- Quarterly Report (10-Q)

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

______________________

FORM 10-Q

______________________

 

 

x	QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012

 

q	TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____ TO _____ 

Commission File number: 333-156263

Omni Ventures, Inc.

(Exact name of registrant as specified in its charter)

 

Kansas		26-3404322
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

10940 Parallel Parkway, Suite K-257, Kansas City, KS 66109

(Address of principal executive offices)

913-981-0823

(Issuer’s telephone number)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o  Yes    x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.              x  Yes     o  No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).               x  Yes     o  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K.                                                                             x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer  o           Accelerated Filer  o            Non-Accelerated Filer  o           Smaller Reporting Company   x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o  Yes    x  No

 

On June 30, 2011, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was $75,344,669, based upon the closing price on that date of the Common Stock of the registrant on the OTC Bulletin Board system of $0.69.  For purposes of this response, the registrant has assumed that its directors, executive officers and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the registrant.

As of as of May 9, 2012 the registrant had 140,951,822 shares of its Common Stock, $0.0001 par value, outstanding.  

 

 

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TABLE OF CONTENTS

Omni Ventures, Inc.

	Part I – Financial Information
Item 1	Financial Statements
	Consolidated  Balance Sheets as of March 31, 2012 (unaudited) and September 30, 2011	3
	Consolidated  Statements of Operations for the three and six months ended March 31, 2012 and 2011	4
	Consolidated  Statements of Cash Flows for the six months ended March 31, 2012 and 2011	5
	Notes to the Unaudited Consolidated Financial Statements (unaudited)	6
Item 2	Management’s Discussion and Analysis or Plan of Operation	14
Item 3	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4	Controls and Procedures	15
	Part II – Other Information
Item 1	Legal Proceedings	17
Item 2	Unregistered Sales Of Equity Securities And Use Of Proceeds	17
Item 3	Defaults Upon Senior Securities	17
Item 4	Mining Safety Disclosures	17
Item 5	Other Information	17
Item 6	Exhibits	17

 

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ITEM 1

  

OMNI VENTURES, INC. and SUBSIDIARY
Consolidated Balance Sheets
		March 31,				September 30,
		2012				2011
		(unaudited)
ASSETS
Current assets
Cash		$	8,188			$	20
Accounts receivable, net			1,001				28,152
Due from factor			2,466				-
Prepaid expenses			5,000				-
Inventories			261,830				178,521
Total current assets			278,485				206,693
Fixed assets, net			47,603				60,712
Intangibles			5,615				5,615
Other assets			11,000				-
Total assets		$	342,703			$	273,020
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Notes payable		$	345,000			$	345,000
Notes and advances payable to related parties			50,391				112,173
Accounts payable			77,617				36,364
Accounts payable to related parties			-				10,695
Accrued liabilities			276,104				185,079
Total current liabilities			749,112				689,311
Total liabilities			749,112				689,311
Commitments and contingencies (Note 8)
Shareholders' equity (deficiency)
Preferred stock, par value $0.001, 50,000,000 shares authorized, 23,124,330 and 23,124,330
Series A shares issued and outstanding, respectively (liquidation value $228,345)			23,124				23,124
Common stock, par value $0.0001, 200,000,000 shares authorized, 140,951,822 and
111,398,663 shares issued and issuable and outstanding, respectively			14,095				11,140
Additional paid-in capital			7,226,596				2,723,653
Accumulated deficit			(7,670,224	)			(3,174,208	)
Total shareholders' equity (deficiency)			(406,409	)			(416,291	)
Total liabilities and shareholders' equity (deficiency)		$	342,703			$	273,020
See accompanying notes to unaudited consolidated financial statements

 

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OMNI VENTURES, INC. and SUBSIDIARY
Consolidated Statements of Operations
(unaudited)
		For the Three Months Ended								For the Six Months Ended
		March 31				March 31				March 31				March 31
		2012				2011				2012				2011
Sales		$	(1,978	)		$	257,768			$	534			$	260,075
Cost of sales			1,359				209,464				3,463				210,563
Gross profit (loss)			(3,337	)			48,304				(2,929	)			49,512
Selling, general and administrative expenses			86,586				143,403				288,048				1,711,852
Loss from operations			(89,923	)			(95,099	)			(290,977	)			(1,662,340	)
Other income (expense)
Interest expense			(17,566	)			(12,636	)			(37,920	)			(29,149	)
Loss on settlement of debt			(4,079,081	)			-				(4,190,601	)			-
Impairment of fixed assets			(5,750	)			(300	)			(5,750	)			(300	)
Gain on settlement of debt			29,232				-				29,232				-
Total other income (expense), net			(4,073,165	)			(12,936	)			(4,205,039	)			(29,449	)
Net loss		$	(4,163,088	)		$	(108,035	)		$	(4,496,016	)		$	(1,691,789	)
Basic and diluted net loss per share		$	(0.04	)		$	(0.00	)		$	(0.04	)		$	(0.02	)
Weighted average shares outstanding
- basic and diluted			115,999,355				110,485,172				113,805,314				105,773,634
See accompanying notes to unaudited consolidated financial statements

 

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OMNI VENTURES, INC. and SUBSIDIARY
Consolidated Statements of Cash Flows
For the Six Months Ended March 31,
(unaudited)
		2012				2011
Cash flows used in operating activities:
Net loss		$	(4,496,016	)		$	(1,691,789	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation			7,359				5,519
Share compensation paid by principal shareholder			-				122,000
Bad debt expense			333				1,164
Transaction fee			-				1,366,892
Loss on settlement of debt			4,190,602				-
Gain on settlement of debt			(29,232	)			-
Impairment of fixed assets			5,750				300
Changes in operating assets and liabilities:
Accounts receivable			26,818				(12,938	)
Due from factor			(2,466	)			-
Prepaid expenses			(5,000	)			-
Inventory			(83,309	)			205,926
Other assets			(11,000	)			(10,000	)
Accounts payable			81,378				18,044
Accounts payable to related parties			(10,695	)			-
Accrued expenses			63,000				-
Accrued interest			37,816				-
Net cash used in operating activities			(224,662	)			5,118
Cash flows from financing activities:
Proceeds from advances - related party			232,830				(2,281	)
Net cash provided by financing activities			232,830				(2,281	)
Net increase (decrease) in cash			8,168				2,837
Cash at beginning of period			20				27
Cash at end of period		$	8,188			$	2,864
Supplemental disclosure of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for taxes		$	-			$	-
Non-cash investing and financing activities:
Common stock issued for the acquisition of the assets		$	-			$	244,088
Common stock issued for trademarks		$	-			$	5,615
Note payable related to asset acquisition		$	-			$	325,000
Common stock issued for advances and accrued interest on advances		$	307,796			$	-
Common stock issued for accrued interest on notes payable		$	7,500			$	-
See accompanying notes to unaudited consolidated financial statements.

 

5

 

Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited)

NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization, Nature of Operations, and Asset Acquisition

Omni Ventures, Inc. (the “Company,” “we,” “us,” “our” or “Omni”) is a Kansas corporation formed on August 14, 2008.  

On November 15, 2010, the Company entered into a Purchase Agreement, Security Agreement and Promissory Note with Agile Opportunity Fund, LLC (“Agile”) to purchase certain assets defined as the “Diamond Decision Assets” which Agile had simultaneously purchased from the Trustee in the Diamond Decisions Inc. Chapter 11 Bankruptcy Case.  With this purchase and our entry into the apparel industry and generation of revenues, we have exited the development stage.

PRVCY Couture, Inc. (“PRVCY”), a wholly-owned subsidiary of the Company, was incorporated in the State of Nevada on December 7, 2010 to receive the assets defined as the “Diamond Decision Assets” and to engage in the manufacture and sale of men’s and women’s clothing. The assets purchased were inventory, equipment, customer lists, domain names, websites, copyrighted materials, and trademarks. The purchase price to be paid by the Company to Agile was for the assets was 16,500,000 shares of Omni common stock and a $325,000 senior secured promissory note to Agile due November 14, 2011, bearing interest at 9% that is secured by substantially all assets of the Company. See Note 6 for Agile’s put right for Omni shares which expired in September 2011.  Management completed a valuation of the consideration paid and the assets acquired and determined that based on the fair value of the assets acquired as the more reliable measure, the total value of the assets acquired was $569,088 and the value assigned to the shares paid was $0.0976 per share.  In accordance with ASC 805-50-30 for acquisition of assets rather than a business. the Company used the relative fair value method of allocating the fair value to the assets acquired. In addition, since the valuation method used the fair value of the assets acquired as the more reliable measure, 14,000,000 of the 16,500,000 common shares paid were expensed as $1,366,892 of transaction costs (see Note 10).  The relative fair value assigned to the assets acquired, which in this case was the same as the fair value was as follows:

 

Inventory		$	495,498
Design and Sample Making Equipment			26,660
Office Furniture and Equipment			46,930
Intangible Assets (1)			-
Total		$	569,088
(1)   The intangible assets include trademarks, copyrights, domain names, websites, and customer lists. These assets were assigned a zero fair value.

Basis of Presentation

The accompanying unaudited consolidated financial statements of Omni Ventures, Inc. and Subsidiary have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.  The results of operations for the interim period ended March 31, 2012 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending September 30, 2012. In the opinion of the Company’s management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company’s results of operations, financial position and cash flows.  The unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Form 10-K for the year ended September 30, 2011 filed on January 12, 2012 and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Principles of Consolidation

The consolidated financial statements include the accounts of Omni and its wholly-owned subsidiary, PRVCY.  All significant inter-company balances and transactions have been eliminated in consolidation.

 

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Significant estimates in the accompanying consolidated financial statements include the fair value and relative fair value allocation of a group of assets acquired, allowance for doubtful accounts receivable, valuation of inventory, valuation of websites developed, depreciable lives of property and equipment, sales return reserve, valuation of share-based payments including the shares issued for the assets acquisition, and the valuation allowance on deferred tax assets.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Accounts Receivable

Accounts receivable are customer obligations due under normal trade terms. Senior management reviews accounts receivable on a monthly basis to determine if any receivables will potentially be uncollectible. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

 

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Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited

Inventories

Inventories are stated at the lower of cost or market, with cost determined using a first-in, first-out method.

Property, Equipment and Depreciation

Property and equipment is recorded at cost.  Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of five years for office furniture and equipment and five years for design and sample making equipment. Leasehold improvements, if any, would be amortized over the lesser of the lease term or the useful life of the improvements.  Expenditures for maintenance and repairs along with fixed assets below our capitalization threshold are expensed as incurred.

Website Development Costs

The Company accounts for its website development costs in accordance with Accounting Standards Codification (“ASC”) ASC 350-10 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” (“ASC 350-10”).  These costs, if any, are included in intangible assets in the accompanying consolidated financial statements.

ASC 350-10 requires the expensing of all costs of the preliminary project stage and the training and application maintenance stage and the capitalization of all internal or external direct costs incurred during the application development stage.  The Company amortizes the capitalized cost of software developed or obtained for internal use over an estimated life of three years.

Intangible Assets

Intangible assets recorded consist of filing fees for trademarks.  Trademarks are considered to have an indefinite life and therefore are not amortized until such time the life becomes definite.  Trademarks are subject to impairment testing as discussed below.

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of FASB ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”.  This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles.  For certain of our financial instruments, including cash, accounts payable, accrued expenses escrow liability and short term loans the carrying amounts approximate fair value due to their short maturities.

We adopted accounting guidance for financial and non-financial assets and liabilities.  The adoption did not have a material impact on our results of operations, financial position or liquidity.  This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.  This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements.  This guidance does not apply to measurements related to share-based payments.  This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).  The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Revenue Recognition and Cost of Goods Sold

The Company recognizes revenue on our products in accordance with ASC 605-10, “Revenue Recognition in Financial Statements.”  Under these guidelines, revenue is recognized on sales transactions when all of the following exist:  persuasive evidence of an arrangement did exist, delivery of product has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured.  The Company’s sales are either FOB shipping point or FOB destination, dependent on the customer.  Revenues are therefore recognized at point of ownership transfer, accordingly.  The Company has several revenue streams as follows:

·	Sale of merchandise to a retail establishment.

·	Sale of merchandise from the Company’s website directly to consumers.

·	Sale of merchandise to a wholesaler.

·	Licensing revenues which are recognized when reports are received from licensees.

The Company follows the guidance of ASC 605-25-50, “Revenue Recognition, Customer Payments” Accordingly, any incentives received from vendors are recognized as a reduction of the cost of products included in inventories. Promotional products or samples given to customers or potential customers are recognized as a cost of goods sold. Cash incentives provided to our customers are recognized as a reduction of the related sale price, and, therefore, are a reduction in sales.

 

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Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited)

Shipping and Handling Costs

The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues.

Sales Return Reserve Policy

Our return policy generally allows our end users and retailers to return purchased products for refund or in exchange for new products. We estimate a reserve for sales returns and record that reserve amount as a reduction of sales and as a sales return reserve liability.  The Company has two return policies, one for eCommerce sales and the other for third party merchants.  Sales to consumers on our web site generally may be returned within 45 days upon receiving a return authorization from the Company.  Our policy for third party merchants requires a return authorization from the Company.  The Company warrants its products for defects and other damages.

 

Stock-Based Compensation

 

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees.  The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.  The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC Topic 505-50, "Equity-Based Payments to Non-Employees." The Company estimates the fair value of each option at the grant date by using the Black-Scholes option-pricing model.

Advertising

Advertising is expensed as incurred and is included in selling, general and administrative expenses on the accompanying statement of operations.  For the six months ended March 31, 2012 and 2011 advertising expense was $6,956 and $18,024 respectively.

Net Earnings (Loss) Per Share

In accordance with ASC 260-10, “Earnings Per Share”, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period.  As of March 31, 2012, there are no common stock equivalent shares outstanding.  Equivalent shares are not utilized when the effect is anti-dilutive.

Segment Information

In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments.  The Company does not have any operating segments as of March 31, 2012.

 

Recent Accounting Pronouncements

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

NOTE 2 - GOING CONCERN

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company sustained net losses of $4,496,016 ($4,190,601 related to losses on settlement of debt) and used cash in operating activities of $224,662 for the six months ended March 31, 2012.  The Company had a working capital deficiency, stockholders’ deficiency and accumulated deficit of $470,627, $406,409 and $7,670,224, respectively, at March 31, 2012.  In addition, as of the date of this report, the Company was in default on three promissory notes of which one was secured by substantially all assets of the Company.  These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from a related party to sustain its current level of operations.  

 

Management is negotiating significant financing which should facilitate the necessary funding needs of the Company.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – ACCOUNTS RECEIVABLE AND FACTORING AGREEMENT

Accounts receivable as of March 31, 2012 is as follows:

Accounts receivable, net		$	1,001
Due from factor			2,466
Total accounts receivable		$	3,467

 

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Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited)

Bad debt write-offs during the six months ended March 31, 2012 and 2011 were $333 and $1,164, respectively.

On September 19, 2011, the Company's subsidiary entered into a one-year automatically renewable factoring agreement with Continental Business Credit, Inc. whereby the Company may sell its accounts receivable to the factor and receive initial advances of up to 80% of the accounts receivable balance sold.  The factor may retain a holdback of the unfunded portion of the accounts receivable balance to apply to factor fees or other contingencies such as vendor early payment discounts.  Such holdback will be released to the Company after any amount is applied to fees or contingencies are resolved. Under certain circumstances, advances may be provided with recourse or non-recourse depending on the credit worthiness of the customer. Non-recourse accounts are to be pre-approved as such by the factor and such approval may be withdrawn by the factor under specific circumstances as defined in the factor agreement.  The Factoring Agreement has a $300,000 credit limit, a factoring fee of 1% of up to $8 million in purchases in one year, 0.9% for purchases greater than $8 million up to $20 million, and 0.75% for purchases greater than $20 million, however, the Company is subject to minimum factoring fees in year one of $12,000 and in subsequent years the greater of $24,000 or 6% of the credit limit.   Advances are subject to a 3% annual interest charge (7% default rate) from the factoring date to the date payment is received by the factor.  Either party may terminate the agreement giving not less than 60 days written notice for the renewal terms or 30 days written notice at any other time.  There is an early termination fee equal to 2% of the then credit limit times the number of months remaining in the term.  This fee is in addition to any other existing obligations or minimum fees due to the factor. To secure obligations and performance of the Company, the factor is granted a security interest in substantially all assets of the Company.  Conditions of default are defined in the agreement and if a default occurs, the factor may among other things, including applying the default interest rate, immediately cease advances under the factor agreement.   As of March 31, 2012 the Company was in default under the financial covenant provisions of the factor agreement.

In October 2011, two invoices of approximately $28,000 included in the September 30, 2011 accounts receivable balance were factored without recourse.  The Company received $20,000 and the remaining approximately $8,570 was being held by the factor as a holdback as of December 31, 2011.  As of March 31, 2012, the balance due to the Company is $2,466.

The Company accounts for accounts receivable factored without recourse by reducing the total accounts receivable factored and establishing a Due from Factor asset account for the holdback.  For accounts factored with recourse, the advance from the factor is treated as a Due to Factor liability for the entire account receivable amount with the holdback reflected as a Due from Factor asset.

NOTE 4 – INVENTORIES

Inventories consists of the following:

		March 31,
		2012
Finished Goods		$	130,345
Raw Materials			37,634
Work in Progress			93,851
Total			261,830

 

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

 

		March 31,
		2012
Design and Sample Making Equipment		$	24,660
Office Furniture and Equipment			43,180
Total Equipment			67,840
Less: Accumulated Depreciation			(20,237	)
Property and Equipment, net		$	47,603

As stated in Note 12, the Company has been prevented from access to certain assets which are controlled by our former landlord. Accordinly, the Company has recorded an impairment loss of $5,750 relating to those assets.

 

Depreciation expense was $7,359 and $5,519 for the six months ended March 31, 2012 and 2011, respectively.

 

9

 

 

Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited)

NOTE 6 – NOTES AND ADVANCES PAYABLE

Notes and advances payable, all classified as current at March 31, 2012, consists of the following:

 

Notes Payable
		March 31,
		2012
Samuel L. Hill		$	10,000
Gene Garrett			10,000
Agile Opportunity Fund, LLC			325,000
Total		$	345,000

Notes and Advances Payable - Related Parties
		March 31,
		2012
Globanc Corporation (advances)		$	50,391
Total		$	50,391

 

On September 3, 2008, the Company secured a note for $100,000 from Going Public, LLC.  The note matured on September 3, 2009, bears interest at a rate of 12%, and is due monthly.  The note is collateralized by the Company’s assets and 80,000,000 shares of stock issued to the Company’s founder.  The Company did not pay the interest in January 2009 and the Lender began charging the default interest of 18%.  The Lender granted extensions to August 14, 2009 to repay all unpaid accrued interest.  The Company did not repay the note by September 3, 2009 or the related accrued interest by August 14, 2009 and was in default.  During December 2009, the current majority shareholder, Globanc Corporation (“Globanc”), agreed to acquire the note payable from the original lender and agreed to acquire the 80,000,000 shares of stock formerly issued to the Company’s founder.  The Company converted the note and accrued interest on August 15, 2011 into Series A preferred stock (see Note 10).

On May 18, 2009, the Company secured a note for $10,000 from Samuel L. Hill (“Hill”).  The note matured on May 18, 2010 and is in default.  The note requires payment of interest in the form of shares of common stock payable as 10,000 shares of common stock on November 18, 2009 and May 18, 2010.  The Company continued to pay the common stock for interest on November 18, 2010 and May 18, 2011 which are recorded as issuable and was issued in January 2012.  All common stock issued and issuable was recorded at the various valuation prices based on the Company’s valuation of the stock.  The first two payments were valued at $0.02 per share based on recent October 2008 sales prices to third parties, the third payment was valued at the same price of $0.0976 per share used for the valuation of the Agile transaction which was within thirty days of the issuance in November 2010, and the fourth payment was valued at $0.15 per share based on a contemporaneous March 2011 shares sale agreement. On November 18, 2011, the Company became obligated to issue 10,000 shares of common stock, having a fair value of $3,750 ($0.375/share based on the trading price), which was issued in January 2012 (see Note 10). On November 18, 2011 the Company became obligated to issue 10,000 shares of common stock, having a fair value of $3,750 ($.0375/ share based on the trading price). which was issued in January 2012 (see Note 10).

On May 18, 2009, the Company secured a note for $10,000 from Gene Garrett (“Garrett”).  The note matured on May 18, 2010 and is in default.  The note requires payment of interest in the form of shares of common stock payable as 10,000 shares of common stock on November 18, 2009 and May 18, 2010.  The Company continued to pay the common stock for interest on November 18, 2010 and May 18, 2011 which are recorded as issuable and was issued in January 2012.  All common stock issued and issuable was recorded at the various valuation prices based on the Company’s valuation of the stock.  The first two payments were valued at $0.02 per share based on recent October 2008 sales prices to third parties, the third payment was valued at the same price of $0.0976 per share used for the valuation of the Agile transaction which was within thirty days of the issuance in November 2010, and the fourth payment was valued at $0.15 per share based on a contemporaneous March 2011 shares sale agreement. On November 18, 2011 the company became obligated to issue 10,000 shares of common stock, having a fair value of $3,750 ($0.375/ share based on the trading price), which was issued in January 2012 (see Note 10).

 

Beginning on January 1, 2010, Globanc, a related party, began advancing funding to the Company, as needed, to provide working capital to the Company.  The Company and Globanc did not have a formal agreement.  The Company and Globanc agreed on a nominal interest rate of 6% to be accrued.  The balance of advances and the above $100,000 loan and all related accrued interest totaling $228,345 as of August 15, 2011, was converted into Series A preferred stock (see Note 10) valued at the conversion amount as this was the best evidence of the preferred stock value.  Additionally, the Company and Globanc agreed that at the end of each quarter, the unpaid balance and accrued interest for advances made would be converted to common stock.  The conversion price would be the average trading price for the quarter with a discount of 25%.  As of September 30, 2011, certain advances of $112,173 were not converted.  As of December 31, 2011, advances and the accrued interest for advances made, totaling $307,797, including the balance at September 30, 2011, were converted into 1,784,329 shares of common stock valued at $419,317 based on the closing price stock on December 31, 2011 of $0.0235 per share, and the Company recorded a loss on settlement of debt for $111,520. Subsequently on March 22, 2012, the prior 2011 conversions were modified due tovaluation issues and an additional 27,748,830 anti-dilutive shares of common stock were issued, valued at $4,079,081 based on $.0147 quoted trading price on the anti-dilutive issuance agreement dated as of March 22,2012, and recorded as a loss on settlement of debt in the accompanying consolidated statement of operations. The Company and Globanc agreed to suspend conversions of advances made after Decmeber 31, 2011 and therefore advances of approximately $50,000 made in the three months ending March 31, 2012 are reflected as Notes and advances payable-related party in the accompanying consolidated financial statements at March 31, 2012.

On November 15, 2010, the Company issued a senior secured promissory note for $325,000 to Agile in conjunction with the acquisition of certain assets of Diamond Assets (see Note 1).  The note matured on November 15, 2011 and is in default with regard to principal and interest payments.  The Company is negotiating an extension.  The note provides for interest at 9% payable on the last day of each calendar month.  After November 15, 2011, due to the default, interest will be 17%.  The note is secured by substantially all assets of the Company.

 

Related to the purchase of “Diamond Decision Assets”, the Seller, Agile shall have the right, at its sole option, to sell up to 10,000,000 of the Company’s shares, or any portion thereof back to the Company for a total consideration equal to all or a pro-rata portion of $2,800,000 if on or before the end of that fiscal quarter which ends June 30, 2011, (i) Omni has not achieved an annual quarterly sales of $10,000,000, (ii) Omni has not obtained total market capitalization of at least $50,000,000 and (iii) Omni has not achieved positive cash flow.  The Company has achieved a market capitalization of $50,000,000 and there has been no request by Agile to sell the Company’s shares and as of September 19, 2011, the put options expired.

 

NOTE 7 – ACCRUED LIABILITIES

Accrued expenses consisted primarily of accrued consulting fees of $139,000, accrued interest of $55,705, and other payables of $81,399, were $276,104 as of March 31, 2012.

 

10

 

 

Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited)

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of March 31, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations, except as noted.

The Company has an outstanding legal issue with Michael Long in regards to a claim of unpaid compensation of approximately $25,000.  The Company believes that the claim is not valid and will pursue all actions to remedy it accordingly.

The Company filed a lawsuit on April 27, 2012 in PRVCY Couture, Inc. v Jean Genie, Kendrick Kim, and Does 1-X , Case Number BC483445, in the Superior Court of the State of California, County of Los Angeles.  The Company has filed a Complaint for Damages for Conversion; Prayer for Writ of Possession.  The Company has stated that the defendant has not afforded the Company the right to retrieve various fixed assets which allegedly the defendant has possession of.  Additionally, the Company claims damages related to the necessity to evacuate the premises due to the alleged situation between the defendant and its landlord.  Mr. Kim was a member of the Company’s board of directors at the time and the Company alleges he had a conflict of interest by maintaining various assets including computers necessary for the Company to maintain its business records.  Mr. Kim was terminated as a director by a Written Consent of the Holders of a Majority of the Voting Stock.  See Note 8 – Leases.

Lease Commitment

Leases

On November 15, 2010, the Company entered into a lease of approximately 9,000 square feet for a term of 5 years in Norco, California at a base rent of $6,468 per month.  In November 2011, the landlord went into bankruptcy.  The Company, anticipating that the bankruptcy court would most likely have the tenants leave the premises, therefore the Company moved in November 2011, as the landlord was technically in default.

 

On December 1, 2011, the Company signed a one year lease with Jean Genie for $3,000 per month for approximately 2,500 square feet (also see Note 12).  In February 2012, due to the landlord allegedly having contractual issues with its landlord, the Company moved out of these premises.  On April 27, 2012, the Company filed a lawsuit against Jean Genie and other third parties (see Note 8 – Legal and Note 12).

On March 1, 2012, the Company entered into a lease for office space with Defiance USA (“Defiance”).  The lease is for one year for $5,000 per month.  The owner of Defiance is a related party to an officer and director of the Company (see Note 9).

Rent expense for the six months ended March 31, 2012 was $20,314.

Other Commitments

 

The Company entered into a contract with The Loft Entertainment to provide social media deals for PRVCY.  The contract commited the Company to payments of $75,000 of which $0 was incurred as of March 31, 2012.  Subsequent to March 31, 2012, the $75,000 was paid by the Company for all obligations which were completed in May 2012.

The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments.  During 2011 the Company entered into agreements to allow third parties to license, distribute or act as sales agent or representative to sell, the Company’s products. Under these agreements the Company would in general be the recipient of proceeds but may be committed to pay certain compensation such as commissions, as stipulated in the agreements.   All expenses and liabilities relating to such contracts were recorded in accordance with generally accepted accounting principles through March 31, 2012.  Although such agreements increase the risk of legal actions against the Company for potential non-compliance, other than disclosed above, there are no firm commitments in such agreements as of March 31, 2012.

NOTE 9 – RELATED PARTIES

 

Beginning on January 1, 2010, Globanc, a related party, began advancing funding to the Company, as needed, to provide working capital to the Company.  The Company and Globanc did not have a formal agreement.  The Company and Globanc agreed on a nominal interest rate of 6% to be accrued.  The balance of advances and the above $100,000 loan and all related accrued interest totaling $228,345 as of August 15, 2011, was converted into Series A preferred stock (see Note 10) valued at the conversion amount as this was the best evidence of the preferred stock value.  Additionally, the Company and Globanc agreed that at the end of each quarter, the unpaid balance and accrued interest for advances made would be converted to common stock.  The conversion price would be the average trading price for the quarter with a discount of 25%.  As of September 30, 2011, certain advances of $112,173 were not converted.  As of December 31, 2011, advances and the accrued interest for advances made, totaling $307,797, including the balance at September 30, 2011, were converted into 1,784,329 shares of common stock valued at $419,317 based on the closing price of stock on December 31, 2011 of $0.235 per share, and the Company recorded a loss on settlement of debt for $111,520.  Subsequently on March 22, 2012, the prior 2011 conversions were modified due to valuation issues and an additional 27,748,830 anti-dilutive shares of common stock were issued, valued at $4,079,081 based on the $0.147 quoted trading price on the anti-dilutive issuance agreement date as of March 22, 2012, and recorded as a loss on settlement of debt in the accompanying consolidated statement of operations.  The Company and Globanc agreed to suspend conversions of advances made after December 31, 2011 and therefore advances of approximately $50,000 made in the three months ending March 31, 2012 are reflected as Notes and advances payable-related party in the accompanying consolidated financial statements at March 31, 2012.

 

In March 2012, the Company entered into a lease for office space with Definance (see Note 8).  Defiance is owned by Christopher Wicks, the father of our President and Director, Christian Wicks.  The lease was negotiated on reasonable and customary terms.

In April 2012, PRVCY entered into an agreement with Centralized Strategic Placements, Inc. (“CSP”) to facilitate becoming a merchant with the Army Air Force Exchange Service (“AAFES”).  CSP is a wholly-owned subsidiary of eLayaway, Inc. (ELAY.QB).  The Company’s CFO, Bruce Harmon, is the CFO and Chairman of eLayaway, Inc.

NOTE 10 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company authorized 50,000,000 shares of preferred stock with a par value of $0.001 and has designated one Series as Series A.  Series A of preferred stock has authorized 23,124,330 shares and has super voting rights of ten votes per share of Series A preferred stock.  The preferred stock has liquidation preference over common stock with liquidation preference value equal to the price paid for each preferred share.  

11

 

Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited)

 

On August 15, 2011, Globanc converted certain balances due from the Company in the amount of $228,345 into 23,124,330 shares of Series A preferred stock (see Note 6).

 

Common Stock

On November 15, 2010, the Company acquired certain assets, including intangible assets, from Diamond Decision Assets.  The Company issued 16,500,000 shares of common stock (14,000,000 to Agile and 2,500,000 to the bankruptcy court trustee) in conjunction with the agreement.  A formal valuation of the shares was performed resulting in a value of $0.0976 per share. The 14,000,000 portion of the shares were considered a transaction fee to be expensed at $1,366,892 and the 2,500,000 portion was valued at $244,088 and included as part of the purchase price allocation (see Note 1).

On November 18, 2010, the Company became obligated to issue 20,000 shares of common stock, having a fair value of $1,952 ($0.0976/share) to two lenders (Garrett and Hill) for interest (see Note 6).

On December 17, 2010, the Company granted J. Bernard Rice 1,250,000 shares of common stock as an incentive to be named as a director of the Company.  The shares were actually transferred from Globanc, a principal stockholder.  In January 2012, Globanc will be reimbursed for the 1,250,000 shares of common stock.  The Company recognized stock-based compensation of $122,000 as the Company’s common stock had a value of $0.0976 based on a valuation in that time frame.

On March 31, 2011 through September 30, 2011, pursuant to a stock purchase agreement whereby a licensee of the Company agreed to purchase $3,000 of common stock per month at a negotiated price, the Company sold 120,000 shares of common stock for $0.15 per share for a total of $18,000.

On April 14, 2011, the Company granted an employee 100,000 shares of common stock as an incentive for his employment.  The shares were actually transferred from Globanc, a principal stockholder.  In January 2012, Globanc will be reimbursed for the 100,000 shares of common stock.  The Company recognized stock-based compensation of $15,000 as the Company’s common stock had a value of $0.15 per share based on a recent sale transaction on March 31, 2011 (see above) and since the Company’s stock was thinly traded.

On May 18, 2011, the Company became obligated to issue 20,000 shares of common stock, having a fair value of $3,000 ($0.15/share) to two lenders (Garrett and Hill) for interest (see Note 6).  The stock valuation is based on a recent sale transaction on March 31, 2011(see above) as the Company’s stock was thinly traded.

On September 30, 2011, the Company became obligated to issue 673,491 shares of common stock to Globanc in exchange for the conversion of $224,270 in advances made to the Company (see Note 6).  The conversion was calculated using a discount of 25% or $0.33 per share, compared to the average trading price for the quarter ended September 30, 2011 which was $0.44.  The Company recognized a loss of $72,066 based on the value of the shares of $296,336.

On November 18, 2011, the Company became obligated to issue 20,000 shares of common stock, having a fair value of $7,500 ($0.375/share based on the trading price) to two lenders for interest (see Note 6).

On December 31, 2011, the Company became obligated to issue 1,784,329 shares of common stock to Globanc in exchange for the conversion of $307,797 in advances and accrued interest made to the Company (see Note 6).  The conversion price was calculated, and agreed, using the average closing price for the quarter ended December 31, 2011, which was $0.23, less a discount of 25%, thereby resulting in a per share price of $0.1725.  The Company recognized a loss of $111,520 based on the fair value of shares of $0.23 per share or $419,317.

In January 2012, the Company issued all obligated issuances as of December 31, 2011.

On March 22, 2012, the Company issued Globanc an additional 27,748,830 anti-dilutive shares of common stock valued at $4,079,081 based on the $0.147 quoted trading price on the anti-dilutive agreement dated as of March 22, 2012, and computed based on prior conversions at September 30, 2011 and December 31, 2011.  The conversion price was decreased as it had been based on prices that Globanc and management believes were not indicative of the value of the stock of the Company as its stock was thinly traded at the time of both conversions, resulting in a loss on settlement of debt of $4,079,081 (see Notes 6 and 9).

NOTE 11 – CONCENTRATIONS

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

The Company places its temporary cash investments with financial institutions insured by the FDIC.  No amounts exceeded federally insured limits as of March 31, 2012.  There have been no losses in these accounts through March 31, 2012.

 

Concentration of Accounts Receivable and Revenues

At March 31, 2012, 71% of accounts receivable was due from the factor.

During the six months ended March 31, 2012, there were no significant customer concentrations.

Concentration of Intellectual Property

The Company has applied to revive the trademark “PRVCY” and “Privacywear.”  The Company’s business is reliant on these intellectual property rights.  

Concentration of Funding

During 2012 and 2011 a majority of the Company’s funding was provided by a principal stockholder paying Company vendors on behalf of the Company. The amounts paid were recorded as liabilities during 2012 and 2011 and then converted in total to preferred Series A and common stock as of September 30, 2011 and December 31, 2011 (see Notes 6, 9 and 10).

 

12

 

 

Omni Ventures, Inc. and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2012

(unaudited)

NOTE 12 – SUBSEQUENT EVENTS

 

In April 2012, PRVCY entered into an agreement with Centralized Strategic Placements, Inc. (“CSP”) to facilitate becoming a merchant with the Army Air Force Exchange Service (“AAFES”).  CSP is a wholly-owned subsidiary of eLayaway, Inc. (ELAY.QB).  The Company’s CFO, Bruce Harmon, is the CFO and Chairman of eLayaway, Inc.

The Company filed a lawsuit on April 27, 2012 in PRVCY Couture, Inc. v Jean Genie, Kendrick Kim, and Does 1-X , Case Number BC483445, in the Superior Court of the State of California, County of Los Angeles.  The Company has filed a Complaint for Damages for Conversion; Prayer for Writ of Possession.  The Company has stated that the defendant has not afforded the Company the right to retrieve various fixed assets which allegedly the defendant has possession of.  Additionally, the Company claims damages related to the necessity to evacuate the premises due to the alleged situation between the defendant and its landlord.  Mr. Kim was a member of the Company’s board of directors at the time and the Company alleges he had a conflict of interest by maintaining various assets including computers necessary for the Company to maintain its business records.  Mr. Kim was terminated as a director by a Written Consent of the Holders of a Majority of the Voting Stock.  See Note 8.

 

 

13

 

ITEM 2.                       MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

We believe that it is important to communicate our future expectations to our security holders and to the public.  This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions.  Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement.  Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Form 10-K dated September 30, 2011 for the fiscal year ended September 30, 2011 and in our subsequent filings with the Securities and Exchange Commission.

THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. THESE FORWARD LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" IN THIS “MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS REPORT. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH "SELECTED FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.

Plan of Operation

The Company was a startup company that was incorporated in Kansas on August 14, 2008.  

We have begun operations in apparel design, manufacturing and distribution via our wholly owned subsidiary PRVCY Couture, Inc., and we will require outside capital to continue operations. We believe we will be able to competitively market ourselves using the traditional as well as online and viral marketing tools. All functions will be coordinated and managed by our Board of Directors, including marketing, finance, and operations.

 

We also entered into negotiations with several proprietors of premium brand consumer goods in the USA and in Europe with the purpose of integrating their brands into distribution programs developed by our management. We have put a significant effort into developing our e-commerce platform and will continue to market it as one of the main distribution vehicles for our products. We have begun the manufacturing, sales and marketing of our products in premium denim and other apparel using traditional retail and wholesale channels, including but not limited to small and medium-size retail boutiques and national department store chains as well as online through our websites. We have started developing the network of international distributors of our products as well as started licensing the non-denim product to third parties, manufacturers of non-denim apparel.

 

If we are unable to effectively market and fund these projects we may have to suspend or cease our efforts. If we cease our previously stated efforts we do not have plans to pursue other business opportunities. If we cease operations investors will not receive any return on their investments.

 

In expanding and continuing to develop the Company’s plan of operations, we have been actively seeking to expand into non-apparel consumer products such as jewelry and accessories as well as beverages.

The Company will continue to develop its subsidiaries in the field of design, manufacture, branding and distribution of consumer goods, in particular with the purpose of design, marketing and distribution of its PRVCY Premium and Privacywear brands, including offering the products under these brands via a network of international distributors, as well as via the Company’s websites at http://www.prvcy.net , http://www.prvcycouture.com   and http://www.privacywear.com . We are also looking to develop private-label apparel manufacturing as well as manufacturing and distribution under licenses from other apparel brands.

Results of Operations

Three months ended March 31, 2012 compared to the three months ended March 31, 2011

 

Revenue. For the three months ended March 31, 2012, our revenue was $(1,978), compared to $257,768 for the same period in 2011. This decrease in revenue was due to returns from a prior period compared to liquidation sales of existing product in 2011.

 

Gross Profit / Loss. For the three months ended March 31, 2012, our gross loss was $3,337, compared to gross profit of $48,304 for the same period in 2011. This decrease was related to the lack of sales.

 

Selling, General and Administrative Expenses. For the three months ended March 31, 2012, selling, general and administrative expenses were $86,586 compared to $143,403 for the same period in 2011, a decrease of 39.6%, which relates to the reorganization of the Company.  

 

Net Loss. We generated net losses of $4,163,088 for the three months ended March 31, 2012 compared to $108,035 for the same period in 2011, a decrease of 3,753%.  For the three months ended March 31, 2012, there was a loss on conversion of $4,079,081, or 98.0% of the total net loss.

Six months ended March 31, 2012 compared to the six months ended March 31, 2011

 

Revenue. For the six months ended March 31, 2012, our revenue was $534, compared to $260,075 for the same period in 2011. This decrease in revenue was due to the Company restructuring its goals whereas in 2011, the Company was liquidating inventory.

 

Gross Profit / Loss. For the six months ended March 31, 2012, our gross loss was $2,929, compared to gross profit of $49,512 for the same period in 2011. This decrease was due to the lack of sales in 2012.

 

 

14

 

Selling, General and Administrative Expenses. For the six months ended March 31, 2012, selling, general and administrative expenses were $288,048 compared to $1,711,852 for the same period in 2011, a decrease of 83.2%.  This decrease was primarily due to stock-based transaction fees of $1,366,892 recorded for the six months ended March 31, 2011.  The actual selling, general and administrative expenses for the six months ended March 31, 2011 were $344,960.  Therefore, there was a decrease of 16.5%.

 

Net Loss. We generated net losses of $4,496,016 for the six months ended March 31, 2012 compared to $1,691,789 for the same period in 2011, an increase of 165.8%.  Factoring out the transaction fee of $1,366,892, the net loss for 2011 would have been $324,897, and factoring out the loss on settlement of debt in 2012, the net loss for 2012 would have been $305,415, therefore, there was a decrease of $19,482, or 6.0%.

Liquidity and Capital Resources

General. At March 31, 2012, we had cash and cash equivalents of $8,188. We have historically met our cash needs through a combination of cash flows from operating activities, proceeds from private placements of our securities, and loans including loans from our majority shareholder. Our cash requirements are generally for selling, general and administrative activities. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements, and partial repayment of debt through the next 12 months.

 

Our operating activities used cash of $224,662 for the six months ended March 31, 2012, and we had cash provided by operations of $5,118 during the same period in 2011. The principal elements of cash flow from operations for the six months ended March 31, 2012 included a net loss of $4,496,016 offset primarily by loss on settlement of debt of $4,190,601.

Cash generated in our financing activities was $232,830 for the six months ended March 31, 2012, compared to cash used of $2,281 during the comparable period in 2011.  The $232,830 relates to advances from our majority shareholder.

 

As of March 31, 2012, current liabilities exceeded current assets by 2.6 times. Current assets increased from $206,693 at September 30, 2011 to $278,485 at March 31, 2012 whereas current liabilities increased from $689,311 at September 30, 2011 to $749,112 at March 31, 2012.

 

		For the six months ended
		March 31,
		2012				2011
Cash provided by (used in) operating activities		$	(224,662	)		$	5,118
Cash used in investing activities			-				-
Cash provided by (used in) financing activities			232,830				(2,281	)
Net changes to cash		$	8,168			$	2,837

Going Concern

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company had sales of $534 and net losses of $4,496,016 (includes loss on settlement of debt of $4,190,601) for the six months ended March 31, 2012 compared to sales of $260,075 and net loss of $1,691,789 (includes transaction fee of $1,366,892) for the six months ended March 31, 2011.  The Company used cash in operations for the six months ended March 31, 2012 of $224,662.  The Company had a working capital deficit, stockholders’ deficit, and accumulated deficit of $470,627, $406,409 and $7,670,224, respectively, at March 31, 2012.  In addition, the Company, as of the date of this report, was in default on three promissory notes, one of which is secured by substantially all assets of the Company.  These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company is highly dependent on its ability to continue to obtain investment capital from future funding opportunities to fund the current and planned operating levels.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company is in negotiation with a third party for financing that should facilitate the Company’s growth in the short-term period.  The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.

 

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As the Company is a “smaller reporting company,” this item is inapplicable.

 

  ITEM 4

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

 

15

 

 

As of the end of the period covered by the Form 10-K for fiscal year 2011, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date.  The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

 

1.	The Company has an independent director but does not have an Audit Committee.  The Company intends to appoint additional independent directors and set up an Audit Committee;
2.	Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
3.	Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4.	Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

To remediate our internal control weaknesses, management intends to implement the following measures:

▪

The Company will add sufficient number of independent directors to the board and appoint additional member(s) to the Audit Committee.

▪

The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.

▪

The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.

▪

Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

Changes in Internal Control over Financial Reporting

Except as set forth above, there were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.  Further, the design of the control system must reflect that there are resource constraints and that the benefits 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.  Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls.  The design of any system of controls is based in part on 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.  Projections of any evaluation of controls effectiveness to future periods are subject to risks.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

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PART II - OTHER INFORMATION

ITEM 1.                 LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of March 31, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations, except as noted.

The Company has one outstanding legal issue with Michael Long in regards to a claim of unpaid compensation of approximately $25,000.  The Company believes that the claim is not valid and will pursue all actions to remedy it accordingly.

The Company filed a lawsuit on April 27, 2012 in PRVCY Couture, Inc. v Jean Genie, Kendrick Kim, and Does 1-X , Case Number BC483445, in the Superior Court of the State of California, County of Los Angeles.  The Company has filed a Complaint for Damages for Conversion; Prayer for Writ of Possession.  The Company has stated that the defendant has not afforded the Company the right to retrieve various fixed assets which allegedly the defendant has possession of.  Additionally, the Company claims damages related to the necessity to evacuate the premises due to the alleged situation between the defendant and its landlord.  Mr. Kim was a member of the Company’s board of directors at the time and the Company alleges he had a conflict of interest by maintaining various assets including computers necessary for the Company to maintain its business records.  Mr. Kim was terminated as a director by a Written Consent of the Holders of a Majority of the Voting Stock.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

MINING SAFETY DISCLOSURES

None

ITEM 5.

OTHER INFORMATION

On May 18, 2012, Michael Gauss resigned from the board of directors to pursue other opportunities.

ITEM 6.

EXHIBITS

Number			Description
3.1 (1)			Articles of Incorporation, as Amended
3.2 (1)			Bylaws
3.3 (2)			Certificate of Designation of the Preferences and Rights of Series E Preferred Stock
31.1 (3)			Certification of Chief Executive Officer of Omni Ventures, Inc. Required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 (3)			Certification of Chief Financial Officer of Omni Ventures, Inc. Required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 (3)			Certification of Chief Executive Officer of Omni Ventures, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
32.2 (3)			Certification of Chief Financial Officer of Omni Ventures, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

(1)      Previously filed with the Form 8-K filed on April 16, 2010 and is incorporated herein by reference.

(2)      Previously filed with the Form 10-Q for the period ended June 30, 2010 and is incorporated herein by reference.

(3)      Filed herewith.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

	OMNI VENTURES, INC.
Date: May 21, 2012	By:	/s/ Christian Wicks
		Christian Wicks
		Interim President
Date: May 21, 2012	By:	/s/ Bruce Harmon
		Bruce Harmon
		Chief Financial Officer

 

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Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christian Wicks, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Omni Ventures, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

     Date: May 21, 2012

 

     By: /s/ Christian Wicks

     Interim President

     (Principal Executive Officer)

 

 

19

 

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce Harmon, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Omni Ventures, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

      Date: May 21, 2012

 

      By: /s/ Bruce Harmon

      Chief Financial Officer       

 
 

 

 

20

 

 

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Christian Wicks, Chief Executive Officer of Omni Ventures, Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2012 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company.

 

       Date: May 21, 2012

       By: /s/ Christian Wicks

        Interim President

        (Principal Executive Officer)

 

 

 

21

 

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce Harmon, Chief Financial Officer, of Omni Ventures, Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2012 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company.

              Date: May 21, 2012

 

              By: /s/ Bruce Harmon

              Chief Financial Officer

22