subcontractor to another consulting firm to assist an unrelated client in Florida. It is not possible at this time to estimate the amount of fees to be realized from this engagement.
Recent Accounting Pronouncements
In June 2003, the Securities and Exchange Commission adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002. Commencing with our annual report for the year ended January 31, 2007, we will be required to include a report of management on our internal control over financial reporting. The internal control report must include a statement
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· | of management’s responsibility for establishing and maintaining adequate internal control over our financial reporting; |
· | of management’s assessment of the effectiveness of our internal control over financial reporting as of year end; |
· | of the framework used by management to evaluate the effectiveness of our internal control over financial reporting; and |
· | that our independent accounting firm has issued an attestation report on management’s assessment of our internal control over financial reporting, which report is also required to be filed. |
In December 2005 the SEC's advisory committee on small business recommended that the SEC allow most companies with market values of less than $700 million to avoid having their internal controls certified by auditors. The advisory committee recommended that most companies with market capitalizations under $100 million be exempted totally. It further recommended that companies with market capitalizations of $100 million to $700 million not face audits of internal controls. Some companies with large revenues but low market values would still be required to comply with the act. There can be no assurances that these proposals or similar proposals will be adopted.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since we have no assets and do not have any investments in eligible portfolio companies, there is no quantitative information, as of the end of October 31, 2005, about market risk that has any impact on our present business. Once we begin making investments in eligible portfolio companies we anticipate there will be market risk sensitive instruments and we will disclose the applicable market risk information at that time.
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ITEM 4
CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was carried out by the Company under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures have been designed and are being operated in a manner that provides reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. There have been no changes in the Company’s internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
PART II
Item 1 Legal Proceedings
None
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
There have been no events that are required to be reported under this Item.
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Securityholders
None
Item 5 Other Information
None
Item 6 Exhibits
Exhibit Number | Description |
31.1 | Section 302 Certification of Chief Executive Officer and Chief Financial Officer |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 |
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Innocap, Inc. | |
(Registrant) | |
/s/ B. Alva Schoomer | |
By: | B. Alva Schoomer |
President | |
Date: | March 1, 2006 |
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