UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
X
QUARTERLY REPORT UNDER TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR
THE QUARTERLY PERIOD ENDED NOVEMBER 30,
2009
Commission file number
333-145730
PRINCIPLE
SECURITY INTERNATIONAL, INC.
(Exact name of
registrant as specified in its charter)
NEVADA
(State or other
jurisdiction of incorporation or organization)
Unit
B – 2015 Burrard Street
Vancouver,
British Columbia
Canada
V6J 3H4
(Address of
principal executive offices, including zip code.)
(778)
233-3562
(telephone number,
including area code)
Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the last 90 days.
YES
[ X ] NO [ ]
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated
filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
|
[
]
|
Accelerated
filer
|
[
]
|
|
Non-accelerated
filer
|
[
]
|
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).
YES [
X ] NO [ ]
At
November 30, 2009, there were
21,295,006
shares of our
common stock issued and outstanding.
EXPLANATORY
NOTE
This
quarterly report is being amended throughout to reflect a 2.5 for 1 forward
split effected by the registrant on October 5, 2009, but inadvertently
omitted in the original November 30, 2009 report filed.
TABLE
OF CONTENTS
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PART
I - FINANCIAL INFORMATION
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3
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Item
1. Consolidated Financial Statements
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3
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Item
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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20
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Item
3. Quantitative and Qualitative Disclosures of Market Risk
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22
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Item
4. Controls and Procedures
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23
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PART
II - OTHER INFORMATION
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23
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Item
1. Legal Proceedings
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23
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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23
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Item
3. Defaults Upon Senior Securities
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23
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Item
4. Submission of Matters to a Vote of Security Holders
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23
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Item
5. Other Information and Subsequent Events
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24
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.
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Item
6. Exhibits
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24
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SIGNATURES
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24
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PART
I – FINANCIAL INFORMATION
ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
The
accompanying unaudited interim consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
("SEC") and should be read in conjunction with the audited financial statements
and notes thereto contained in our Annual Report filed with the SEC on Form 10-K
on August 27, 2009. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented have
been reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full
year.
Forward-Looking
Statements
The statements contained in this Form 10-Q that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These include statements about our
expectations, beliefs, intentions or strategies for the future, which are
indicated by words or phrases such as anticipate, expect, intend, plan, will,
the Company believes, management believes and similar words or phrases. The
forward-looking statements are based on our current expectations and are subject
to certain risks, uncertainties and assumptions. Our actual results could differ
materially from results anticipated in these forward-looking statements. All
forward-looking statements included in this document are based on information
available to us on the date hereof, and we assume no obligation to update any
such forward-looking statements.
Principle
Security International, Inc.
(A
Development Stage Company)
Consolidated
Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
30 November
2009
Principle
Security International, Inc.
(A
Development Stage Company)
Consolidated
Balance Sheets
(Expressed
in U.S. Dollars)
|
|
|
As
at
30
November
2009
(Restated
)
|
|
As
at
31
May
2009
(Audited)
|
|
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
Cash
and cash equivalents (Note 2)
|
|
14,500
|
|
1,496
|
|
Goods
and Services Tax recoverable
|
|
688
|
|
234
|
|
|
|
|
|
|
|
|
|
15,188
|
|
1,730
|
|
|
|
|
|
|
|
Equipment
(Note
3)
|
|
805
|
|
1,057
|
|
|
|
|
|
|
|
|
|
15,993
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|
2,787
|
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|
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|
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|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
Accounts
payable and accrued liabilities (Note 4)
|
|
3,825
|
|
13,508
|
|
Convertible
debentures (Note 5)
|
|
15,048
|
|
14,323
|
|
Demand
loan (Note 6)
|
|
46,235
|
|
-
|
|
Due
to related party (Note 7)
|
|
5,046
|
|
-
|
|
|
|
|
|
|
|
|
|
70,154
|
|
27,831
|
|
|
|
|
|
|
|
Stockholders’
deficiency
|
|
|
|
|
|
Capital stock
(Note
8)
|
|
|
|
|
|
Authorized
|
|
|
|
|
|
100,000,000
of common shares, par value $0.00001
|
|
|
|
|
|
100,000,000
of preferred shares, par value $0.00001
|
|
|
|
|
|
Issued
and outstanding
|
|
|
|
|
30 November
2009 – 21,295,006 common shares, par value
$0.00001
|
|
|
|
|
|
31
May 2009 – 21,295,006 common shares, par value $0.00001
|
|
213
|
|
213
|
|
Additional
paid in capital
|
|
124,416
|
|
124,416
|
|
Deficit,
accumulated during the development stage
|
|
(178,790)
|
|
(149,673)
|
|
|
|
|
|
|
|
|
|
(54,161)
|
|
(25,044)
|
|
|
|
|
|
|
|
|
|
15,993
|
|
2,787
|
Nature and Continuance of Operations
(Note
1
),
Contingency
(Note 11) and
Subsequent Events
(Note 12)
On
behalf of the Board:
/s/ Charles Payne,
Director
The
accompanying notes are an integral part of the consolidated financial
statements.
Principle
Security International, Inc.
(A
Development Stage Company)
Consolidated
Statements of Operations
(Expressed
in U.S. Dollars)
(Unaudited)
|
|
For
the period
from
the date
of
inception on 27 November 2006 to
30
November
2009
|
|
For
the
three
month
period
ended
30
November
2009
(Restated)
|
|
For
the
three
month
period
ended
30
November
2008
|
|
For
the
six
month
period
ended
30
November
2009
|
|
For
the
six
month
period
ended
30
November
2008
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
(Note 3)
|
|
1,281
|
|
153
|
|
97
|
|
252
|
|
194
|
|
Bank
charges
|
|
1,045
|
|
58
|
|
37
|
|
133
|
|
113
|
|
Consulting
fees (Note 7)
|
|
52,939
|
|
4,160
|
|
9,709
|
|
5,509
|
|
12,140
|
|
Interest
expense (Notes 5, 6, 7 and 10)
|
|
1,529
|
|
544
|
|
-
|
|
1,006
|
|
-
|
|
Legal
fees
|
|
23,523
|
|
3
|
|
875
|
|
471
|
|
1,392
|
|
Marketing
and advertising
|
|
156
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Office
and miscellaneous
|
|
24,388
|
|
2,058
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|
1,229
|
|
2,980
|
|
4,878
|
|
Professional
fees
|
|
55,115
|
|
6,968
|
|
3,589
|
|
10,413
|
|
12,658
|
|
Transfer
agent and filing fees
|
|
13,339
|
|
1,923
|
|
982
|
|
4,216
|
|
1,297
|
|
Loss
on foreign exchange
|
|
5,475
|
|
2,221
|
|
1,566
|
|
4,137
|
|
1,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
(178,790)
|
|
(18,088)
|
|
(18,084)
|
|
(29,117)
|
|
(34,431)
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|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share
|
|
(0.001)
|
|
(0.001)
|
|
(0.001)
|
|
(0.002)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
used
in per share calculations
|
|
21,295,006
|
|
21,295,006
|
|
21,295,006
|
|
21,295,006
|
The
accompanying notes are an integral part of the consolidated financial
statements.
Principle
Security International, Inc.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows
(Expressed
in U.S. Dollars)
(Unaudited)
|
|
For
the period
from
the date
of
inception on
27
November
2006
to
30
November
2009
|
|
For
the
three
month
period
ended
30
November
2009
|
|
For
the
three
month
period
ended
30
November
2008
|
|
For
the
six
month
period
ended
30
November
2009
|
|
For
the
six
month
period
ended
30
November
2008
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows used in operating activities
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
(178,790)
|
|
(18,088)
|
|
(18,084)
|
|
(29,117)
|
|
(34,431)
|
|
Adjustments
to reconcile loss to net cash used by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
(Note 3)
|
|
1,281
|
|
153
|
|
97
|
|
252
|
|
194
|
|
Interest
(Notes 5, 6, 7 and 10)
|
|
1,529
|
|
544
|
|
-
|
|
1,006
|
|
-
|
|
Contribution
to capital by related party
|
|
10,909
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in Goods and Services Tax recoverable
|
|
(688)
|
|
(67)
|
|
10,095
|
|
(454)
|
|
10,095
|
|
Increase
(decrease) in accounts payable and accrued liabilities
|
3,825
|
|
(3,403)
|
|
(573)
|
|
(9,683)
|
|
(691)
|
|
Increase
(decrease) in due to related party
|
20
|
|
-
|
|
(6,310)
|
|
-
|
|
3,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(161,914)
|
|
(20,861)
|
|
(14,775)
|
|
(37,996)
|
|
(21,706)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows used in investing activities
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
(2,086)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
Common
shares issued for cash (Note 8)
|
|
78,700
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Convertible
debentures (Note 5)
|
|
13,800
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Demand
loan (Note 6)
|
|
46,000
|
|
26,000
|
|
-
|
|
46,000
|
|
-
|
|
Loans
from related party (Note 7)
|
|
40,000
|
|
-
|
|
199
|
|
5,000
|
|
1,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,500
|
|
26,000
|
|
199
|
|
51,000
|
|
1,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
14,500
|
|
5,139
|
|
(14,576)
|
|
13,004
|
|
(20,095)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
-
|
|
9,361
|
|
15,548
|
|
1,496
|
|
21,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
14,500
|
|
14,500
|
|
972
|
|
14,500
|
|
972
|
Supplemental Disclosures with Respect
to Cash Flows
(Note 10)
The
accompanying notes are an integral part of the consolidated financial
statements.
Principle
Security International, Inc.
(A
Development Stage Company)
Consolidated
Statements of Changes in Stockholders’ Deficiency
(Expressed
in U.S. Dollars)
(Unaudited)
|
|
Number
of
shares
issued
|
Capital
Stock
|
Additional
paid
in capital
|
Deficit,
accumulated during the
development
stage
|
Stockholders’
deficiency
|
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at 27 November 2006 (inception)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Common
shares issued – cash (
$.0004 per
share
) (Note 8)
|
|
6,250,002
|
|
63
|
|
2,437
|
|
-
|
|
2,500
|
|
Common
shares issued – cash
($.003 per
share
) (Note 8)
|
|
14,500,002
|
|
145
|
|
43,355
|
|
-
|
|
43,500
|
|
Common
shares issued – cash (
$.06 per
sha
re) (Note 8)
|
|
545,002
|
|
5
|
|
32,695
|
|
-
|
|
32,700
|
|
Net
loss for the period
|
|
-
|
|
-
|
|
-
|
|
(19,332)
|
|
(19,332)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at 31 May 2007
|
|
21,295,006
|
|
213
|
|
78,487
|
|
(19,332)
|
|
59,368
|
|
Net
loss for the year
|
|
-
|
|
-
|
|
-
|
|
(72,251)
|
|
(72,251)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at 31 May 2008
|
|
21,295,006
|
|
213
|
|
78,487
|
|
(91,583)
|
|
(12,883)
|
|
Contributions to capital by related
party
(Note
8)
|
|
-
|
|
-
|
|
45,929
|
|
-
|
|
45,929
|
|
Net
loss for the year
|
|
-
|
|
-
|
|
-
|
|
(58,090)
|
|
(58,090)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at 31 May 2009
|
|
21,295,006
|
|
213
|
|
124,416
|
|
(149,673)
|
|
(25,044)
|
|
Net
loss for the period
|
|
-
|
|
-
|
|
-
|
|
(29,117)
|
|
(29,117)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at 30 November 2009
|
|
21,295,006
|
|
213
|
|
124,416
|
|
(178,790)
|
|
(54,161)
|
The
accompanying notes are an integral part of the consolidated financial
statements.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
|
1.
|
Nature and Continuance of
Operations
|
Principle
Security International, Inc. (the “Company”) was incorporated under the laws of
the State of Nevada on 27 November 2006. The Company intends to
conduct its business through its wholly owned subsidiary, Principle Security
International Incorporated, a company incorporated in Canada.
These
consolidated financial statements represent the presentation on a consolidated
basis of the accounts of the Company and its wholly owned subsidiary, Principle
Security International Incorporated, a company incorporated under the laws of
British Columbia, Canada on 29 November 2006.
The
Company is a development stage enterprise,
as
defined in Accounting Standards Codification (the “Codification” or “ASC”)
915-10, “
Development Stage
Entities
”. The Company is devoting all of its present efforts
to securing and establishing a new business and its planned principle operations
have not commenced. Accordingly, no revenue has been derived during
the organization period.
The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) applicable to development stage enterprises, and are expressed
in U.S. dollars. The Company’s fiscal year end is 31
May.
The
Company’s consolidated financial statements as at 30 November 2009 and for
the three and six month period then ended have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. The
Company has a loss of $18,088 and $29,117 for the three and six month
period ended 30 November 2009, respectively (30 November 2008 – $18,084 and
$34,431, respectively, cumulative – $178,790) and has a working capital deficit
of $54,966 at 30 November 2009 (31 May 2009 – $26,101).
Effective 5 October 2009,
the Company completed a 2.5 to 1 forward stock split and increased the issued
and oustanding share capital from 8,518,000 common shares to 21,295,006 common
shares with the same par value of $0.00001. Unless otherwise noted,
all references herein to number of shares, price per share or weighted average
number of shares outstanding have been adjusted to reflect this stock split on
a retroactive basis (Note 8).
Management
cannot provide assurance that the Company will ultimately achieve profitable
operations or become cash flow positive, or raise additional debt and/or equity
capital. Management believes that the Company’s capital resources
should be adequate to continue operating and maintaining its business strategy
during the fiscal year ending 31 May 2010. However, if the Company is
unable to raise additional capital in the near future, due to the Company’s
liquidity problems, management expects that the Company will need to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other remedial measures. These consolidated financial
statements do not include any adjustments related to the recoverability and
classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
At 30
November 2009, the Company was not engaged in a business and had suffered losses
from development stage activities to date. Although management is
currently attempting to implement its business plan, and is seeking additional
sources of equity or debt financing, there is no assurance these activities will
be successful. Accordingly, the Company must rely on its president to
perform essential functions without compensation until a business operation can
be commenced. These factors raise substantial doubt about the ability
of the Company to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
|
2.
|
Significant
Accounting Policies
|
The
following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements.
Basis
of presentation
The
consolidated financial statements of the Company have been prepared in
accordance with GAAP and are expressed in U.S. dollars. The Company’s
fiscal year end is 31 May.
Cash
and cash equivalents
Cash and
cash equivalents include highly liquid investments with original maturities of
three months or less. As at 30 November 2009, the Company has cash and cash
equivalents in the amount of $14,500 (31 May 2009 – $1,496).
Equipment
Equipment
is recorded at cost and depreciation is provided over its estimated economic
life at 30%.
Long-lived
assets
Long-term
assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360-10-35-15,
“Impairment or Disposal of
Long-Lived Assets”
.
Management
considers assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations (undiscounted and without interest
charges). If impairment is deemed to exist, the assets will be written down to
fair value. Fair value is generally determined using a discounted cash flow
analysis.
Financial
instruments
The
carrying value of cash and cash equivalents, Goods and Services Tax recoverable,
accounts payable and accrued liabilities, convertible debentures, demand loans
and due to related party approximates their fair value because of the short
maturity of these instruments. The Company’s operations are in Canada
and virtually all of its assets and liabilities are giving rise to significant
exposure to market risks from changes in foreign currency rates. The
Company’s financial risk is the risk that arises from fluctuations in foreign
exchange rates and the degree of volatility of these
rates. Currently, the Company does not use derivative instruments to
reduce its exposure to foreign currency risk.
Derivative
financial instruments
The
Company has not, to the date of these consolidated financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
Income
taxes
Deferred
income taxes are reported for timing differences between items of income or
expense reported in the consolidated financial statements and those
reported for income tax purposes in accordance with ASC 740, “
Income Taxes”
, which requires
the use of the asset/liability method of accounting for income
taxes. Deferred income taxes and tax benefits are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and for tax loss and credit
carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The Company provides for deferred taxes for the estimated
future tax effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
Basic
and diluted net loss per share
The
Company computes net income (loss) per share in accordance with ASC 260, “
Earnings per
Share
.” ASC 260 requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income
statement. Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the
period using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted EPS
excludes all dilutive potential shares if their effect is
anti-dilutive.
Comprehensive
loss
ASC 220,
“
Comprehensive Income”
,
establishes standards for the reporting and display of comprehensive loss and
its components in the consolidated financial statements. As at 30
November 2009, the Company has no items that represent a comprehensive loss and,
therefore, has not included a schedule of comprehensive loss in the consolidated
financial statements.
Segments
of an enterprise and related information
ASC 280,
“
Segment
Reporting
,” establishes standards for the way that public companies
report information about operating segments in annual consolidated financial
statements and
requires reporting of
selected information about operating segments in interim consolidated financial
statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. ASC 280 defines operating segments as components of a
company about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company has
evaluated this Codification and does not believe it is applicable at this
time.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
Start-up
expenses
The
Company has adopted ASC 720-15 “
Start-up Costs
,” which
requires that costs associated with start-up activities be expensed as
incurred. Accordingly, start-up costs associated with the Company's
formation have been included in the Company's general and administrative
expenses for the period from the date of inception on 27 November 2006 to 30
November 2009.
Foreign
currency translation
The
Company’s functional and reporting currency is in U.S. dollars. The
consolidated financial statements of the Company are translated to U.S. dollars
in accordance with ASC 830, “
Foreign Currency
Matters
.” Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income. The Company has not, to the date of
these consolidated financial statements, entered into derivative instruments to
offset the impact of foreign currency fluctuations.
Use
of estimates
The
preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenditures during the reporting period. Actual results
could differ from these estimates.
Changes
in Accounting Policies
Fair
Value Measurement and Disclosure
In August
2009, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2009-05,
“
Fair Value Measurement and
Disclosure (Topic 820) – Measuring Liabilities at Fair Value
”, which
provides valuation techniques to measure fair value in circumstances in which a
quoted price in an active market for the identical liability is not
available. The guidance provided in this update is effective 1
September 2009. The adoption of this guidance did not have a material
impact on the Company’s consolidated financial statements.
The
Accounting Standards Codification
In June
2009, the FASB issued SFAS No. 168, “
The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principle – a
replacement of FASB Statement No. 162
”. The Codification
reorganized existing U.S. accounting and reporting standards issued by the FASB
and other related private sector standard setter into a single source of
authoritative accounting principles arranged by topic. The
Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities
and Exchange Commission guidance for publicly-traded companies) is considered
non-authoritative. The Codification was effective on a prospective
basis for interim and annual reporting periods ending after 15 September
2009. The adoption of the Codification changed the Company’s
references to GAAP accounting standards but did not impact the Company’s results
of operations, financial position or liquidity.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
Subsequent
Events
In May
2009, the FASB issued new guidance for accounting for subsequent
events. The new guidance, which is now part of ASC 855, “
Subsequent Events
” is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before consolidated
financial statements are issued or are available to be issued. It
requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. This disclosure should
alert all users of the consolidated financial statements that an entity has not
evaluated subsequent events after that date in the set of the consolidated
financial statements being presented. The new guidance was effective
on a prospective basis for interim or annual reporting periods ending after 15
June 2009. The adoption of this guidance did not have a material
impact on the Company’s consolidated financial statements.
Convertible
Debt
In May
2008, the FASB issued new guidance for accounting for convertible debt
instruments that may be settled in cash. The new guidance, which is
now part of ASC 470-20, “
Debt
with Conversion and Other Options
” requires the liability and equity
components to be separately accounted for in a manner that will reflect the
entity’s nonconvertible debt borrowing rate. The Company will
allocate a portion of the proceeds received from the issuance of convertible
notes between a liability and equity component by determining the fair value of
the liability component using the Company’s nonconvertible debt borrowing
rate. The difference between the proceeds of the notes and the fair
value of the liability component will be recorded as a discount on the debt with
a corresponding offset to paid-in capital. The resulting discount
will be accreted by recording additional non-cash interest expense over the
expected life of the convertible notes using the effective interest rate
method. The new guidance was to be applied retrospectively to all
periods presented upon those fiscal years. The adoption of this
guidance did not have a material impact on the Company’s consolidated financial
statements.
Useful
Life of Intangible Assets
In April
2008, the FASB issued new guidance for determining the useful life of an
intangible assets, the new guidance, which is now part of ASC 350, “
Intangibles – Goodwill and
Other
”. In determining the useful life of intangible assets,
ASC 350 removes the requirement to consider whether an intangible asset can be
renewed without substantial cost of material modifications to the existing terms
and conditions and, instead, requires an entity to consider its own historical
experience in renewing similar arrangements. ASC 350 also requires
expanded disclosure related to the determination of intangible asset useful
lives. The new guidance was effective for consolidated financial
statements issued for fiscal years beginning after 15 December
2008. The adoption of this guidance did not have a material impact on
the Company’s consolidated financial statements.
Derivative
Instruments and Hedging Activities
In March
2008, the FASB issued new guidance on the disclosure of derivative instruments
and hedging activities. The new guidance, which is now part of ASC
815, “
Derivatives and Hedging
Activities
” requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of, and gains and losses on, derivative instruments, and disclosures
about credit-risk-related contingent features in derivative
agreements. The new guidance was effective prospectively for
consolidated financial statements issued for fiscal years beginning after 15
November 2008, with early application encouraged. The adoption of
this guidance did not have a significant impact on the Company’s financial
statements.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
Business
Combinations
In
December 2007, the FASB issued revised guidance for accounting for business
combinations. The revised guidance, which is now part of ASC 805,
“
Business Combinatiosn
”
requires the fair value measurement of assts acquired, liabilities assumed and
any noncontrolling interest in the acquiree, at the acquisition date with
limited exceptions. Previously, a cost allocation approach was used
to allocate the cost of the acquisition based on the estimated fair value of the
individual assets acquired and liabilities assumed. The cost
allocation approach treated acquisition-related costs and restructuring costs
that the acquirer expected to incur as a liability on the acquisition date, as
part of the cost of the acquisition. Under the revised guidance,
those costs are recognized in the statement of income separately from the
business combination. The revised guidance applies to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after 15 December
2008. The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements.
Comparative
figures
Certain
comparative figures have been adjusted to conform to the current period’s
presentation.
Recent
Accounting Pronouncements
From June
2009 to October 2009, the FASB issued various updates, Accounting Standard
Update (“ASU”) No. 2009-2 through ASU No. 2009-15, which contain technical
corrections to existing guidance or affect guidance to specialized industries or
entities. These updates have no current applicability to the Company
or their effect on the consolidated financial statements is
insignificant.
In June
2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
167, “
Amendments to FASB
Interpretation No. 46(R)
”. SFAS No. 167, which amends ASC
810-10, “
Consolidation
”, prescribes a
qualitative model for identifying whether a company has a controlling financial
interest in a variable interest entity (“VIE”) and eliminates the quantitative
model. The new model identifies two primary characteristics of a
controlling financial interest: (1) provides a company with the power to direct
significant activities of the VIE, and (2) obligates a company to absorb losses
of and/or provides rights to receive benefits from the VIE. SFAS No.
167 requires a company to reassess on an ongoing basis whether it holds a
controlling financial interest in a VIE. A company that holds a
controlling financial interest is deemed to be the primary beneficiary of the
VIE and is required to consolidate the VIE. SFAS No. 167, which is
referenced in ASC 105-10-65, has not yet been adopted into the Codification and
remains authoritative. SFAS No. 167 is effective 1 June
2010. The Company does not expect that the adoption of SFAS No. 167
will have a material impact on its consolidated financial
statements.
In June
2009, the FASB issued SFAS No. 166, “
Accounting for Transfer of Financial
Assets – an amendment of FASB Statement
”. SFAS No. 166 removes
the concept of a qualifying special-purpose entity from ASC 860-10, “
Transfers and Servicing
”, and
removes the exception from applying ASC 810-10, “
Consolidation
”. These
statements also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale
accounting. SFAS No. 166, which is referenced in ASC 105-10-65, has
not yet been adopted into the Codification and remains
authoritative. This statement is effective 1 June
2010. The Company does not expect that the adoption of SFAS No. 166
will have a material impact on its consolidated financial
statements.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
International
Financial Reporting Standards
In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board. Under the proposed
roadmap, the Company would be required to prepare consolidated financial
statements in accordance with IFRS in fiscal year 2014, including comparative
information also prepared under IFRS for fiscal 2013 and 2012. The
Company is currently assessing the potential impact of IFRS on its consolidated
financial statements and will continue to follow the proposed roadmap for future
developments.
During
the six month period ended 30 November 2009, the total additions of the
Company to equipment were $Nil (30 November 2008 – $Nil).
|
|
|
|
|
|
Accumulated
amortization
|
|
Net
Book Value
|
|
|
|
|
|
Cost
|
|
30
November
2009
|
|
31
May 2009
(Audited)
|
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer
equipment
|
|
2,086
|
|
1,281
|
|
805
|
|
1,057
|
During
the six month period ended 30 November 2009, the total additions of the
Company to equipment were $Nil (30 November 2008 –
$Nil).
|
4.
|
Accounts Payable and Accrued
Liabilities
|
Accounts
payable and accrued liabilities are non-interest bearing, unsecured and have
settlement dates within one year.
|
5.
|
Convertible
Debentures
|
|
|
30
November
2009
|
31
May
2009
(Audited)
|
|
|
|
$
|
|
$
|
|
|
Issued
on 24 December 2008, the convertible debenture bears interest at 10% per
annum on any unpaid principal and interest balance and is secured by
a general charge on the assets of the Company. The principal
amount is repayable at any time in whole or in part and accrued interest
shall be due at the end of each calendar quarter, with the first payment
due on the last day of the first calendar quarter after 24 December 2008.
The holder of the convertible debenture has the right to convert any
portion of the unpaid principal and/or accrued interest into common shares
of the Company at any time up to 24 December 2011 at $0.0125 per Unit
where a Unit consists of one common share for an equivalent amount of
principal and interest due and payable. During the six month period
ended 30 November 2009, the Company accrued interest expense of $264 (30
November 2008 – $Nil). The balance as at 30 November 2009 consists of
principal and accrued interest of $5,000 (31 May 2009 – $5,000) and $480
(31 May 2009 – $216), respectively (Notes 10 and 11).
|
5,480
|
|
5,216
|
|
|
Issued
on 24 December 2008, the convertible debenture bears interest at 10% per
annum on any unpaid principal and interest balance and is secured by a
general charge on the assets of the Company. The principal
amount is repayable at any time in whole or in part and accrued interest
shall be due at the end of each calendar quarter, with the first payment
due on the last day of the first calendar quarter after 24 December 2008.
The holder of the convertible debenture has the right to convert any
portion of the unpaid principal and/or accrued interest into common shares
of the Company at any time up to 24 December 2011 at $0.0125 per Unit
where a Unit consists of one common share for an equivalent amount of
principal and interest due and payable. During the six month period
ended 30 November 2009, the Company accrued interest expense of $264(30
November 2008 – $Nil). The balance as at 30 November 2009 consists of
principal and accrued interest of $5,000 (31 May 2009 – $5,000) and $480
(31 May 2009 – $216), respectively (Notes 10 and 11).
|
5,480
|
|
5,216
|
|
|
Issued
on 5 March 2009, the convertible debenture bears interest at 10% per annum
on any unpaid principal and interest balance and is secured by a general
charge on the assets of the Company. The principal amount is
repayable at any time in whole or in part and accrued interest shall be
due at the end of each calendar quarter, with the first payment due on the
last day of the first calendar quarter after 5 March 2009. The holder of
the convertible debenture has the right to convert any portion of the
unpaid principal and/or accrued interest into common shares of the Company
at any time up to 5 March 2012 at $0.0125 per Unit where a Unit consists
of one common share for an equivalent amount of principal and interest due
and payable. During the six month period ended 30 November 2009, the
Company accrued interest expense of $197 (30 November 2008 – $Nil). The
balance as at 30 November 2009 consists of principal and accrued interest
of $3,800 (31 May 2009 – $3,800) and $288 (31 May 2009 – $91),
respectively (Notes 10 and 11).
|
4,088
|
|
3,891
|
|
|
|
|
|
|
|
|
|
15,048
|
|
14,323
|
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
|
|
30
November
2009
|
31
May
2009
(Audited)
|
|
|
|
$
|
|
$
|
|
|
Issued
on
18
June 2009,
the demand loan bears interest at 2% per annum on
any unpaid principal and interest balance and is secured by a general
charge on the assets of the Company. The principal amount is repayable at
any time in whole or in part and accrued interest shall be due at the end
of each calendar quarter, with the first payment due on the last day of
the first calendar quarter after 30 June 2009. During the isx month
period ended 30 November 2009, the Company accrued interest expense of
$181 (30 November 2008 – $Nil). The balance as at 30 November
2009 consists of principal and accrued interest of $20,000 (31 May 2009 –
$Nil) and $181 (31 May 2009 – $Nil), respectively (Notes 10 and
11).
|
20,181
|
|
-
|
|
|
|
|
|
|
|
|
I
ssued
on 15 September 2009, the demand loan bears interest at 2% per
annum on any unpaid principal and interest balance and is secured by a
general charge on the assets of the Company. The principal amount is
repayable at any time in whole or in part and accrued interest shall be
due at the end of each calendar quarter, with the first payment due on the
last day of the first calendar quarter after 30 September 2009.
During the six month period ended 30 November 2009, the Company
accrued interest expense of $42 (30 November 2008 – $Nil). The
balance as at 30 November 2009 consists of principal and accrued interest
of $20,000 (31 May 2009 – $Nil) and $42 (31 May 2009 – $Nil), respectively
(Notes 10 and 11).
|
10,042
|
|
-
|
|
|
|
|
|
|
|
|
Issued
on 11 November 2009, the demand loan bears interest at 2% per annum on any
unpaid principal and interest balance and is secured by a general charge
on the assets of the Company. The principal amount is repayable at any
time in whole or in part and accrued interest shall be due at the end of
each calendar quarter, with the first payment due on the last day of the
first calendar quarter after 30 November 2009. During the six
month period ended 30 November 2009, the Company accrued interest expense
of $12 (30 November 2008 – $Nil). The balance as at 30 November 2009
consists of principal and accrued interest of $16,000 (31 May 2009 – $Nil)
and $12 (31 May 2009 – $Nil), respectively (Notes 10 and
11).
|
16,012
|
|
-
|
|
|
|
|
|
|
|
|
|
46,235
|
|
-
|
|
7.
|
Due
to Related Party and Related Party
Transaction
|
As at 30
November 2009, the amount due to related party consists of a demand loan of
$5,046 (31 May 2009 – $Nil) payable to a director and officer of the
Company. The current amount was issued on 16 June 2009, the demand
loan bears interest at 2% per annum on any unpaid principal and interest balance
and is secured by a general charge on the assets of the Company. The
principal amount is repayable at any time in whole or in part and accrued
interest shall be due at the end of each calendar quarter, with the first
payment due on the last day of the first calendar quarter after 30 June
2009. During the three month period ended 30 November 2009, the
Company accrued interest expense of $25 (30 November 2008 – $Nil). The balance
as at 30 November 2009 consists of principal and accrued interest of $5,000 (31
May 2009 – $Nil) and $46 (31 May 2009 – $Nil), respectively (Notes 10 and
11).
During
the three month period ended 30 November 2009, a director and shareholder of the
Company was paid consulting fees in the amount of $5,509 (30 November 2008 –
$12,140).
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
Authorized
The total
authorized capital is 100,000,000 common shares with a par value of $0.00001 per
common share and 100,000,000 preferred shares with a par value of
$0.00001.
Issued
and outstanding
The total
issued and outstanding capital stock is
21,295,006
common shares
with a par value of $0.00001 per common share.
The common stock is not subject to warrants, agreements or options at
30 November 2009.
Effective 5
October 2009, the Company completed a 2.5 to 1 forward stock split and increased
the issued and oustanding share capital from 8,518,000 common shares to
21, 295,006
common shares with the same par value of $0.00001. Unless otherwise
noted, all references herein to number of shares, price per share or weighted
average number of shares outstanding have been adjusted to reflect this stock
split on a retroactive basis (Note 1).
During
the year ended 31 May 2007, the Company issued
21,295,006
common
shares for cash proceeds of $78,700.
During
the year ended 31 May 2009, a director and shareholder of the Company made
contributions to capital for consulting fees in the amount of
$10,909.
During
year ended 31 May 2009, a director and shareholder of the Company forgave loans
to the Company totaling $35,020. This loan forgiveness was recorded as
contributions to capital of the Company.
The
Company has losses carried forward for income tax purposes to 30 November 2009.
There are no current or deferred tax expenses for the three months ended 30
November 2009 due to the Company’s loss position. The Company has fully reserved
for any benefits of these losses. The deferred tax consequences of temporary
differences in reporting items for financial statement and income tax purposes
are recognized, as appropriate. Realization of the future tax benefits related
to the deferred tax assets is dependent on many factors, including the Company’s
ability to generate taxable income within the net operating loss carryforward
period. Management has considered these factors in reaching its conclusion as to
the valuation allowance for financial reporting purposes.
The
provision for refundable federal income tax consists of the
following:
|
|
|
|
For
the six month period ended 30 November 2009
|
|
For
the six month period ended 30 November 2008
|
|
|
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset attributable to:
|
|
|
|
|
|
|
Current
operations
|
|
8,041
|
|
9,987
|
|
|
Less:
Change in valuation allowance
|
|
(8,041)
|
|
(9,987)
|
|
|
|
|
|
|
|
|
|
Net
refundable amount
|
|
-
|
|
-
|
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
The
composition of the Company’s deferred tax assets as at 30 November 2009 and 31
May 2009 are as follows:
|
|
|
|
30
November
2009
|
|
31
May
2009
(Audited)
|
|
|
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Net
income tax operating loss carryforward
|
|
143,770
|
|
113,624
|
|
|
|
|
|
|
|
|
|
Statutory
federal income tax rate
|
|
15%-30.67%
|
|
15%-30.67%
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset
|
|
41,443
|
|
33,087
|
|
|
Less:
Valuation allowance
|
|
(41,443)
|
|
(33,087)
|
|
|
|
|
|
|
|
|
|
Net
deferred tax asset
|
|
-
|
|
-
|
The
potential income tax benefit of these losses has been offset by a full valuation
allowance.
As at 30
November 2009, the Company has an unused net operating loss carry-forward
balance of approximately $143,770 that is available to offset future taxable
income. This unused net operating loss carry-forward balance expires
in 2030.
|
10.
|
Supplemental
Disclosures with Respect to Cash
Flows
|
|
|
|
For
the period from the date of inception on 27 November 2006 to
30
November
2009
|
|
For
the
three
month
period
ended
30
November
2009
|
|
For
the
three
month
period
ended
30
November
2008
|
|
For
the
six month
period
ended
30
November
2009
|
|
For
the
six
month
period
ended
30
November
2008
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Cash
paid during the period for interest
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for income taxes
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Foreign
exchange loss
|
5,475
|
|
2,221
|
|
1,566
|
|
4,137
|
|
1,759
|
During
the six month period ended 30 November 2009, the Company accrued total
interest expense of $1,006 related to various convertible debentures, demand
loan and balance due to related party (Notes 5, 6 and 7).
The
Company is in default of certain terms related to the convertible debentures,
demand loans and due to related party agreements and is in the process of
renegotiating them (Notes 5, 6 and 7).
There are
no subsequent events from the date of the period ended 30 November 2009 to the
date the consolidated financial statements were available to be issued on 12
February 2010.
Principle
Security International, Inc.
(A
Development Stage Company)
Notes to
Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited)
|
13.
|
Restatement
of Consolidated Financial
Statements
|
The
Company’s consolidated financial statements for the six month period ended 30
November 2009 have been restated to reflect a 2.5 to 1 forward stock split
enacted by the Company on 5 October 2009. The issued and outstanding
share capital increased from 8,518,000 common shares to 21,295,006 common shares
with the same par value of $0.00001. Unless otherwise noted, all references
herein to number of shares, price per share or weighted average number of shares
outstanding have been adjusted to reflect this stock split on retroactive basis.
This
has also resulted in an increase to capital stock and a decrease to additional
paid in capital of $128.
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Our
consolidated interim financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles. In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars. All references to “common
shares” refer to our common stock.
As used
in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “PSI”
means Principle Security International, Inc., unless otherwise
indicated.
General
We were
incorporated in the State of Nevada on November 27, 2006. On November 29,
2006 we incorporated our wholly-owned subsidiary in Canada to conduct our
business operations in the Greater Vancouver area.
We are a development stage
company. Through our wholly-owned Canadian subsidiary, Principle Security
International Incorporated, we are working towards the establishment of a
customer service oriented security firm specializing in uniformed guard
services, private investigations and a training facility for security personnel.
We have not yet generated or realized any revenues from our business
operations.
Since
inception, we have been implementing the early phases of our business plans,
including the establishment of our office, making application for our security
business license, making application and scouting locations for our accredited
security training facility, making application for our surety bond, registering
the URL address necessary to create our website, building a database of
potential clients, commencing interviews to hire a salesperson, designing our
corporate logos/badges and ordering uniforms.
On
December 15, 2006, we obtained our surety bond in the amount of $5,000
Cdn., as required by the Private Investigators and Security Agencies
Act. This bond enabled us to make application for a security business
license. On January 3, 2007, we were granted our security business
license. This license has been renewed and is now valid until
February 3, 2010. The license enables us to carry on a business in
the categories of “private investigator” and “security patrol”. We
have established our office and continue to lease office space on a
month-to-month basis at a cost of $500 Cdn. per month from a non-related
third party. T
o manage
operating costs until the Company can raise additional funds or start generating
revenues the lessee has agreed to release the Company from amounts owed for
unpaid rent for the month of November and to suspend monthly lease charges until
further notice.
We have initiated work on our basic web page under
the URL address www.principlesecurity.ca.
On
September 8, 2008 we received a two-year approval to operate a security training
school under the name “Principle Security Training Academy”.
We have
made application to our suppliers and completed the design of our corporate logo
and uniforms. We underwent a standard inspection by the Ministry of
the Attorney General of Canada working under Security Programs and we passed the
inspection.
Our
auditors have issued us a going concern opinion, which means there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills and continue
our operations. This is because we have not generated any revenues and no
revenues are anticipated until we begin to implement our business plan and begin
to provide our security guard services. Accordingly, we must
raise cash from sources other than the sale of our services. Our only
other source for cash at this time is investment by others. We intend to
continue to try to
raise the additional funds we will need
to fully implement our business plans from public or private placement
offerings of our securities and/or through loans. At the present
time, we have not made any plans to raise additional monies and there is no
assurance that we will be able to do so in the future. If financing
is not available on satisfactory terms, we may be unable to continue, develop or
expand our business plans.
We have
not generated any revenues as we have not yet been able to secure a
contract. Our officers and directors have been building a database of
potential clients and will be maintaining the database on an ongoing
basis. They have been actively contacting a number of businesses in
hopes of securing a contract, but have not yet done so to date.
On October 5,
2009, we completed a 2.5 to 1 forward stock split, which increased the
number of issued and outstanding shares of common stock from 8,518,000 common
shares to
21,
295,006 shares, with the same par value of $0.00001. The forward
stock split did not increase the authorized capital stock of the
company.
Since
inception, we have issued
21,295,006
shares of
common stock via private placement sales of our restricted common
stock for cash proceeds of $78,700, all of which is being used to
develop and grow our business operations. On November 28, 2006,
we issued
6,250,002
shares of
common stock through a private placement pursuant to Reg. S of the Securities
Act of 1933 to our sole officer and director, Mr. Charles Payne, in
consideration of $2,500 in cash. On February 23, 2007, we completed a
private placement of
14,500,002
shares of
common stock pursuant to Reg. S of the Securities Act of 1933 and raised $43,500
in cash. On May 8, 2007, we completed an additional private placement
of
545,002
shares of common
stock pursuant to Reg. S of the Securities Act of 1933 and raised $32,700 in
cash.
All of
these transactions closed outside the US and were sold to non-US persons.
Results of Operations
Our total net losses since inception on November 27, 2006 to November 30,
2009 are $178,790.
Three months ended November 30, 2009
as compared to the three months ended November 30, 2008
We
incurred net losses of $18,088, or
$0.001 per
share
, for the three-month period ended November 30, 2009, as
compared to net losses of $18,084,
or $0.001 per
share
, for the three-month period ended November 30, 2008, which
reflected a very small increase.
Our expenses for the
three months ended November 30, 2009 consisted of the following: consulting
fees ($4,160 - 2009 compared to $9,709- 2008), professional fees ($6,968 - 2009
compared to $3,589 - 2008), transfer agent and filing fees ($1,923 - 2009
compared to $982 - 2008), amortization ($153 - 2009 compared to $97- 2008),
legal fees ($3 - 2009 compared to $875 - 2008), interest expense ($544 -
2009 compared to $Nil - 2008), office and miscellaneous ($2,058 - 2009 compared
to $1,229 - 2008), loss on foreign currency exchange ($2,221 - 2009 compared
to $1,566 - 2008) and bank service charges ($58 - 2009 compared to $37
- 2008).
Six months
ended November 30, 2009 as compared to the six months ended November 30,
2008
We incurred net losses of
$29,117, or
$0.001 per
share
, for the six-month period ended November 30, 2009, as
compared to net losses of $34,431,
or $0.002 per share
, for
the six-month period ended November 30, 2008. The decrease was mainly
attributed to a reduction in consulting fees ($5,509 - 2009 compared to $12,140
- 2008, cumulative - $52,939).
Our
other expenses for the six-month period ended November 30, 2009 consisted
of the following: professional fees ($10,413 - 2009 compared to $12,658 -
2008, cumulative - $55,115); transfer agent and filing fees ($4,216 - 2009
compared to $1,297 - 2008, cumulative - $13,339); legal fees ($471 - 2009
compared to $1,392 - 2008, cumulative - $23,523); interest expense ($1,006 -
2009 compared to $Nil - 2008, cumulative - $1,529); office and miscellaneous
($2,980 - 2009 compared to $4,878 - 2008, cumulative - $24,388); loss on foreign
currency exchange ($4,137 - 2009 compared to $1,759- 2008, cumulative -
$5,475); amortization ($252 - 2009 compared to $194 - 2008, cumulative -
$1,281); and bank service charges ($133 - 2009 compared to $194 - 2008,
cumulative - $1,045).
We are not a party to any
off-balance sheet arrangements that have, or are reasonably likely to have, a
current or future material effect on our financial condition, changes in
financial condition, sales or expenses, results of operations, liquidity,
capital expenditures or capital resources. We are not aware of any trends or
events that would materially affect our capital requirements or liquidity. We
believe that our and internal cash generating capabilities will be sufficient to
finance our ongoing capital expenditures and other operating activities through
fiscal 2010.
Liquidity and Capital
Resources
At
November 30, 2009 and as of the date of this filing, we have not generated any
revenues from our business activities.
At
November 30, 2009, we had total assets of $15,993, consisting of $14,500 in
cash and cash equivalents; $688 in goods and services tax recoverable; and $805
in equipment, net of depreciation.
On
December 24, 2008, we issued a convertible debenture in exchange for $5,000 in
cash. The convertible debenture bears interest at a rate of 10% per annum on any
unpaid principal and interest balance, is secured by the assets of the Company
and accrued interest is due and payable at the end of each calendar quarter,
with the first payment due on the last day of the first calendar quarter after
December 24, 2008. The principal amount is repayable at any time in whole or in
part. The holder of the convertible debenture has the right to convert any
portion of the unpaid principal and/or accrued interest into shares of our
common stock at any time within thirty-six (36) months from December 24, 2008 on
the basis of $0.0125 per Unit, where a Unit consists of one share of common
stock for an equivalent amount of principal and interest due and
payable. During the three month period ended November 30, 2009, we accrued
interest expense on this convertible debenture in the amount of $133. The
balance due at November 30, 2009 consists of principal and accrued interest of
$5,000 and $480, respectively.
On
December 24, 2008, we issued a second convertible debenture in exchange for
$5,000 in cash. The convertible debenture bears interest at a rate of 10% per
annum on any unpaid principal and interest balance, is secured by the assets of
the Company and all principal and accrued interest is due and payable at the end
of each calendar quarter, with the first payment due on on the last day of the
first calendar quarter after December 24, 2008. The principal amount is
repayable at any time in whole or in part. The holder of the convertible
debenture has the right to convert any portion of the unpaid principal and/or
accrued interest into shares of our common stock at any time within thirty-six
(36) months from December 24, 2008 on the basis of $0.0125 per Unit, where a
Unit consists of one share of common stock for an equivalent amount of principal
and interest due and payable. During the three month period ended November
30, 2009, we accrued interest expense on this convertible debenture in the
amount of $133. The balance due at November 30, 2009 consists of principal and
accrued interest of $5,000 and $480, respectively.
On March 5,
2009, we issued a convertible debenture in exchange for $3,800 in cash. The
convertible debenture bears interest at a rate of 10% per annum on any unpaid
principal and interest balance, is secured by the assets of the Company and all
principal and accrued interest is due and payable at the end of each calendar
quarter, with the first payment due on on the last day of the first calendar
quarter after March 5, 2009. The principal amount is repayable at any time in
whole or in part. The holder of the convertible debenture has the right to
convert any portion of the unpaid principal and/or accrued interest into shares
of our common stock at any time within thirty-six (36) months from March 5, 2009
on the basis of $0.0125 per Unit, where a Unit consists of one share of common
stock for an equivalent amount of principal and interest due and payable. During
the three month period ended November 30, 2009, we accrued interest expense on
this convertible debenture in the amount of $99. The balance due at
November 30, 2009 consists of principal and accrued interest of $3,800 and $288,
respectively.
On June
18, 2009, we entered into a demand loan with an unrelated third party. The
demand loan bears interest at the rate of 2% per annum on any unpaid principal
and interest balance and is secured by a general charge on the assets of the
Company. The principal amount is repayable at any time in whole or in part and
accrued interest shall be due at the end of each calendar quarter, with the
first payment due on the last day of the first calendar quarter after June 30,
2009. During the three month period ended November 30, 2009, the
Company accrued interest expense of $100 on the demand loan. The
balance due at November 30, 2009 consists of principal and
accrued interest of $20,000 and $181, respectively.
On
September 14, 2009, we entered into a demand loan with an unrelated third
party. The demand loan bears interest at the rate of 2% per annum on any unpaid
principal and interest balance and is secured by a general charge on the assets
of the Company. The principal amount is repayable at any time in whole or in
part and accrued interest shall be due at the end of each calendar quarter, with
the first payment due on the last day of the first calendar quarter after
September 30, 2009. During the three month period ended November
30, 2009, the Company accrued interest expense of $42 on the demand loan.
The balance due at November 30, 2009 consists of principal and
accrued interest of $20,000 and $42, respectively.
On
November 16, 2009, we entered into a demand loan with an unrelated third
party. The demand loan bears interest at the rate of 2% per annum on any unpaid
principal and interest balance and is secured by a general charge on the assets
of the Company. The principal amount is repayable at any time in whole or in
part and accrued interest shall be due at maturity, calculated at May 31st of
each year. During the three month period ended November 30, 2009, the
Company accrued interest expense of $12 on the demand loan. The
balance due at November 30, 2009 consists of principal and
accrued interest of $16,000 and $12,
respectively.
At November
30, 2009, the amount due to Charles Payne, an officer and director and a related
party, consists of a demand loan in the amount of $5,046. A demand loan
was entered into for current amount due on June 16, 2009. The demand loan
bears interest at 2% per annum on any unpaid principal and interest balance
and is secured by a general charge on the assets of the Company. The
principal amount is repayable at any time in whole or in part and accrued
interest shall be due at maturity, as calculated at May 31 of each year.
During the three month period ended November 30, 2009, the Company accrued
interest expense of $25 on the demand loan. The balance due as at November
30, 2009 consists of principal and accrued interest in the amount of
$5,000 and $46, respectively.
During
the three month period ended November 30, 2009, Charles Payne, an
officer, director and shareholder of the Company was paid consulting fees
in the amount of $5,509, compared to consulting fees in the amount of $12,140
paid during the three month period ended November 30, 2008.
At November
30, 2009, our total liabilities were $70,154, consisting of accounts
payable and accrued liabilities in the amount of $3,825, convertible debentures
payable in the amount of $15,048, demand loans payable in the amount of $46,235
and amounts due to related party in the amount of $5,046.
We have not issued and do not have any outstanding stock options or
warrants.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
We are a non-accelerated filer and a smaller
reporting company, as defined in Rule 12b-2 of the of the Securities Exchange
Act of 1934, and as such, are not required to provide the information under this
item.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation of
Disclosure Controls and Procedures
We
maintain “disclosure controls and procedures,” as such term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that
are designed to ensure that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms, and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
We
conducted an evaluation (the “Evaluation”), under the supervision and with the
participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”), of the effectiveness of the design and operation of our disclosure
controls and procedures (“Disclosure Controls”) as of the end of the period
covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on
this Evaluation, our CEO and CFO concluded that our Disclosure Controls were
effective as of the end of the period covered by this report.
Additionally,
there were no significant changes in our internal controls or in other factors
that could significantly affect theses controls subsequent to the
evaluation date. We have not identified any significant deficiencies
or material weaknesses in our internal controls, and therefore there were no
corrective actions taken.
PART
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently a party to any pending legal proceeding.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 5, 2009, upon approval of the holders of the majority of our issued and outstanding common stock, we completed a 2.5 to 1 forward stock split, which increased the
number of issued and outstanding shares of common stock from 8,518,000 common shares to 21,295,006 shares, with the same par value of $0.00001. The forward stock split did
not increase the authorized capital stock of the Company.
ITEM 5. OTHER INFORMATION AND SUBSEQUENT EVENTS
|
Exhibit
No.
|
Document
Description
|
|
|
|
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
All other
exhibits required to be filed with this quarterly report on Form 10-Q are
incorporated by this reference and can be found in their entirety as exhibits
to our original registration statement on Form SB-2, filed with the U.S.
Securities and Exchange Commission on August 27, 2007, under our SEC File Number
333-145730 on their website at www.sec.gov.
SIGNATURES
In accordance with Section 13
or 15 (d) of the Exchange Act, the registrant caused this report to be signed on
behalf by the undersigned, thereto duly authorized on this 12th day of
April, 2010.
|
|
PRINCIPLE
SECURITY INTERNATIONAL, INC.
|
|
|
(Registrant)
|
|
|
|
|
|
|
/s/
|
CHARLES
PAYNE
|
|
|
By:
|
Charles
Payne
|
|
|
|
President,
Principal Executive Officer, Principal Accounting Officer, Principal
Financial Officer, Treasurer, Chairman of the Board of
Directors
|
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