EXPLANATORY
NOTE
THIS FORM
10-KSB IS BEING FILED BY OMNIMMUNE HOLDINGS, INC. (“OHI”) AS THE
SUCCESSOR-IN-INTEREST OF ROUGHNECK SUPPLIES, INC.
(“ROUGHNECK”). ROUGHNECK WAS INITIALLY FORMED AS A NEVADA CORPORATION
AND BECAME A REPORTING COMPANY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
(“SEC”) ON AUGUST 30, 2007. ROUGHNECK’S FISCAL YEAR END WAS MAY 31
UNTIL CLOSING OF THE FIRST MERGER (AS MORE FULLY DESCRIBED HEREINBELOW) ON
AUGUST 6, 2008. CONSEQUENTLY, AS OF MAY 31, 2008, ROUGHNECK, AS A
REPORTING COMPANY, BECAME
REQUIRED
BY SEC RULES
TO FILE AN ANNUAL REPORT ON FORM 10-KSB FOR ITS FISCAL YEAR ENDED MAY 31,
2008. THIS OBLIGATION COULD NOT BE VACATED AFTER IT ACCRUED ON MAY
31, 2008 DESPITE THE OCCURRENCE OF THE MATERIAL SUBSEQUENT EVENTS DESCRIBED
HEREINBELOW WHICH HAVE MADE THIS FILING WHOLLY IRRELEVANT AND IMMATERIAL TO ANY
CURRENT SHAREHOLDER OF OHI. CONSEQUENTLY, PLEASE DO NOT MISCONSTRUE
OR CONFUSE THIS FILING AS CONTAINING ANY MATERIAL OR RELEVANT INFORMATION WITH
RESPECT TO OHI AND ITS BUSINESS AS IT EXISTS TODAY OR AS IT HAS EXISTED SINCE
THE CLOSING OF THE SECOND MERGER ON AUGUST 7, 2008.
As of
August 6, 2007, and as of May 31, 2008 (the date of this annual report),
Roughneck was technically a shell corporation with little or no
operations. On August 6, 2008, Roughneck merged with and into OHI
which resulted in (i) Roughneck changing its domicile from Nevada to Delaware,
(ii) Roughneck changing its name from “Roughneck Supplies, Inc.” to “Omnimmune
Holdings, Inc.”, (iii) Roughneck changing its fiscal year end from May 31 to
December 31 and (iv) Roughneck’s shareholders becoming the stockholders of OHI
(the “First Merger”). Because the First Merger had no effect on
Roughneck’s status as a public company required to file reports with the SEC or
its obligation accrued as of May 31, 2008, OHI, as Roughneck’s
successor-in-interest, is required to file on behalf of Roughneck this annual
report on Form 10-KSB for its fiscal year ended May 31, 2008, reporting
information as it existed prior to these mergers.
On August
7, 2008, Omnimmune Corp., a privately-held Texas corporation, merged with and
into Omnimmune Acquisition Corp., a Delaware corporation, and a wholly-owned
subsidiary of OHI (formerly Roughneck) formed for the purpose of the merger (the
“Second Merger”). As a result of the Second Merger, (i) Omnimmune
Corp. became a wholly-owned subsidiary of OHI, (ii) the shareholders of
Omnimmune Corp. became the majority stockholders of OHI and the shareholders
prior to the Second Merger were reduced to a minority ownership, (iii) the
management of OHI resigned, and the management of Omnimmune Corp. became the
management of OHI, (iv) the business of Omnimmune Corp. became the business of
OHI and the former business of Roughneck was eliminated and thus the business
from Roughneck (as required to be described in this annual report on Form
10-KSB) has been eliminated and is no longer of any materiality to OHI or its
stockholders, and (v) the historical financial statements of Omnimmune Corp.
became the historical financial statements of OHI and thus the historical
financial statements of Roughneck (as required to be set forth in this annual
report on Form 10-KSB) were eliminated and are no longer of any materiality to
OHI or its stockholders. Therefore, as a consequence of two mergers,
one on August 6, 2008, and one on August 7, 2008, OHI (formerly Roughneck) went
from being a public corporation domiciled in Nevada formerly in the business of
marketing and retailing oil and gas drilling supply products with little or no
continuing operations and a fiscal year end of May 31, to being a
public company domiciled in Delaware in the biotechnology business with a fiscal
year end of December 31. These mergers and the new management,
business and financial statements of OHI are described in detail in OHI’s Form
8-K filed with the SEC on August 12, 2008, as amended on August 21, 2008, August
27, 2008 and September 5, 2008, respectively.
Consequently,
as indicated hereinabove, this annual report on Form 10-KSB is being filed by
OHI (formerly Roughneck) merely as a formality and pursuant to the SEC filing
requirements requiring OHI to report on the business of OHI as of May 31, 2008,
despite the fact that, as of August 7, 2008, OHI’s business, management and
control changed, and thus OHI is now in the biotechnology business and the
historical financial statements of OHI as of May 31, 2008 have been eliminated
and no longer exist. Accordingly, the business and financial
statements described herein are of no current or ongoing consequence and are
wholly irrelevant and immaterial to OHI and its operations today and since
August 7, 2008.
PART
I
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
As used
in this Annual Report on Form 10-KSB (the “Annual Report”), references to “our
Company,” “Company,” “we” or “us” refers to Roughneck Supplies, Inc., unless
otherwise specifically stated or the context requires otherwise.
This
Annual Report contains forward-looking statements that involve risks and
uncertainties. These statements relate to future events or future financial
performance. A number of important factors could cause our actual results to
differ materially from those expressed in any forward-looking statements made by
us in this Annual Report. Forward-looking statements are often identified by
words like: “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project”
and similar expressions or words which, by their nature, refer to future events.
In some cases, you can also identify forward-looking statements by terminology
such as “may”, “will”, “should”, “plans”, “predicts”, “potential” or “continue”
or the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks discussed in Item 1 under the caption “Risk
Factors”, as well as those discussed elsewhere in this Annual Report, that may
cause our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements.
While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual
results.
Item
1.
Description of
Business.
Company
Overview
Roughneck
Supplies, Inc. is engaged in the business of marketing and retailing oil and gas
drilling supply products. Our products include drill bits, hand tools, safety
equipment, work wear, industrial cleaning products, and lubrication fluids used
in the drilling process. We sell our products to oil and gas drilling companies
and to field workers in that industry.
Our
products are marketed and sold through our printed catalog, through our
toll-free phone line, and through our online store at www.RoughneckSupplies.com.
We do not carry an inventory of products. Instead we form distribution
agreements with manufacturers and suppliers whereby our suppliers agree to
package products in our proprietary packaging and ship them directly to our
customers. We facilitate the sale of products to our customers and the purchase
of those products from our suppliers, acting as a marketing agent.
We
generate two separate revenue streams through our business operations. First, we
act as a marketing and sales agent by facilitating the sale of products to our
customers. Our prices reflect a retail markup over our suppliers’ wholesale
prices, and that retail markup reflects the net revenue stream from our retail
sales. We collect money from the sale, pay our suppliers their wholesale rate
for the products, and our suppliers will ship the products directly to our
customers.
Our
second anticipated source of revenue is through the sale of advertising space on
our website. The amount of revenue generated through advertising revenue will be
a factor of the level of traffic we are able to drive to such site.
The
supply of oil and gas drilling supply products is currently highly
decentralized, requiring oil and gas companies and field workers to go through
multiple manufacturers, distributors, and dealers to obtain tools, safety gear,
specialized clothing and other general products commonly used in connection with
their occupational practice. We centralize the availability of such products by
offering a broad range of oil field products through one single company -
available though both our catalog and our website. We believe this will adds
efficiency and convenience to the purchasing and supply process for oil and gas
companies and their employees.
We were
formed as a Nevada corporation on February 22, 2007. We maintain our principal
executive offices at 5254 Green Street, Suite #10, Halifax, Nova Scotia, B3H
1N7, and our telephone number is 1-800-471-6889.
Description
of our products
We are
engaged in the business of marketing and selling oil and gas drilling supply
products to companies and individuals within the oil and gas industry. We
anticipate that these products will include drill bits, hand tools, safety
equipment, work wear, industrial cleaning products, and lubrication fluids used
in the drilling process.
On June
21, 2007, we entered into a distribution agreement with Bell Industries. This
agreement provides our company with the rights to offer the products of Bell
Industries for sale through our website, printed catalog, and toll free phone
line.
We
currently have verbal distribution agreements with Solo Horton Brushes, Inc. and
Atlantic Hard Chrome, companies that manufacture products for the oil and gas
industry
Description
of our online offerings
Our
website was launched during June of 2007. In addition to containing our online
product catalog, our website includes valuable industry-related content and a
private interactive section. Visitors can sign up for a free membership account,
which provides access to our industry discussion boards, job boards, and
industry-related informational articles. The industry discussion boards allow
workers in the industry to communicate and share information. The job boards
offer companies within the industry the opportunity to post their employment
openings as a recruiting tool. As of July 23, 2007, one company within the
industry has committed to using our website as a tool to recruit future
employees by posting their job openings on our job board. We believe the
above-mentioned online resources will be valuable to those within the industry,
and will therefore serve to drive traffic to our website.
As a
secondary source of revenue, we plan to sell online advertising space on our
website. Display advertising opportunities have been integrated throughout our
website, providing marketing professionals the ability to deliver targeted
online advertising messages utilizing a variety of sizes and formats. We
anticipate that our ability to sell such online advertising will be directly
impacted by the level of traffic experienced by our website. In order to
increase website traffic, we have developed the above mentioned industry
discussion boards, job boards, and industry news and information
articles.
Revenue
Streams
We
currently anticipate two sources of revenue:
|
1.
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Income
derived from the sale of products related to the oil and gas industry;
and
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2.
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Income
derived from the sale of advertising space on our
website.
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Retail
Markup
We desire
to enter into distribution agreements with manufacturers and suppliers that
agree to ship products directly to our customers in our proprietary packaging.
We facilitate the sale of products to our customers and the purchase of those
products from our suppliers, acting as a marketing agent. We market and sell
these products through our printed catalog, through our toll free phone line,
and through our online store on our website. When a customer purchases one of
our products through any of our three sales channels, we bill the customer our
retail price, which is the sum of our supplier’s predetermined wholesale price
for that product plus our own percentage-based retail markup. Our supplier then
packages that product, using Roughneck packaging we provide them, and ships the
product directly to our customer. We earn revenue equal to the sales price of
the product, although that is offset immediately by the cost of goods to us from
the supplier. Our sales price is determined by considering the price our
supplier charges us for a particular product, the price range for similar
products available in the market place, and feedback we receive from our
customers and suppliers.
Sale of Advertising Space on
our Website
We have
placed space for advertising banners on every page of our website. We plan on
selling this online advertising space as a means of generating revenue. We
anticipate that our ability to sell such ads will be affected by our website
traffic, measured by the number of people that visit our website on a daily
basis. In order to drive traffic to our website, we have developed industry
discussion boards, job boards, industry news, and informational articles. We
believe the above-mentioned online resources will be valuable to those within
the industry, and thus increase the traffic to our website, improving our
ability to sell advertising space for premium rates on our website.
Distribution
Channels
We have
three main channels for the sale and distribution of our products:
|
1.
|
Through
our printed catalog;
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|
2.
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Through
our toll free phone line;
|
|
3.
|
Through
our online store on our website.
|
Printed
Catalog
We intend
to develop and print a paper catalog based upon the design and content of our
online store, mailing copies to our customers and potential customers quarterly.
Customers can use our toll free phone line or our website to place orders for
items they find in the printed catalog. We will obtain initial mailing lists for
our catalogs by purchasing them through mailing list suppliers who can provide
such lists based upon industry involvement. Subsequent lists will be
supplemented by addresses provided by customers who make purchases from
us.
Toll free telephone
number
Customers
can choose to place their order through our 1-800 toll free phone line. Callers
place an order by providing the product name or product number found in both our
printed and online product catalogs. Orders made through our toll free phone
line are charged to the credit card provided to us by the caller. We are using
the credit card billing service PayPal to conduct all telephone sales
transactions.
Online
Store
Products
we offer are displayed in an online catalog on our website. Visitors can view
our entire selection through the online catalog, add desired products to their
virtual shopping cart, and then complete their purchase by charging a major
credit card. We are using the credit card billing service PayPal to conduct all
online sales transactions.
Strategy
Our
company’s long-term business strategy is designed to capitalize on the current
decentralization we perceive within the oil and gas drilling supplies sector.
Our goal is to grow our company by expanding the reach of our product sales
channels, by forming relationships with companies who supply products that fit
our business model, and by further developing content on our
website.
Marketing
We intend
to market our products both to oil and gas drilling companies and directly to
field workers in that industry. Our initial marketing plan involves mailing
one-page printed flyers to field workers and companies involved in the oil and
gas drilling industry. We will also send promotional emails to those same
individuals, attempting to generate interest and create brand awareness.
Initially, we will be relying on our President’s personal contacts within the
oil and gas industry to market our website and associated products. To date, we
have generated a short list of industry contacts, which we plan on utilizing in
our marketing efforts.
Our
on-going sales and marketing strategy will be to develop relationships and build
contacts with influential industry decision makers, such as the management
personnel of drilling companies, field managers, and oil rig managers. We hope
to be able to position our website in such a way that companies will find it
beneficial to post our website flyer in their lunch rooms and employee common
areas. Along with sending out printed flyers and promotional emails, our initial
marketing plans include purchasing Google search ads and banner advertisements
on industry-specific third party websites.
We plan
to conduct a significant amount of in-house marketing, promoting our business,
our website, and our products to existing customers. Visitors who choose to sign
up for a membership account on our website will be sent a weekly email
newsletter containing valuable information, such as rig reports, along with one
of our featured product listings. We believe that by adding useful content and
services, such as discussion boards, job boards, and industry related articles,
we are developing a ready market for our products.
Intellectual Property
Our
business depends, in part, on the protection of our intellectual property,
including our business name, logo, and distinctive branding. We have not taken
any measures to protect our intellectual property to this point, so there are no
legal barriers to prevent others from using what we regard as our intellectual
property. In the future we may decide to file a trademark application to protect
our brand, but we cannot guarantee the success of this application. In addition,
the laws of some foreign countries do not protect intellectual property to the
same extent as the laws of Canada and the United States, which could increase
the likelihood of misappropriation. Furthermore, other companies could develop
similar or superior trademarks without violating our intellectual property
rights. If we resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome, disruptive and expensive,
and distract the attention of management, and there can be no assurance that we
would prevail. We currently own two domain names, Roughnecker.com and
RoughneckSupplies.com, and have successfully developed a corporate logo and
branding strategy.
Competition
The oil
and gas drilling supplies industry can be categorized as highly competitive.
There are a large number of established firms that currently sell products
similar to ours, aimed at a target market similar to ours. Many of these
established distributors have representatives in the field who have established
relationships within the industry. In some cases, competitors have exclusivity
agreements to supply certain drilling rig companies. A number of manufacturers
for the types of products we offer already sell their products directly to the
consumer. These highly competitive market conditions may make it difficult for
our company to succeed in this market. Five of our most established competitors
are:
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·
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Derrick Services, Ltd.
offers large oil field equipment to oil and gas industry companies.
They do not offer products aimed at individuals, and customers cannot make
purchases online;
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·
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Helly Hansen
offers
warm, weather-resistant clothing for individual field workers, but
customers cannot make purchases online. They are instead directed to
retail locations;
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·
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Elk River, Inc.
offers
safety equipment for field workers, particularly those who require
equipment to protect them from falls while working in elevated locations.
Again, customers cannot make purchases online. They are directed to a
toll-free number where they can make their purchases from the online or
print catalog;
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·
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Warrior Supply, Inc.
offers customers a wide array of supplies for use by corporations,
managers, and individual field workers in the oil and gas industry. Their
online catalog does not have a graphical interface, requiring users to
find items through a downloadable list in pdf format. Customers cannot
order online, but are required to call a toll number to the retail
location in Texas to place orders;
and
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·
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Synergy Oil & Gas
International, Inc.
provides a significant number of products
relative to the oil and gas industry, from drilling rigs and chemicals to
personal safety gear. Customers are required to contact a sales
representative at Synergy via email, mail, or international telephone call
in order to make a purchase. No online purchases are
available.
|
Government
Regulation
Government
regulation and compliance with environmental laws do not have a material effect
on our business.
Employees
We have
no employees other than our sole officer and director of our company as of the
date of this prospectus. As needed from time to time, we may pay for the
services of independent contractors such as web designers and commissioned sales
people.
Item
2.
Description of
Property.
We do not
lease or own any real property. We maintain our corporate office at 5254 Green
Street, Suite #10, Halifax, Nova Scotia, B3H 1N7. This office space is being
provided free of charge by our Chief Executive Officer, Travis McPhee. The fair
value of the office and warehouse space provided by Travis McPhee is estimated
at $500 per month. While limited in size, our present corporate office provides
facilities suited to our current operations. This arrangement provides us with
the office space necessary to process necessary paper work while providing
telephone, fax and mailing facilities.
Item
3.
Legal
Proceedings.
There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.
Item
4.
Submission of Matters to a Vote of
Security Holders.
There was
no matter submitted to a vote of security holders during the fiscal year ended
May 31, 2008.
Part
II
Item
5.
Market for Common Equity and Related
Stockholder Matters and Small Business Issuer Purchases of Equity
Securities.
Admission
to Quotation on the OTC Bulletin Board
Our
common stock has been quoted on the OTC Bulletin Board under the symbol
“RNCK.OB” since December 2007. Since that time, there has not been any active
trading of our securities.
Security
Holders
As of May
31, 2008, there were 3,500,000 shares of common stock issued and outstanding,
which were held by 43 stockholders of record.
Dividends
We have
not declared or paid any cash dividends on our common stock nor do we anticipate
paying any in the foreseeable future. Furthermore, we expect to retain any
future earnings to finance its operations and expansion. The payment of cash
dividends in the future will be at the discretion of our board of directors and
will depend upon our earnings levels, capital requirements, any restrictive loan
covenants and other factors the Board considers relevant.
Transfer
Agent
Empire
Stock Transfer, Inc., 2470 St. Rose Pkwy, Suite 304, Henderson, Nevada
89074.
Recent
Sales of Unregistered Securities; Use of Proceed from Registered
Securities
None.
Purchases
of Our Equity Securities
None.
Item
6.
Managements Discussion and Analysis
or Plan of Operation.
The
following discussion of our financial condition and results of operations should
be read in conjunction with the financial statements and the related notes
thereto included elsewhere in this Form 10-KSB.
This Plan
of Operation contains forward-looking statements that involve risks,
uncertainties, and assumptions. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management’s
analysis, judgment, belief or expectation only as of the date hereof. We
undertake no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof. The actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
presented under “Risk Factors” elsewhere in this Annual Report.
Plan
of Operation
We are
engaged in the business of marketing and selling oil and gas drilling supply
products to companies and individuals within the oil and gas industry. We
anticipate that these products will include drill bits, hand tools, safety
equipment, work wear, and industrial cleaning products. We are actively seeking
to enter into distribution agreements with manufacturers and other wholesale
suppliers of these products.
We plan
to generate two separate revenue streams through our business operations. First,
we will act as a marketing and sales agent by facilitating the sale of products
to our customers. Our prices will reflect a retail mark-up over our suppliers’
wholesale prices, and that retail mark-up reflects the net revenue stream from
our retail sales. We will collect money from the sale, pay our suppliers their
wholesale rate for the products, and our suppliers will ship the products
directly to our customers.
Our
second anticipated source of revenue will be through the sale of advertising
space on our website. The amount of revenue generated through advertising
revenue will be a factor of the level of traffic we are able to drive to our
website.
The
supply of oil and gas drilling supply products is currently highly
decentralized, requiring oil and gas companies and field workers to go through
multiple manufacturers, distributors, and dealers to obtain tools, safety gear,
specialized clothing and other general products commonly used in connection with
their occupational practice. We intend to centralize the availability of such
products by offering a broad range of oil field products through one single
company - available through our catalogue, toll free phone number, and our
website. We believe this will add efficiency and convenience to the purchasing
and supply process for oil and gas companies and their employees, which we
anticipate will give us a competitive advantage in the marketplace for the sale
of these products.
We expect
that Travis McPhee, who does not currently draw a salary, will be generating our
sales over the coming year. Sales campaigns will be conducted principally
through the use of the Internet, direct mail, e-mail, and telephone. Personal
contact will be made where prospective advertisers have offices or
representatives near Halifax where we maintain our corporate
office.
Significant
Equipment
We do not
intend to purchase any significant equipment for the next twelve
months.
Results
of Operations for the twelve months ended May 31, 2008 and since
inception
We earned
revenues in the amount of $445 for the twelve months ended May 31, 2008, and
$445 for the period from our inception on February 22, 2007 to May 31, 2008. We
incurred total operating expenses in the amount of $48,054 for the twelve months
ended May 31, 2008, and $80,575 for the period from our inception on February
22, 2007 to May 31, 2008. Our operating expenses incurred for the twelve months
ended May 31, 2008 included $4,836 in general and administrative expenses, $845
credit for advertising and promotion expenses, and $44,064 in professional fees.
Our operating expenses incurred for the period from our inception on February
22, 2007 to May 31, 2008 included $75,064 for professional fees, $494 in
advertising and promotion expenses, and $5,462 in general and administrative
expenses. Thus, our net loss for the twelve months ended May 31, 2008 was
$47,609, and our net loss for the period from our inception on February 22, 2007
to May 31, 2008 was $80,575.
Liquidity
and Capital Resources
As of May
31, 2008, we had current assets in the amount of $3,160, consisting solely of
cash. Our current liabilities as of May 31, 2008 were $8,735.
Off
Balance Sheet Arrangements
As of May
31, 2008, there were no off balance sheet arrangements.
Going
Concern
We have
experienced losses since inception amounting to $47,609 as of May 31,
2008. As of May 31, 2008, we had a total of $3,160 in cash. These
factors raise substantial doubt about our ability to continue as a going
concern. Our ability to meet our commitments as they become payable is dependent
on our ability to execute our business plan to establish a customer base, obtain
customers that make purchases, and to obtain necessary financing or achieve a
profitable level of operations. There are no assurances that we will be
successful in achieving these goals.
These
financial statements do not give effect to adjustments to the amounts and
classifications to assets and liabilities that would be necessary should we be
unable to continue as a going concern.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants list their most “critical
accounting polices” in the Management Discussion and Analysis. The SEC indicated
that a “critical accounting policy” is one which is both important to the
portrayal of a company’s financial condition and results, and requires
management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. We believe that the following accounting policies fit this
definition.
Recently
Issued Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.” This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosure about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurement, the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement
attribute. This statement does not require any new fair value
measurements. However, for some entities, the application of the
statement will change current practice. This statement is effective
for financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. The Company is
currently reviewing the effect, if any, that this new pronouncement will have on
its financial statements.
FASB
Interpretation No. 48,
Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement
No. 109
, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance
with SFAS No. 109
.
FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. The new FASB standard also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The evaluation of a tax position in
accordance with FIN 48 is a two-step process. The first step is a recognition
process whereby the enterprise determines whether it is more likely than not
that a tax position will be sustained upon examination, including resolution of
any related appeals or litigation processes, based on the technical merits of
the position. In evaluating whether a tax position has met the
more-likely-than-not recognition threshold, the enterprise should presume that
the position will be examined by the appropriate taxing authority that has full
knowledge of all relevant information. The second step is a measurement process
whereby a tax position that meets the more-likely-than-not recognition threshold
is calculated to determine the amount of benefit to recognize in the financial
statements. The tax position is measured at the largest amount of benefit that
is greater than 50% likely of being realized upon ultimate settlement. The
provisions of FIN 48 are effective for fiscal years beginning after
December 15, 2006. Earlier application is permitted as long as the
enterprise has not yet issued financial statements, including interim financial
statements, in the period of adoption. The provisions of FIN 48 are to be
applied to all tax positions upon initial adoption of this standard. Only tax
positions that meet the more-likely-than-not recognition threshold at the
effective date may be recognized or continue to be recognized upon adoption of
FIN 48. The cumulative effect of applying the provisions of FIN 48 should be
reported as an adjustment to the opening balance of retained earnings (or other
appropriate components of equity or net assets in the statement of financial
position) for that fiscal year. We are currently evaluating the statement and
have not yet determined the impact of such on our financial
statements.
SFAS
No. 151
, Inventory Costs
– an amendment of ARB No. 43, Chapter 4
(“SFAS 151”). In November
2004, the FASB issued SFAS 151 which amends the guidance in ARB No. 43,
Chapter 4, “Inventory Pricing.” ARB No. 43 previously required that certain
costs associated with inventory be treated as current period charges if they
were determined to be so abnormal as to warrant it. SFAS 151 amends this
removing the so abnormal requirement and stating that unallocated overhead costs
and other items such as abnormal handling costs and amounts of wasted materials
(spoilage) require treatment as current period charges rather than a portion of
inventory cost. SFAS 151 is effective for inventory costs incurred during fiscal
years beginning after June 15, 2005, with earlier application permitted.
The provisions of this statement need not be applied to immaterial items. We do
not allocate overhead costs to inventory and management has determined that
there are no other material items which require the application of SFAS
151.
There
were various other accounting standards and interpretations issued during 2007
or to May 31, 2008, none of which are expected to have a material impact on the
Company’s financial position, operations or cash flows.
Item
7.
Financial
Statements.
ROUGHNECK
SUPPLIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
MAY
31, 2008, AND 2007
(A
DEVELOPMENT STAGE COMPANY)
Consolidated
Balance Sheet as of May 31, 2008
|
|
|
May
31, 2008
|
|
|
May
31, 2007
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,160
|
|
|
$
|
74,034
|
|
|
Account
Receivables
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
3,160
|
|
|
|
74,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
3,160
|
|
|
$
|
74,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
450
|
|
|
$
|
0
|
|
|
Accrued
Liabilities
|
|
|
8,285
|
|
|
|
32,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
8,735
|
|
|
|
32,000
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
& CONTINGENCIES (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
Common
Stock (Note 1)
|
|
|
|
|
|
|
|
|
|
Authorized
50,000,000 shares at par value of $0.001 each
|
|
|
|
|
|
|
|
|
|
Issued
and Outstanding 3,500,000 shares
|
|
|
3,500
|
|
|
|
3,500
|
|
|
Additional
Paid-In Capital
|
|
|
71,500
|
|
|
|
71,500
|
|
|
Accumulated
Deficit during Development Stage
|
|
|
(80,575
|
)
|
|
|
(32,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
(5,575
|
)
|
|
|
42,034
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
3,160
|
|
|
$
|
74,034
|
|
(A
DEVELOPMENT STAGE COMPANY)
Consolidated
Statements of Operations for the Year Ended May 31, 2008,
Period
Ended May 31, 2007, and Cumulative from Inception
|
|
|
Twelve
Months Ended May 31, 2008
|
|
|
February
22, 2007 (Date of Inception) to May 31, 2007
|
|
|
Cumulative
From February 22, 2007 (Date of Inception) to May 31, 2008
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
Sales
and Services
|
|
$
|
445
|
|
|
$
|
0
|
|
|
$
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
|
|
445
|
|
|
|
0
|
|
|
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administative
|
|
|
4,836
|
|
|
|
626
|
|
|
|
5,462
|
|
|
Marketing
and Promotion
|
|
|
(846
|
)
|
|
|
1,340
|
|
|
|
494
|
|
|
Professional
Fees
|
|
|
44,064
|
|
|
|
31,000
|
|
|
|
75,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
48,054
|
|
|
|
32,966
|
|
|
|
81,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$
|
(47,609
|
)
|
|
$
|
(32,966
|
)
|
|
$
|
(80,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Common Share - Basic and Fully Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss for the Cumulative Period
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Common Stock Outstanding
|
|
|
3,202,103
|
|
|
|
2,109,904
|
|
|
|
3,202,103
|
|
(A
DEVELOPMENT STAGE COMPANY)
Consolidated
Statements of Stockholders’ (Deficit) for the Year Ended May 31,
2008,
Period
Ended May 31, 2007, and Cumulative from Inception
|
|
|
Twelve
Months Ended May 31, 2008
|
|
|
February
22, 2007 (Date of Inception) to May 31, 2007
|
|
|
Cumulative
From February 22, 2007 (Date of Inception) to May 31, 2008
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$
|
(47,609
|
)
|
|
$
|
(32,966
|
)
|
|
$
|
(80,575
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Net
change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Other
current liabilities
|
|
|
(23,265
|
)
|
|
|
32,000
|
|
|
|
8,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash flows provided by operating activities
|
|
|
(70,874
|
)
|
|
|
(966
|
)
|
|
|
(71,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net
cash flows used by investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issues
of shares
|
|
|
-
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash flows used by financing activities
|
|
|
-
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash
|
|
|
(70,874
|
)
|
|
|
74,034
|
|
|
|
3,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
74,034
|
|
|
|
-
|
|
|
|
-
|
|
|
Cash,
end of period
|
|
$
|
3,160
|
|
|
$
|
74,034
|
|
|
$
|
3,160
|
|
(A
DEVELOPMENT STAGE COMPANY)
Consolidated
Statements of Cash Flows for the Year Ended May 31, 2008,
Period
Ended May 31, 2007, and Cumulative from Inception
|
|
|
Common
Stock
|
|
|
Amount
|
|
|
Additional
Paid-in Capital
|
|
|
Deficit
Accumulated During Development Stage from Inception to May 31,
2008
|
|
|
Shareholders'
Equity
|
|
|
Balance
at Inception, February 22, 2007
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued at $0.01 per share pursuant to subscription on March 22,
2007
|
|
|
2,500,000
|
|
|
|
2,500
|
|
|
|
22,500
|
|
|
|
-
|
|
|
|
25,000
|
|
|
Shares
issued at $0.05 per share pursuant to subscription on May 31,
2007
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
49,000
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit during development stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,966
|
)
|
|
|
(32,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
May 31, 2007
|
|
|
3,500,000
|
|
|
$
|
3,500
|
|
|
$
|
71,500
|
|
|
$
|
(32,966
|
)
|
|
$
|
42,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit during development stage for the twelve months ended May 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,609
|
)
|
|
|
(47,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
May 31, 2008
|
|
|
3,500,000
|
|
|
|
3,500
|
|
|
|
71,500
|
|
|
|
(80,575
|
)
|
|
|
(5,575
|
)
|
(A
Development Stage Company)
Notes
to Financial Statements
May
31, 2008
(Expressed
in US Dollars)
Audited-Prepared
by Management
1. BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and Description of Business
Roughneck
Supplies, Inc. (the “Company”) was incorporated in the State of Nevada on
February 22, 2007. The Company plans to sell oil and gas drilling
supply products; a category of goods that typically includes: drill bits, hand
tools, safety equipment, work wear, industrial cleaning products, and
lubrication fluids used in the drilling process. The Company intends
to provide credit in the normal course of business to its customers and perform
ongoing credit evaluations of those customers. It will maintain
allowances for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends, and/or other information.
Cash
and Cash Equivalents
Cash
equivalents comprise certain highly liquid instruments with a maturity of three
months or less when purchased. As at May 31, 2008, the Company did
not have any cash equivalents.
Asset
Retirement Obligations
The
Company has adopted SFAS No. 143,
Accounting for Asset Retirement
Obligations
which requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred. The Company has not incurred any asset retirement
obligations as of May 31, 2008.
Foreign
Currency
The
operations of the Company are located in Canada. The Company
maintains a US dollar bank account(s). The functional currency is the
US Dollar. Transactions in foreign currencies other than the
functional currency, if any, are remeasured into the functional currency at the
rate in effect at the time of the transaction. Remeasurement gains
and losses that arise from exchange rate fluctuations are included in income or
loss from operations.
Use
of Estimates
The
preparation of the Company’s financial statements in conformity with generally
accepted accounting principles of the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management makes its best
estimate of the ultimate outcome for these items based on historical trends and
other information available when the financial statements are
prepared. Actual results could differ from those
estimates.
Loss
Per Share
Basic
earnings (loss) per share of common stock are computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding
during the period. Diluted earnings (loss) per share are equal to the
basic loss per share for the nine months ended May 31, 2008 because there are no
common stock equivalents outstanding.
ROUGHNECK
SUPPLIES, INC.
(A
Development Stage Company)
Notes
to Financial Statements
May
31, 2008
(Expressed
in US Dollars)
Audited-Prepared
by Management
Fair
Value of Financial Instruments
The
carrying value of cash and accrual liabilities at May 31, 2008 reflected in
these financial statements approximates their fair value due to the short-term
maturity of the instruments.
Income
Taxes
The
Company records deferred taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, “Accounting for Income
Taxes.” The statement requires recognition of deferred tax assets and
liabilities for temporary differences between the tax bases of assets and
liabilities and the amounts at which they are carried in the financial
statements, based upon the enacted tax rates in effect for the year in which the
differences are expected to reverse. A valuation allowance is
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
Development
Stage
The
Company entered the development stage upon its inception of February 22, 2007
for the fiscal year end of May 31, 2007. Accordingly, income and
expenses for the current year and cash flow for the current year combined with
the amounts from prior year equal income and expenses and cash flow on a
cumulative basis since inception.
Impairment
of Long-Lived Assets
The
Company periodically analyzes its long-lived assets for potential impairment,
assessing the appropriateness of lives and recoverability of unamortized
balances through measurement of undiscounted operation cash flows in accordance
with SFAS No. 144,
Accounting
for the Impairment or Disposal of Long-lived Assets
. If
impairment is deemed to exist, the asset will be written down to its fair
value. Fair value is generally determined using a discounted cash
flow analysis. As of May 31, 2008, the Company does not believe any
adjustment for impairment is required.
Concentrations
The
Company has only a limited operating history, and its growth strategy is
dependent upon its ability to obtain customers. The Company’s success
depends largely upon the efforts, abilities, and decision-making of its sole
officer and director. Management has negotiated one supplier
agreement to date, interruptions in or non-performance by this supplier can
adversely affect the company’s operations.
ROUGHNECK
SUPPLIES, INC.
(A
Development Stage Company)
Notes
to Financial Statements
May
31, 2008
(Expressed
in US Dollars)
Audited-Prepared
by Management
New
Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 157,
Fair Value
Measurements
.” This statement defines fair value, establishes
a framework for measuring fair value in generally accepted accounting
principles, and expands disclosure about fair value
measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurement, the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. This statement does not require any
new fair value measurements. However, for some entities the
application of the statement will change current practice. This
statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The Company is currently reviewing the effect, if any, that
this new pronouncement will have on its financial statements.
FASB
Interpretation No. 48,
Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement
No. 109
, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance
with SFAS No. 109
.
FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. The new FASB standard also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The evaluation of a tax position in
accordance with FIN 48 is a two-step process. The first step is a recognition
process whereby the enterprise determines whether it is more likely than not
that a tax position will be sustained upon examination, including resolution of
any related appeals or litigation processes, based on the technical merits of
the position. In evaluating whether a tax position has met the
more-likely-than-not recognition threshold, the enterprise should presume that
the position will be examined by the appropriate taxing authority that has full
knowledge of all relevant information. The second step is a measurement process
whereby a tax position that meets the more-likely-than-not recognition threshold
is calculated to determine the amount of benefit to recognize in the financial
statements. The tax position is measured at the largest amount of benefit that
is greater than 50% likely of being realized upon ultimate settlement. The
provisions of FIN 48 are effective for fiscal years beginning after
December 15, 2006. Earlier application is permitted as long as the
enterprise has not yet issued financial statements, including interim financial
statements, in the period of adoption. The provisions of FIN 48 are to be
applied to all tax positions upon initial adoption of this standard. Only tax
positions that meet the more-likely-than-not recognition threshold at the
effective date may be recognized or continue to be recognized upon adoption of
FIN 48. The cumulative effect of applying the provisions of FIN 48 should be
reported as an adjustment to the opening balance of retained earnings (or other
appropriate components of equity or net assets in the statement of financial
position) for that fiscal year. We are currently evaluating the statement and
have not yet determined the impact of such on our financial
statements.
SFAS
No. 151
, Inventory Costs
– an amendment of ARB No. 43, Chapter 4
(“SFAS 151”). In November
2004, the FASB issued SFAS 151 which amends the guidance in ARB No. 43,
Chapter 4, “Inventory Pricing.” ARB No. 43 previously required that certain
costs associated with inventory be treated as current period charges if they
were determined to be so abnormal as to warrant it. SFAS 151 amends this
removing the so abnormal requirement and stating that unallocated overhead costs
and other items such as abnormal handling costs and amounts of wasted materials
(spoilage) require treatment as current period charges rather than a portion of
inventory cost. SFAS 151 is effective for inventory costs incurred during fiscal
years beginning after June 15, 2005, with earlier application permitted.
The provisions of this statement need not be applied to immaterial items. We do
not allocate overhead costs to inventory and management has determined that
there are no other material items which require the application of SFAS
151.
There
were various other accounting standards and interpretations issued during 2007
or to May 31, 2008, none of which are expected to have a material impact on the
Company’s financial position, operations or cash flows.
2. BASIS
OF PRESENTATION – GOING CONCERN
These
financial statements have been prepared on a going-concern basis which assumes
that the Company will be able to realize assets and discharge liabilities in the
normal course of business for the foreseeable future.
The
Company has experienced losses since its inception of the development stage
amounting to $80,575 as of May 31, 2008 and has operating revenues of
$445. As of May 31, 2008, the Company had a total of $3,160 in
cash. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to
meet its commitments as they become payable is dependent on the ability of the
Company to execute its plan to establish a customer base, obtain customers that
make purchases, and to obtain necessary financing or achieve a profitable level
of operations. There are no assurances that the Company will be
successful in achieving these goals.
These
financial statements do not give effect to adjustments to the amounts and
classifications to assets and liabilities that would be necessary should the
Company be unable to continue as a going concern.
ROUGHNECK
SUPPLIES, INC.
(A
Development Stage Company)
Notes
to Financial Statements
May
31, 2008
(Expressed
in US Dollars)
Audited-Prepared
by Management
3. COMMON
STOCK
On March
1, 2007, the number of authorized shares of common stock was increased from
1,000 to 50,000,000 shares.
On March
22, 2007, the Company issued 2,500,000 shares at $0.01 per share to its founder
and CEO in return for total proceeds of $25,000.
During
March 23 to May 31, 2007, the Company issued 1,000,000 shares to 40 individuals
pursuant to subscriptions for $0.05 per share in return for total proceeds of
$50,000.
4. INCOME
TAXES
The
Company is subject to United States income. The Company had no income
tax expense during the reported period due to net operating losses.
A
reconciliation of income tax expense to the amount computed at the statutory
rates is as follows:
|
Loss
for the nine months
|
|
$
|
(47,609
|
)
|
|
Average
statutory tax rate
|
|
|
35
|
%
|
|
|
|
|
|
|
|
Expected
income tax provision
|
|
|
(16,663
|
)
|
|
Unrecognized
tax losses
|
|
16,663
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$
|
0
|
|
Significant
components of deferred income tax assets are as follows:
|
Net
operating losses carried forward in U.S. at May 31, 2007
|
|
$
|
32,966
|
|
|
Net
operating losses carried forward in U.S. at May 31, 2008
|
|
|
47,609
|
|
|
Valuation
allowance
|
|
|
(80,575
|
)
|
|
|
|
|
|
|
|
Net
deferred income tax assets
|
|
$
|
0
|
|
The
Company has net operating losses carried forward of $80,575 for United States
tax purposes which will begin to expire in 2027 if not utilized. A
valuation allowance has been established for this amount.
5. COMMITMENTS
& CONTINGENCIES
As of May
31, 2008, the Company has $8,285 of accrued liabilities for future
expenditures.
6. RELATED
PARTY TRANSACTIONS
As of May
31, 2008, the sole officer and director of the Company owns 71.4% of the
outstanding shares of the Company.
The
Company does not have an employment agreement with the sole officer and
director. The Company does not have a non-compete agreement with the
sole officer and director.
Item
8.
Changes In and Disagreements With
Accountants on Accounting and Financial Disclosure.
Schumacher
& Associates, Inc. is our registered independent auditor. There have not
been any changes in or disagreements with accountants on accounting and
financial disclosure or any other matter.
Item
8A(T).
Controls and
Procedures
We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of May 31, 2008. This evaluation was
carried out under the supervision and with the participation of our Chief
Executive Officer and our Chief Financial Officer, Mr. Travis McPhee. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of May 31, 2008, our disclosure controls and procedures are
effective. There have been no changes in our internal controls over
financial reporting during the quarter ended May 31, 2008.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Limitations on the
Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.
None.
Item
9.
Directors, Executive Officers,
Promoters, Control Persons and Corporate Governance; Compliance with Section
16(a) of the Exchange Act.
Directors
and Executive Officers
Set forth
below is certain information relating to Ro current directors and officers
including their name, age, and business experience.
|
Name
and Business Address
|
|
Age
|
|
Position
|
|
Travis
McPhee
5254
Green St. Unit 10
Halifax,
Nova Scotia B3H 1N7
|
|
23
|
|
Chief
Executive Officer and Director
|
Travis McPhee
is our sole
officer and director. Mr. McPhee obtained a Bachelor of Commerce, along with the
Canadian Securities Course Designation, from Saint Mary’s University, in Halifax
Nova Scotia, in 2007. Travis graduated with a major in finance while also
managing a stock portfolio with a small group of students. Travis was the
portfolio manager responsible for the energy sector. During this time Travis was
able to achieve higher returns than the Canadian energy index. From 2004 to
2005, Mr. McPhee worked as a roughneck on a single coil-tubing oil rig. Prior to
that, Mr. McPhee has had significant exposure to the oil industry through his
father, David McPhee, who owns and operates a large oil company, Conquest Energy
Services, based out of Calgary, Alberta.
Each
director of the Company serves for a term of one year or until the successor is
elected at the Company’s annual shareholders’ meeting and is qualified, subject
to removal by the Company’s shareholders. Each officer serves, at the pleasure
of the board of directors, for a term of one year and until the successor is
elected at the annual meeting of the board of directors and is
qualified.
Compliance
with Section 16(a) of the Exchange Act
Our
officers, directors and shareholders owning greater than ten percent of our
shares are not required to comply with Section 16(a) of the Securities Exchange
Act of 1934 because we do not have a class of securities registered under
Section 12 of the Securities Exchange Act of 1934.
Auditors;
Code of Ethics; Financial Expert
Our
principal independent accountant is Schumacher & Associates, Inc., Denver,
Colorado. We do not currently have a Code of Ethics applicable to our principal
executive, financial and accounting officers. The Board of Directors has not
established an audit committee and does not have an audit committee financial
expert. The Board is of the opinion that an audit committee is not necessary
since the Company has only two directors, and such directors have been
performing the functions of an audit committee. We do not have a “financial
expert” on the board or an audit committee or nominating committee.
Potential
Conflicts of Interest
Since we
do not have an audit or compensation committee comprised of independent
directors, the functions that would have been performed by such committees are
performed by our directors, who are also our officers. Thus, there is a
potential conflict of interest in that our directors and officers have the
authority to determine issues concerning management compensation and audit
issues that may affect management decisions. We are not aware of any other
conflicts of interest with any of our executive officers or
directors.
Item
10.
Executive
Compensation.
Summary
Compensation
Since our
incorporation on February 22, 2007, Travis McPhee has been our Chief Executive
Officer and sole Director. There are no other executive officers or
employees of the Company. Mr. McPhee has not drawn a salary nor
received any other compensation as an executive officer of the Company or for
acting as the sole Director.
We have
no employment agreements with any of our directors or executive officers. We
have no pension, health, annuity, bonus, insurance, equity incentive, non-equity
incentive, stock options, profit sharing or similar benefit plans. No stock
options or stock appreciation rights were granted to any of our directors or
executive officers during the period from the date of our incorporation on
February 22, 2007 through May 31, 2008, our fiscal year-end.
The
following table sets forth information concerning the compensation paid or
earned for the period from the date of our incorporation on February 22, 2007
through May 31, 2008, our fiscal year-end for services rendered to our Company
in all capacities by our principal executive officers.
Outstanding
Equity Awards
As of May
31, 2008, none of our directors or executive officers held unexercised options,
stock that had not vested, or equity incentive plan awards.
Long
Term Incentive Award Plans.
We have
no long-term incentive plans.
Compensation
of Directors
Travis
McPhee has been our sole Director since our incorporation on February 22, 2007.
Our sole Director did not receive any compensation for their services rendered
to our Company for the fiscal year ended May 31, 2008.
Item
11.
Security Ownership of Certain
Beneficial Owners and Management.
Securities
Authorized for Issuance under Equity Compensation Plans
We not
have any compensation plan under which equity securities are authorized for
issuance.
Security
Ownership of Certain Beneficial Owners and Management
The
following table lists, as of May 31, 2008, the number of shares of common stock
of our Company that are beneficially owned by (i) each person or entity known to
our Company to be the beneficial owner of more than 5% of the outstanding common
stock; (ii) each officer and director of our Company; and (iii) all officers and
directors as a group. Information relating to beneficial ownership of common
stock by our principal shareholders and management is based upon information
furnished by each person using “beneficial ownership” concepts under the rules
of the Securities and Exchange Commission. Under these rules, a person is deemed
to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or direct the voting of the security, or
investment power, which includes the power to vote or direct the voting of the
security. The person is also deemed to be a beneficial owner of any security of
which that person has a right to acquire beneficial ownership within 60 days.
Under the Securities and Exchange Commission rules, more than one person may be
deemed to be a beneficial owner of the same securities, and a person may be
deemed to be a beneficial owner of securities as to which he or she may not have
any pecuniary beneficial interest. Except as noted below, each person has sole
voting and investment power.
The
percentages below are calculated based on 3,500,000 shares of our common stock
issued and outstanding as of May 31, 2008. We do not have any outstanding
options, warrants or other securities exercisable for or convertible into shares
of our common stock. Unless otherwise indicated, the address of each person
listed is c/o Roughneck Supplies, Inc., 5254 Green St. Unit 10, Halifax, Nova
Scotia B3H 1N7.
|
Name
of Beneficial Owner
|
|
Title
Of Class
|
|
Amount
and Nature
of
Beneficial Ownership
|
|
Percent
of Class
|
|
Travis
McPhee
(1)
|
|
Common
|
|
2,500,000
|
|
71.4%
|
|
Directors
and Officers as a Group (1 persons)
|
|
Common
|
|
2,000,000
|
|
71.4%
|
|
|
(1)
|
Our
Chief Executive Officer and sole
Director
|
Item
12
.
Certain Relationships and Related
Transactions, and Director Independence.
Except as
provided below, none of the following parties has, since our date of
incorporation, had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will materially
affect us:
|
·
|
Any
of our directors or officers;
|
|
·
|
Any
person proposed as a nominee for election as a
director;
|
|
·
|
Any
person who beneficially owns, directly or indirectly, shares carrying more
than 10% of the voting rights attached to our outstanding shares of common
stock;
|
|
·
|
Any
of our promoters; or
|
|
·
|
Any
relative or spouse of any of the foregoing persons who has the same house
address as such person.
|
We issued
2,500,000 shares of common stock on March 22, 2007 to Travis McPhee, our Chief
Executive Officer. These shares were issued pursuant to Regulation S of the
Securities Act of 1933 (the “Securities Act”) at a price of $0.01 per share, for
total proceeds of $25,000. The 2,500,000 shares of common stock are restricted
shares as defined in the Securities Act.
Director
Independence
We are
not subject to listing requirements of any national securities exchange or
national securities association and, as a result, we are not at this time
required to have our board comprised of a majority of “independent directors.”
We do not believe that any of our directors currently meet the definition of
“independent” as promulgated by the rules and regulations of
NASDAQ.
The
following exhibits are filed as part of this registration
statement:
|
Exhibit
|
|
Description
|
|
3.1
|
|
Certificate
of Incorporation of Registrant (Roughneck Supplies, Inc.)
(*)
|
|
3.2
|
|
By-Laws
of Registrant (Roughneck Supplies, Inc.) (*)
|
|
31.1
|
|
|
|
32.1
|
|
|
(*)
Incorporated by reference herein from the Registrant’s (Roughneck Supplies,
Inc.) Registration Statement on Form SB-2 (Registration No. 333-145507) filed
with the SEC on October 9, 2007, as Post-Effective Amendment No. 1.
Item
14.
Principal Accountant Fees and
Services.
Audit
Fees
The
following is a summary of the fees billed to us by Schumacher & Associates,
Inc. for professional services rendered for the past two fiscal
years:
|
Fee
Category
|
|
Fiscal
2007 Fees
|
|
|
Audit
Fees
|
|
$
|
19,600
|
|
|
Tax
Fees
|
|
$
|
0
|
|
|
Total
Fees
|
|
$
|
19,600
|
|
Audit
Fees consist of fees billed for professional services rendered for the audit of
our financial statements and review of the interim financial statements included
in quarterly reports and services that are normally provided by Schumacher &
Associates, Inc. in connection with statutory and regulatory filings or
engagements.
Policy
on Audit Committee Pre-Approval of Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Auditors
Our
policy is to pre-approve all audit and permissible non-audit services provided
by the independent auditors. These services may include audit services,
audit-related services, tax services, and other services. Pre-approval is
generally provided for up to one year, and any pre-approval is detailed as to
the particular service or category of services and is generally subject to a
specific budget. The independent auditors and management are required to
periodically report to the Board of Directors regarding the extent of services
provided by the independent auditors in accordance with this pre-approval and
the fees for the services performed to date. The Board of Directors may also
pre-approve particular services on a case-by-case basis.
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