UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission file number: 333-139773
K-9 CONCEPTS, INC.
(Name of small business issuer in its charter)
Nevada Applied For
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
RM0933, 9/F., Block C, Harbourfront Horizon
Hung Hom Bay, 8 Hung Luen Road
Kowloon, Hong Kong
(Address of principal executive offices)
(852) 6622-3666
Issuer's telephone number
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No _____
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
Yes X No _____
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes X No _____
State issuer's revenues for its most recent fiscal year: Nil
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act.)
$1,600,000 as at November 16, 2007 based on the average bid price of our common
stock
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
6,400,000 shares of common stock as at November 16, 2007
TABLE OF CONTENTS
PAGE
ITEM 1: DESCRIPTION OF BUSINESS...............................................4
ITEM 2: DESCRIPTION OF PROPERTY..............................................10
ITEM 3: LEGAL PROCEEDINGS....................................................10
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................10
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............10
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............10
ITEM 7: FINANCIAL STATEMENTS.................................................12
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES................................................23
ITEM 8A:CONTROLS AND PROCEDURES..............................................23
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.........23
ITEM 10: EXECUTIVE COMPENSATION..............................................25
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......25
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................25
ITEM 13: EXHIBITS AND REPORTS................................................26
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVCES...............................26
PART I
ITEM 1: DESCRIPTION OF BUSINESS
IN GENERAL
We have commenced operations as a distributor of Vitamin C shower heads and
related accessories in both the mass wholesale and retail market throughout
North America. However, there is no assurance that our current business model
is commercially and economically viable. Further marketing of the product
in a broader distribution network will be required before a final evaluation
as to the economic feasibility of the Company's business model is determined.
Economic feasibility refers to the ability of an enterprise to conduct its
business operations in a profitable and cash-flow positive manner.
The Vitamin C shower head, a product designed by Everise Water Technology Ltd.,
a Hong Kong company, contains a small canister that releases a Vitamin C
solution during operation that neutralizes chlorine and chloramines contained
in the water. We are engaged in the marketing and distribution of Vitamin C
shower heads and related accessories to the general public throughout North
America. We are engaged in a marketing and sales distribution agreement with
our supplier, Everise Water Technology Ltd. for the sales and distribution of
Vitamin C shower heads and related accessories in North America.
We are also continuing to review other potential acquisitions of and sales and
distribution arrangements with companies involved in the wholesale and
manufacturing sectors. We are currently in the process of completing due
diligence investigations of various opportunities in the leisure footwear and
biotechnology sectors.
We will rely upon the stability of the North American retail sales market, and
specifically continued growth in the personal healthcare sector, for the
success of our business plan. Future downturns in consumer sentiment and
spending and in home improvement activity may result in intense price
competition among suppliers in the showerhead segment, which may adversely
affect our intended business.
Our plan of operation is to enter into distribution agreements with mass
merchandisers and home centers, providing for the sale of our Vitamin C shower
head. We intend to develop our distribution network by initially focusing our
marketing efforts on larger chain stores that sell various types of shower
heads and vitamin supplements, such as Wal-Mart, Target, Home Depot, Lowe's
and Bed Bath & Beyond. These businesses sell more products in our targeted
market segment, have a greater budget for in-stock inventory and tend to
purchase a more diverse assortment of showerhead products and related
accessories. In 2008, we anticipate expanding our retail network to include
small to medium size retail businesses whose businesses focus is limited to
the sale of bathroom accessories. Any relationship we arrange with retailers
for the wholesale distribution of our flooring will be non-exclusive.
Accordingly, we will compete with other showerhead product vendors for
positioning of our products in retail space.
To date, we have primarily been involved in organizational activities and the
initial marketing of Vitamin C shower heads and related accessories. We intend
to retain one full-time sales person in the next six months, as well as an
additional full-time sales person in the six months thereafter. These
individuals will be independent contractors compensated solely in the form of
commission based upon shower heads sales they arrange. We expect to pay each
sales person 12% to 15% of the net profit we realize from such sales.
Even if we are able to receive order commitment from larger clients, some
larger chains will only pay cash on delivery and will not advance deposits
against orders. Such a policy may place a financial burden on us and, as a
result, we may not be able to deliver the order. Other retailers may only pay
us 30 or 60 days after delivery, creating an additional financial burden.
Although the shower head and related accessories market is mature in North
America, our Vitamin C shower head product line might not gain acceptance in
the North American market.
SHOWERHEAD MARKET
Separate showers and baths have become common in many North American
households. Showers have transformed into vertical spas, delivering hydro
massage through a series of whirlpool jets arranged vertically in a shower-like
enclosure, where water is propelled through the air, rather than through the
water as in a traditional whirlpool.
Shower components are often set on telescoping arms that are easily adjusted to
accommodate users of different heights or to direct the jets to different parts
of the body. Control valves have also become more sophisticated to meet the
demands of multiple shower heads, including separate controls to adjust the
thermostat and the volume.
Steam shower rooms are also gaining in popularity. They are usually self-
enclosed units that function as a regular shower but also use a humidifying
steam generator to produce a warm aura of relaxing water vapor.
We believe that we can take advantage of personal health care trends by
providing a product to North Americans that will address their concerns
regarding the quality and safety of the tap water that they use for showering.
AGREEMENT WITH OUR SUPPLIER
The Vitamin C shower head and related accessory products were developed and
manufactured by Everise Water Technology Ltd. ("Everise"), a private Hong Kong
based company. We are in the business of marketing and distributing items to
the general public.
By a Marketing and Sales Distribution Agreement dated January 15, 2006, Everise
has agreed to supply Vitamin C shower head and related accessories to us on a
non-exclusive basis and to fulfill our written purchase orders for these
products in a timely manner. Upon placing an order, we are required to prepay
Everise for 50% of the wholesale purchase price of the products that we order.
Upon shipping, we are required to pay Everise the balance of the purchase order
price. We are responsible for all shipping costs.
Everise's products consist of various shower heads made of hard white plastic
or chrome. The shower heads also come with regular or massage components.
Shower head unit wholesale prices range from $42 to $63 each. As well, Everise
will supply us with Vitamin C cartridges to be inserted into each shower head.
Cartridges can be purchased as unscented or with one of three designer scents:
sandalwood, lavender or geranium. The wholesale cost of an unscented cartridge
is $4.50. For a scented cartridge, the wholesale price is $6.30.
Everise may change the price of any of its products that it supplies to us upon
written notice. Either party may terminate the agreement upon 60 day's written
notice.
Everise's Vitamin C shower head system is an ISO 9001 certified product. While
the shower head is in operation, it releases a proprietary, granulated vitamin
C based compound that neutralizes all chlorine or chloramine into the water
stream. When the water is shut off, the Vitamin C cartridge stops releasing
this compound.
SALES AND MARKETING STRATEGY
We intend to rely on sales representatives to market our shower heads and
accessories. Initially, this marketing will be conducted by our directors:
Albert Au and Jeanne Mok. Eventually, we will sell our products using a
combination of sales representatives and distributors. This will provide a
broad distribution network that allows us to efficiently distribute our
products across a number of distribution channels to reach a greater number
of consumers and distributors.
Our products will be primarily marketed to consumers through mass merchandisers
and home centers such as Wal-Mart, Target, Home Depot, Lowe's and Bed Bath &
Beyond. These distributors and stores will be asked to sell our products to
consumers. We will provide them with shower head inventory at wholesale
prices. They will then sell them to consumers at retail prices. To date, we
have not made arrangements with any retailers to sell the shower head products
that we intend to distribute.
COMPLIANCE WITH GOVERNMENT REGULATION
We do not believe that government regulation will have a material impact on
the way we conduct our business.
EMPLOYEES
We have no employees as of the date of this annual report other than our two
directors.
RESEARCH AND DEVELOPMENT EXPENDITURES
We have not incurred any other research or development expenditures since our
incorporation.
SUBSIDIARIES
We do not have any subsidiaries.
PATENTS AND TRADEMARKS
We do not own, either legally or beneficially, any patents or trademarks.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
annual report before investing in our common stock. If any of the following
risks occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock could decline due to
any of these risks, and you may lose all or part of your investment.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS MAY FAIL.
Our business plan calls for ongoing expenses in connection with the marketing
and sales of Vitamin C shower heads and accessories. We have not generated any
revenue from operations to date.
We anticipate that additional funding will be needed for general administrative
expenses and marketing costs. In order to expand our business operations, we
anticipate that we will have to raise additional funding. If we are not able
to raise the funds necessary to fund our business expansion objectives, we may
have to delay the implementation of our business plan.
We do not currently have any arrangements for financing. Obtaining additional
funding will be subject to a number of factors, including general market
conditions, investor acceptance of our business plan and initial results from
our business operations. These factors may impact the timing, amount, terms or
conditions of additional financing available to us. The most likely source of
future funds presently available to us is through the sale of additional shares
of common stock.
BECAUSE WE HAVE NOT YET COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK OF
BUSINESS FAILURE.
We were incorporated on August 25, 2005 and to date have been involved
primarily in organizational activities. We have not earned revenues as of the
date of this prospectus. Accordingly, you cannot evaluate our business, and
therefore our future prospects, due to a lack of operating history. To date,
our business development activities have consisted solely of negotiating and
executing a marketing and sales distribution agreement with Everise Water
Technology Ltd., our supplier based in Hong Kong, and conducting initial
marketing activities.
Potential investors should be aware of the difficulties normally encountered by
development stage companies and the high rate of failure of such enterprises.
WE NEED TO CONTINUE AS A GOING CONCERN IF OUR BUSINESS IS TO SUCCEED.
Our business condition, as indicated in our independent accountant's audit
report to our financial statements raises substantial doubt as to our
continuance as a going concern. To date, we have completed only part of our
business plan and we can provide no assurance that we will be able to generate
enough revenue from our business in order to achieve profitability. It is not
possible at this time for us to predict with assurance the potential success of
our business.
ANY ADDITIONAL FUNDING WE ARRANGE THROUGH THE SALE OF OUR COMMON STOCK WILL
RESULT IN DILUTION TO EXISTING SHAREHOLDERS.
We must raise additional capital in order for our business plan to succeed. Our
most likely source of additional capital will be through the sale of additional
shares of common stock. Such stock issuances will cause stockholders' interests
in our company to be diluted. Such dilution will negatively affect the value of
an investor's shares.
OUR GROWTH MAY SUFFER IF AN ECONOMIC DOWNTURN IN OUR MAJOR MARKET INHIBITS
PEOPLE FROM SPENDING THEIR DISPOSABLE INCOME ON HEALTH CARE PRODUCTS.
Our growth depends significantly on continued economic growth in the health
care sector in North America where we intend to distribute the Vitamin C shower
heads. Because the shower heads are paid directly by the consumer out of
disposable income and are not subject to reimbursement by third-party payers
such as health insurance organizations, an economic downturn in the North
American market could have an adverse effect on the sales and profitability of
our products.
PRODUCT LIABILITY LAWSUITS COULD DIVERT OUR RESOURCES, RESULT IN SUBSTANTIAL
LIABILITIES AND REDUCE THE COMMERCIAL POTENTIAL OF OUR PRODUCTS.
Our business exposes us to the risk of product liability claims that are
inherent to the development, clinical testing and marketing of skin health
products. These lawsuits may divert our management from pursuing our business
strategy and may be costly to defend. In addition, if we are held liable in any
of these lawsuits, we may incur substantial liabilities and may be forced to
limit or forgo further commercialization of those products.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY. OUR FAILURE TO COMPETE EFFECTIVELY
COULD ADVERSELY AFFECT OUR SALES AND GROWTH PROSPECTS.
The U.S. vitamin supplements and health product retail industry is a large and
highly fragmented industry. We compete primarily against other specialty
distributors and retailers, supermarkets, drugstores, mass merchants, multi-
level marketing organizations and mail order companies. This market is highly
sensitive to the introduction of new products, which may rapidly capture a
significant share of the market. Increased competition from companies that
distribute through retail or wholesale channels could have a material adverse
effect on our financial condition and results of operations.
Our competitors may have significantly greater financial, technical and
marketing resources than we do. In addition, our competitors may be more
effective and efficient in introducing new products. We may not be able to
compete effectively, and any of the factors listed above may cause price
reductions, reduced margins and losses of our market share.
WE SOURCE SHOWER HEAD PRODUCTS FROM HONG KONG AND ARE EXPOSED TO RISKS
ASSOCIATED WITH DOING BUSINESS GLOBALLY.
We are subject to risks associated with changes in political, economic and
social environments, local labor conditions, changes in laws, regulations and
policies of foreign governments, as well as Canadian laws affecting activities
of Canadian companies abroad, including tax laws and enforcement of contract
and intellectual property rights. Many of these risks are beyond our control.
Exchange rate fluctuations may increase the cost of sourced products and reduce
our margins and profitability.
CHANGES IN REGULATORY STANDARDS FOR WATER USING APPLIANCES COULD NEGATIVELY
IMPACT OUR BUSINESS SALES AND LIMIT OUR ABILITY TO DEVELOP AND MARKET OUR
PRODUCTS.
New regulatory initiatives could restrict our ability to develop new products.
There is no assurance that our future products will satisfy the rules and
standards governing our industry, or that our existing rules and standards will
not be changed in ways that negatively affect the sales of our products.
Furthermore, any future rule changes could further impair our ability to
differentiate our products from our competitors resulting in reduced sales and
profitability.
BECAUSE WE RELY UPON ONE SUPPLIER FOR THE VITAMIN SHOWER HEAD PRODUCTS WE
INTEND TO DISTRIBUTE, OUR BUSINESS WILL FAIL IF OUR SUPPLIER TERMINATES ITS
RELATIONSHIP WITH US.
As a result of being totally dependent on a single supplier, Everise Water
Technology Ltd., that is located in Hong Kong, we may be subject to certain
risks, including changes in regulatory requirements, tariffs and other
barriers, increased pressure, timing and availability of export licenses,
foreign currency exchange fluctuations, the burden of complying with a variety
of foreign laws and treaties, and uncertainties relative to regional, political
and economic circumstances. Our agreement with Everise Water Technology Ltd.
does not prevent it from supplying its shower head products to our competitors
or directly to consumers. If this company modified or terminated its
association
with us for any other reason, we would suffer an interruption in our business
unless and until we found a substitute for that supplier. If we were unable to
find a substitute for that supplier, our business would fail. Everise Water
Technology Ltd. may cancel our marketing and sales distribution agreement upon
60 day's notice, without cause.
PURCHASER IS PURCHASING PENNY STOCK WHICH LIMITS THE ABILITY TO SELL THE STOCK.
The shares offered by this prospectus constitute penny stock under the Exchange
Act. The shares will remain penny stock for the foreseeable future. "Penny
stock" rules impose additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers and
accredited investors, that is, generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with a
spouse. For transactions covered by these rules, the broker-dealer must
make a special suitability determination for the purchase of such securities
and have received the purchaser's written consent to the transaction prior
to the purchase. Additionally, for any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the transaction, of
a disclosure schedule prescribed by the Commission relating to the penny
stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements must be sent
disclosing recent price information on the limited market in penny stocks.
Consequently, the "penny stock" rules may restrict the ability of
broker-dealers to sell our shares of common stock. The market price of our
shares would likely suffer as a result.
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements that involve risks and
uncertainties. We use words such as anticipate, believe, plan, expect, future,
intend and similar expressions to identify such forward-looking statements. You
should not place too much reliance on these forward-looking statements. Our
actual results are most likely to differ materially from those anticipated in
these forward-looking statements for many reasons, including the risks faced by
us described in the "Risk Factors" section and elsewhere in this annual report.
ITEM 2: DESCRIPTION OF PROPERTY
We do not ownership or leasehold interest in any property. Our president, Mr.
Bruce Biles, provides us with office space and related office services free of
charge.
ITEM 3: LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened against us.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of our fiscal year to a
vote of security holders, through the solicitation of proxies or otherwise.
PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our shares of common stock were quoted on the OTC Bulletin Board on July 11,
2007. However, during the fiscal year ended August 31, 2007, no trades of
our common stock occurred through the facilities of the OTC Bulletin Board.
The quotations on the OTC Bulletin Board reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
We had 32 shareholders of record as at the date of this annual report.
DIVIDENDS
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual
course of business; or
2. our total assets would be less than the sum of our total liabilities plus
the amount that would be needed to satisfy the rights of shareholders who
have preferential rights superior to those receiving the distribution.
We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
We will rely upon the stability of the North American retail sales market for
the success of our business plan. Because our products are paid directly by
the consumer out of disposable income, an economic downturn in the North
American market could have an adverse effect on the sales and profitability of
our products.
Our plan of operation for the twelve months following the date of this
prospectus is to enter into agreements with shower head and health product
wholesale distributors and retail stores, providing for the sale of shower
heads.
We intend to develop our retail network by initially focusing our marketing
efforts on larger chain stores that sell various types of shower heads and
vitamin supplements. These businesses have a greater budget for in-stock
inventory and tend to purchase a more diverse assortment of vitamin supplements
and shower products. By mid-2008, we anticipate expanding our retail network to
include small to medium size retail businesses whose businesses
focus is limited to the sale of bathroom accessories. Any relationship we
arrange with retailers for the wholesale distribution of our shower heads will
be non-exclusive. Accordingly, we will compete with other vitamin supplement
and shower head vendors for positioning our products in retail space.
Even if we are able to receive an order commitment, some larger chains will
only pay cash on delivery and will not advance deposits against orders. Such
a policy may place a financial burden on us and, as a result, we may not be
able to deliver the order. Other retailers may only pay us 30 or 60 days after
delivery, creating an additional financial burden.
We intend to retain one full-time sales person in the next six months, as well
as an additional full-time sales person in the six months thereafter. These
individuals will be independent contractors compensated solely in the form of
commission based upon shower head sales they arrange. We expect to pay each
sales person 12% to 15% of the net profit we realize from such sales.
We therefore expect to incur the following costs in the next 12 months in
connection with our business operations:
Marketing costs: $20,000
General administrative costs: $10,000
Total: $30,000
In addition, we anticipate spending an additional $10,000 on administrative
fees. Total expenditures over the next 12 months are therefore expected to be
$40,000.
We do not have sufficient funds on hand to commence intended business
operations and our cash reserves are not sufficient to meet our obligations
for the next twelve-month period. As a result, we will need to seek
additional funding in the near future. We currently do not have a specific
plan of how we will obtain such funding; however, we anticipate that
additional funding will be in the form of equity financing from the sale of
our common stock.
We may also seek to obtain short-term loans from our directors. At this time,
we cannot provide investors with any assurance that we will be able to raise
sufficient funding from the sale of our common stock or through a loan from our
directors to meet our obligations over the next twelve months. We do not have
any arrangements in place for any future equity financing.
If we are unable to raise the required financing, we will be delayed in
conducting our business plan.
Our ability to generate sufficient cash to support our operations will be based
upon our sales staff's ability to generate shower head sales. We expect to
accomplish this by securing a significant number of agreements with large and
small retailers and by retaining suitable salespersons with experience in the
retail sales sector.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED AUGUST 31, 2007
We did not earn any revenues during the fiscal year ended August 31, 2007. We
have not fully implemented our sales and marketing strategy for our showerhead
products and can therefore provide no assurance that our business model and
plan is economically feasible.
We incurred operating expenses in the amount of $12,078 for the year ended
February 28, 2007. These operating expenses were comprised of bank charges and
interest fees of $126, filing and transfer agent fees of $11,598, management
fees of $6,000, professional fees of $10,500 and travel and promotional costs
of $120.
Our net loss in fiscal 2007 ($28,344) was higher than in fiscal 2006 ($12,078)
primarily due to the incurrence of filing and transfer agent fees of $11,598
(2006 - $0), although there was an increase in professional fees ($4,348 in 2006
as compared to $10,500 in 2007).
We have not attained profitable operations and are dependent upon obtaining
financing to complete our proposed business plan. For these reasons, there is
substantial doubt that we will be able to continue as a going concern.
ITEM 7: FINANCIAL STATEMENTS
K-9 CONCEPTS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
AUGUST 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BALANCE SHEETS
STATEMENT OF OPERATIONS
STATEMENT OF CASH FLOWS
STATEMENT OF STOCKHOLDERS' DEFICIT
NOTES TO THE FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
of K-9 Concepts, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of K-9 Concepts Inc. (a
development stage company) as of August 31, 2007 and 2006 and the statements
of operations, stockholders' deficit and cash flows for the year ended August
31, 2007, the period from August 25, 2005 (inception) through August 31,2006
and for the period from August 25, 2005 (inception) through August 31, 2007.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the company's internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of K-9 Concepts, Inc. as of August 31, 2007
and 2006 and the results of its operations and its cash flows for the year
ended August 31, 2007, the period from August 25, 2005 (inception) through
August 31,2006 and for the period from August 25, 2005 (inception) through
August 31, 2007 in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage and has losses
from operations since inception. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
this regard are described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED ACCOUNTANTS
Vancouver, Canada
November 5, 2007
K-9 CONCEPTS, INC.
A DEVELOPMENT STAGE COMPANY
BALANCE SHEETS
(EXPRESSED IN US DOLLARS)
August August
31, 31,
ASSETS 2007 2006
CURRENT
ASSETS
Cash $8,078 $16,826
Account
receivable $- $96
Total Assets 8,078 16,922
LIABILITIES
CURRENT LIABILITES
Accounts payable and
accrued liabilities $13,500 $-
Total liabilities $13,500 $-
STOCKHOLDERS'
EQUITY (DEFICIT)
STOCKHOLDERS'
EQUITY
Common stock (Note 3)
Authorized
75,000,000, par value
$0.001 per share
Issued and outstanding:
6,400,000 common shares 6,400 6,400
Additional paid in capital 19,600 19,600
Donated capital (Note 4) 9,000 3,000
Deficit (26,922) (12,078)
TOTAL STOCKHOLDERS'
EQUITY (deficit) 8,078 16,922
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY (deficit) $8,078 $16,922
The accompanying notes are an integral part of these financial statements.
K-9 CONCEPTS, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENT OF OPERATIONS
(EXPRESSED IN US DOLLARS)
August
25, 2005 August 25,
(Date of Year 2005 (Date
Inception Ended of Inception)
to August August to August 31,
31, 2006 31, 2007 2007
Bank charges $224 $126 $350
Filing and transfer
agent fees - 11,598 11,598
Management fees 3,000 6,000 9,000
Marketing 1,626 - 1,626
Professional fees 4,348 10,500 14,848
Travel and
entertainment 2,880 120 3,000
Loss for the period $12,078 $28,344 $40,422
BASIC AND DILUTED
LOSS PER SHARE $(0.00) $(0.00)
WEIGHTED AVERAGE
NUMBER OF
SHARES OUTSTANDING 5,293,333 6,400,000
The accompanying notes are an integral part of these financial statements.
K-9 CONCEPTS, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
(EXPRESSED IN US DOLLARS)
(Deficit)
Accumulated
Additional Donated During the
Paid-in Capital Development
Number Amount Capital (Note 5) Stage Total
Balance, August 25,
2005 (Date of
Inception) $- $- $- $- $- $-
Common stock issued
for cash at
$0.001 per share
October 4, 2005 2,000,000 2,000 - - - 2,000
Common stock issued
for cash at
$0.001 per share
November 8, 2005 4,000,000 4,000 - - - 4,000
Common stock issued
for cash at
$0.05 per share
March 30, 2006 400,000 400 19,600 - - 20,000
Donated services - - - 3,000 - 3,000
Net loss - - - - (12,078) (12,078)
Balance, August 6,400,000 6,400 19,600 3,000 (12,078) 16,922
31, 2006
Donated services - - - 6,000 - 6,000
Net loss - - - - (28,344) (28,344)
BALANCE, AUGUST 31,
2007 6,400,000 6,400 19,600 9,000 (40,422) (5,422)
The accompanying notes are an integral part of these financial statements.
K-9 CONCEPTS, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENT OF CASH FLOWS
(EXPRESSED IN US DOLLARS)
August 25, August
2005 (Date of Year 25, 2005
Inception) Ended (Date of
to August August Inception) to
31, 2006 31, 2007 August 31, 2007
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $(12,078) $(14,844) $(26,922)
Non-cash item:
Donated services 3,000 6,000 9,000
Changes in non-cash
operating working
capital item:
Other receivable (96) 96 -
Accounts payable and accrued
liabilities - 13,500 13,500
Net cash (used in)
operating activities (9,174) (8,748) (17,922)
Cash Flows From Financing
Activities
Issuance of common shares 26,000 - 26,000
Net cash provided by financing
activities 26,000 - 26,000
Increase (decrease) in Cash 16,826 (8,748) 8,078
Cash, Beginning - 16,826 -
Cash, Ending $16,826 $8,078 $8,078
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest $- $- $-
Income taxes $- $- $-
The accompanying notes are an integral part of these financial statements.
K-9 CONCEPTS, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2007
(EXPRESSED IN US DOLLARS)
NOTE 1. NATURE AND CONTINUANCE OF OPERATIONS
K-9 Concepts, Inc. ("the Company") was incorporated under the laws of
the State of Nevada on August 25, 2005. The Company is in the business of
marketing and distribution items to the general public. The Company is
considered to be a development stage company and has not generated any
significant revenues from operations since its inception.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As of August 31, 2007, the
Company has a working capital deficiency $5,422, has not yet achieved
profitable operations and has accumulated a deficit of $40,422 since
inception. Its ability to continue as a going concern is dependent upon
the ability of the Company to obtain the necessary financing to meet its
obligations and pay its liabilities arising from normal business
operations when they come due. The outcome of these matters cannot
be predicted with any certainty at this time and raise substantial
doubt that the Company will be able to continue as a going concern.
These financial statements do not include any adjustments to the
amounts and classification of assets and liabilities that may be
necessary should the Company be unable to continue as a going
concern. Management believes that the Company has adequate funds to carry
on operations for the upcoming fiscal year. Management intends to finance
operating costs over the next twelve months with existing cash on hand
and loans from directors and or private placement of common stock.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America
("US GAAP") and are presented in United States dollars.
USE OF ESTIMATES
The preparation of financial statements in conformity with US GAAP
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 dates of the financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates.
FOREIGN CURRENCY TRANSLATION
The Company's functional currency is the Canadian dollar and reporting
currency is the United States dollar. The Company has adopted SFAS No. 52
"Foreign Currency Translation" as of its inception. Monetary assets and
liabilities denominated in foreign currencies are translated using the
exchange rate prevailing at the balance sheet date. Non-monetary assets
and liabilities denominated in foreign currencies are translated at rates
of exchange in effect at the date of the transaction. Average monthly
rates are used to translate revenues and expenses. Gains and losses
arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income. The
Company has not, to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.
K-9 CONCEPTS, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2007
(EXPRESSED IN US DOLLARS)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The carrying value of cash, accounts payable and accrued liabilities
approximates their fair value because of the short-term maturity of these
instruments. The Company's operations are in Canada and virtually all of
its assets and liabilities are giving rise to significant exposure to
market risks from changes in foreign currency rates. The financial risk
is the risk to the Company's operations that arise from fluctuations in
foreign exchange rates and the degree of volatility of these rates.
Currently, the Company does not use derivative instruments to reduce its
exposure to foreign currency risk.
INCOME TAXES
The Company follows the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are
recognized for the estimated tax consequences attributable to differences
between the financial statement carrying values and their respective
income tax basis (temporary differences). The effect on deferred income
tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. At August 31, 2007
a full deferred tax asset valuation allowance has been provided and no
deferred tax asset benefit has been recorded.
LOSS PER SHARE
In accordance with SFAS No. 128 "Earnings Per Share", the basic loss per
common share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding.
Diluted loss per common share is computed similar to basic loss per
common share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional common
shares were dilutive. At August 31, 2007, the Company had no dilutive
stock equivalents, accordingly diluted loss per share is equal to basic
loss per share.
RECENT ACCOUNTING PRONOUNCEMENT
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial Liabilities". This Statement permits
entities to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which
the fair value option has been elected are reported in earnings. SFAS No.
159 is effective for fiscal years beginning after November 15, 2007. The
Company is currently assessing the impact of SFAS No. 159 on its
financial position and results of operations.
NOTE 3 COMMON STOCK
Authorized
75,000,000 common shares of stock with a par value of one tenth of one
cent ($0.001) per share.
Issued
During the period from August 25, 2005 (inception) to August 31, 2006,
the Company issued 6,400,000 common shares for total cash proceeds of
$26,000.
The Company has not adopted a stock option plan and has not granted any
stock options. Accordingly, no stock-based compensation has been
recorded to date.
K-9 CONCEPTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2007
NOTE 4 DONATED CAPITAL
The Company recognized donated services by directors of the Company for
management fees in fiscal 2007, valued at $500 per month, totaling $6,000
for the period from September 1, 2006 to August 31, 2007 and $3,000 for
the period from March 1, 2006 to August 31, 2006. These transactions
were recorded at the exchange amount which is the amount agreed to by the
related parties.
NOTE 5 INCOME TAXES
The following table summarizes the significant components of the Company's
deferred tax assets:
- ------------------------------------------------------------------
2007 2006
- ------------------------------------------------------------------
Deferred Tax Assets
Non-capital losses carryforward $ 13,750 $ 4,106
Valuation allowance for deferred tax asset (13,750) (4,106)
Net deferred tax assets $ - $ -
- ------------------------------------------------------------------
At August 31, 2007, the Company has accumulated non-capital losses
totaling approximately $40,000, which are available to reduce taxable
income in future taxation years. These losses expire beginning 2026.
The potential benefit of those losses, if any, has not been recorded in
the financial statements as these losses are not likely to be realized.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8A: CONTROLS AND PROCEDURES
EVALUTION OF DISCLOSURE CONTROLS
We evaluated the effectiveness of our disclosure controls and procedures as of
the end of the 2007 fiscal year. This evaluation was conducted with the
participation of our chief executive officer and our principal accounting
officer.
Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to disclose in the reports we file
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported.
LIMITATIONS ON THE EFFECTIVE OF CONTROLS
Our management does not expect that our disclosure controls or our internal
controls over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
but no absolute, assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources, and the benefits
of a control system must be considered relative to its costs. These limitations
also include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of a control. A
design of a control system is also based upon certain assumptions about
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may occur and may
not be detected.
CONCLUSIONS
Based upon their evaluation of our controls, the chief executive officer and
principal accounting officer have concluded that, subject to the limitations
noted above, the disclosure controls are effective providing reasonable
assurance that material information relating to us is made known to management
on a timely basis during the period when our reports are being prepared. There
were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name Age Position with RegistrantServed as a Director or Officer
Since
Albert Au 42 President, C.E.O, August 25, 2005
promoter and director
Jeanne Mok 36 Secretary, Treasurer, August 25, 2005
principal accounting
officer, principal
financial officer and
director
The following describes the business experience of the Company's directors and
executive officers, including other directorships held in reporting companies:
MR. ALBERT AU has acted as our president, chief executive officer, secretary,
treasurer and as a director since our incorporation on August 25, 2005. For the
past 20 years, Mr. Au has be involved in marketing and sales as well as in
conducting Asian trade and investments. He has been involved in the import and
export of toys, as well as household goods, between China and various key South
American markets such as Brazil, Chile and Argentina. He has also acted as a
master country distributor for a large motorcycle/scooter manufacturer in China
exporting to Argentina and Vietnam. In addition, Mr. Au was also previously the
master distributor for Tsingtao Brewery for Vietnam. He is currently a Vice-
President for the Tiancheng Group, a large investment holding company and
merchant bank under the CITIC Group. In that capacity, he is involved in the
oversight of investments undertaken by Tiancheng in the Canadian market.
Mr. Au devotes 20% of his business time to our affairs. He is responsible for
managing the implementation of our marketing strategy for the shower head
products.
MS. JEANNE MOK has acted as our director since August 25, 2005. After
graduating from England's Polam Hall School in 1990, where she majored in the
fields of education and musical studies, Ms. Mok was employed as a teacher from
1991 to 1995 in Hong Kong's York English Kindergarten. Since 1995, she has
owned and operated Famous Pet City, a Hong Kong-based distributor of pet
products.
Ms. Mok devotes 10% of his business time to our affairs. She is responsible for
overseeing our day to day affairs, including all administrative aspects. Along
with Mr. Au, she is responsible for implementing our marketing and distribution
strategies.
All directors are elected annually by our shareholders and hold office until
the next Annual General Meeting. Each officer holds office at the pleasure
of the board of directors. No director or officer has any family relationship
with any other director or officer.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and
directors, and persons who beneficially own more than 10% of our equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10%
shareholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file. Based on our review of the copies of such forms
we received, we believe that during the fiscal year ended February 28, 2007
all such filing requirements applicable to our officers and directors
were complied with exception that reports were filed late by the following
persons:
Number TransactionsKnown Failures
Of late Not Timely To File a
Name and principal position Reports Reported Required Form
- -------------------------------------------------------------------------------
Albert Au 0 0 0
(President and director)
Jeanne Mok 0 0 0
(Secretary, treasurer and director)
ITEM 10: EXECUTIVE COMPENSATION
The table below summarizes all compensation awarded to, earned by, or paid to
our executive officers by any person for all services rendered in all
capacities to us for the fiscal year ended February 28, 2007.
Annual Compensation Long Term Compensation
Other Restricted All
Name(1) Annual Stock Options/ LTIP Other
& Title Year Salary Bonus Compensation Awarded SARS(#) Payouts($) Compensation
Albert
Au, 2007 $0 0 0 0 0 0 0
President
Jeanne
Mok, 2007 $0 0 0 0 0 0 0
Secretary
Treasuruer
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership
of our shares of common stock at February 28, 2007, by (i) each person known by
us to be the beneficial owner of more than 5% of our outstanding shares of
common stock, (ii) each of our directors, (iii) our executive officers, and
(iv) by all of our directors and executive officers as a group. Each person
named in the table, has sole voting and investment power with respect to all
shares shown as beneficially owned by such person and can be contacted at
our executive office address.
TITLE OF NAME AND ADDRESS BENEFICIAL PERCENT
CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
COMMON Albert Au 1,000,000 15.62%
STOCK President, Chief
Executive Officer
and Director
6250 King's Lynn Street
Vancouver, BC V5E 3W1
COMMON Jeanne Mok 1,000,000 15.62%
STOCK Secretary, Treasurer
Principal Accounting Officer
and Director
G/F, 233 Wong Chuk Wan
Sai Kung, Hong Kong
COMMON All officers and 2,000,000 31.24%
STOCK directos as a group
that consists
Of shares two people
The percent of class is based on 8,230,000 shares of common stock issued and
outstanding as of the date of this annual report.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of our directors or officers, nor any proposed nominee for election as a
director, nor any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to all of our outstanding
shares, nor any promoter, nor any relative or spouse of any of the foregoing
persons has any material interest, direct or indirect, in any transaction since
our incorporation or in any presently proposed transaction which, in either
case, has or will materially affect us.
Our management is involved in other business activities and may, in the future
become involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between our business and their other business interests. In the event that a
conflict of interest arises at a meeting of
our directors, a director who has such a conflict will disclose his interest in
a proposed transaction and will abstain from voting for or against the approval
of such transaction.
ITEM 13: EXHIBITS AND REPORTS
Exhibits
3.1* Articles of Incorporation
3.2* Bylaws
10.1* Marketing and Sales Distribution Agreement
31.1 Certification pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934
31.2 Certification pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
* filed as an exhibit to our registration statement on Form SB-2
dated January 3, 2007
Reports on Form 8-K
We did not file any reports on Form 8-K during the last quarter of fiscal 2007.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our principal accountants, Dale Matheson Carr-Hilton LaBonte, Chartered
Accountants, rendered invoices to us during the fiscal periods indicated for
the following fees and services:
Fiscal year ended Fiscal year ended
August 31, 2006 August 31, 2007
Audit fees $5,000 $5,000
Audit-related fees Nil Nil
Tax fees Nil Nil
All other fees Nil Nil
Audit fees consist of fees related to professional services rendered in
connection with the audit of our annual financial statements, the review of the
financial statements included in each of our quarterly reports on Form 10-QSB.
Our policy is to pre-approve all audit and permissible non-audit services
performed by the independent accountants. These services may include audit
services, audit-related services, tax services and other services. Under our
audit committee's policy, pre-approval is generally provided for particular
services or categories of services, including planned services, project based
services and routine consultations. In addition, we may also pre-approve
particular services on a case-by-case basis. We approved all services that our
independent accountants provided to us in the past two fiscal years.
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) 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.
K-9 Concepts, Inc.
By /s/ Albert Au
Albert Au
President, CEO & Director
Date: November 16, 2007
In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By /s/ Albert Au__________
Albert Au
President, CEO & Director
Date: November 16, 2007
By /s/ Jeanne Mok___________
Jeanne Mok
Secretary and Director
Date: November 16, 2007