Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
(Mark
One)
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x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended: March 31,
2010
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Commission
File No.: 000-53802
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ANV Security Group, Inc.
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(Exact
Name of Registrant as Specified in Its
Charter)
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Nevada
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13-3089537
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(State
or Other Jurisdiction of Incorporation
or
Organization)
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(I.R.S.
Employer Identification No.)
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2/F, Tower B, Jiada R & D Building, Nanshan District, Shenzhen, China 518057
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(Address
of Principal Executive
Offices)
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0086-755-8665-6436
(Registrant’s
telephone number, including area code)
2105
- 11871 Horseshoe Way, Richmond, BC, Canada V7A 5H5
(Former
name, former address and former fiscal year, if changed since last
report
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par
value $).001
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes ¨ No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (s 229.405) 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. ¨
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 the definitions of “large accelerated filer,” “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 Act).
Yes
¨
No x
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of March 31, 2010: $ 7,684,000
The
number of shares of the registrant’s common stock outstanding as of March 31,
2010: 33,190,071
INDEX
TO FORM 10-K ANNUAL REPORT
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Page
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PART
I
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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11
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Item
1B.
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Unresolved
Staff Comments
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22
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Item
2.
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Properties
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22
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Item
3.
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Legal
Proceedings
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22
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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22
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PART
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder
Matters
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and
Issurer Purchases of Equity Securities
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23
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Item
6.
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Selected
Financial Data
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24
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and
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Results
of Operations
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24
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Item
7A.
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Quantitative
and Qualitative Disclosures about Market Risk
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26
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Item
8.
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Financial
Statements and Supplementary Data
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26
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and
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Financial
Disclosure
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26
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Item
9A(T)
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Controls
and Procedures
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26
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Item
9B
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Other
Information
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27
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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27
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Item
11.
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Executive
Compensation
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29
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management
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and
Related Stockholder Matters
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31
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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32
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Item
14.
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Principal
Accountant Fees and Services
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32
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PART
IV
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Item
15.
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Exhibits
and Financial Statement Schedules
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33
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Signatures
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34
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Financial
Statements
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F-1
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FORWARD-LOOKING
STATEMENTS
CAUTIONAIRY
NOTE REGARDING FORWARD LOOKING STATEMENTS There are statements in this report
that are not historical facts. These forward-looking statements can be
identified by use of terminology such as believe, hope, may, anticipate, should,
intend, plan, will, expect, estimate, project, positioned, strategy and similar
expressions. You should be aware that these forward-looking statements are
subject to risks and uncertainties that are beyond our control. For a discussion
of these risks, you should read this entire Report carefully, especially the
risks discussed under Risk Factors. Although management believes that the
assumptions underlying the forward looking statements included in this Report
are reasonable, they do not guarantee our future performance, and actual results
could differ from those contemplated by these forward looking statements. The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. In the light of these
risks and uncertainties, there can be no assurance that the results and events
contemplated by the forward-looking statements contained in this Report will in
fact transpire. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. We do not
undertake any obligation to update or revise any forward-looking
statements.
PART
I
References
to “us”, “we” and “our” in this report refer to ANV Security Group, Inc together
with our subsidiaries.
ITEM
1. BUSINESS.
General
Development of Business
Organizational
History
We were
originally called “B.G. S. Energy, Inc.” and were incorporated under the laws of
the State of Nevada on May 29, 1981. We were organized to engage in, alone or in
conjunction with others, the exploration for, and where warranted, the
development of oil, gas and mineral properties, the sale of oil, gas and mineral
related leases. We became public in 1981 in a best efforts public offering and
thereafter operated various oil and gas properties. We owned various oil and gas
leases in Utah, Oklahoma, Kentucky, Texas and other states from time to time in
80’s. In 1988 we changed our name to Dini Products Inc. and continued our oil
and gas operations. Our revenues decreased and in 1992 we became dormant and did
not have any operations for many years until we acquired all of the shares of
Canada ANV Systems, Inc., a British Columbia corporation (“CANV”) in June 2009
and changed our name to ANV Security Group, Inc. Our plan is to become a fully
integrated developer, designer, manufacturer, marketer, installer and servicer
of web based security systems for residential, commercial and government
customers operating in Canada, The Peoples Republic of China and the United
States of America. We are currently headquartered in Greater Vancouver, Canada.
After the end of the period covered by this report we engaged in certain
acquisitions in the Peoples Republic of China which will materially expand and
change the character of our business during the fiscal year to end March 31,
2011.
The Video and Alarm Industry in
General
According
to a Frost & Sullivan report dated December, 2007, which is available from
the web site of www.MarketReseach.com
on a fee basis, North America is the world's largest security equipment market,
the demand from North America accounted for 26% of the total global demand. The
report predicts that the North American security equipment market will grow by
an annual rate of 20%. According to Frost & Sullivan's report, the global IP
( “Internet Protocol”) video surveillance market will grow by an annual rate of
40% over the next few years, The size of the global IP security market is
projected to reach $5.0 billion dollars in 2010. According to an IDC market
analysis report dated May, 2009, which is available for a fee from the website
www.idc.com, between year 2007 and 2009, global digital network camera sales
will exceed these of traditional analog cameras and the report predicted that
the sales of IP cameras in US and Canada will be more than 20 million pieces in
2010.
Management
believes that in the next few years, the maturity of broadband networks, video
compression technology, and updating media processor performance, will provide a
good foundation for the realization and application of various low-cost,
high-performance IP video surveillance products. IP monitors are continually
replacing traditional monitors in new and existing security systems. We believe
that our products are well positioned to participate in these
trends.
Operations
and Development Plan
We
design, manufacture, assemble and market advanced and professional security
systems that include H.264 IP Camera and DVS series, NVS Center Management
System and high-end network DVR. We also offer our patent pending USCI8 Global
Network Video Alarm Services Platform, This web based service platform provides
ANV users with real time video monitoring, instant remote video storage, and
instant VoIP/SMS/E-mail notification. ANV’s products and services are typically
used for crime deterrence, real time direct viewing and secure off premises
crime evidence preservation on our remote server.
Our
primary business focus is to provide a global network video alarm service
utilizing the USCI8 Platform and H.264 IP Camera, DVS and DVR for our dealers,
distributors, system integrators and government entities.
Our
products are employed in video alarm system installations in private residences;
commercial and industrial properties; in Canada, the United States and the
Peoples Republic of China.
In
November 2007 we entered into an agreement with an established electronics
manufacturer in Guandong, Peoples Republic of China for the manufacture of H.264
IP Cameras, DVS, NVD and other security system products to our specifications.
We sell our products and video alarm services to wholesalers, dealers and
installers We have also prepared a franchise offering document that complies
with Canadian and Provincial Law and sold franchises for installation of our
systems in Canada. We have acquired three Canadian franchisees that are
installing our systems and in 2008 we realized revenues from these efforts. In
addition we are directly marketing our systems in areas where we have not
granted territories to franchisees. Included in these sales has been a shopping
mall in Westminster California. As of March 31, 2010, approximately 300 of our
cameras were installed in approximately 117 customer locations.
Our
Products & Services
Our
products are based on H.264 video compression technology. H.264 is a high end
standard for video compression that produces video output similar to MPEG4 while
requiring lower data throughput rates. H.264 uses the latest innovations in
video compression technology to provide clear video quality from the a
relatively small amount of video data. H.264 delivers the same quality as MPEG-2
at a third to half the data rate and up to four times the frame size of MPEG-4
Part 2 at the same data rate. We believe that because H.264 achieves the best
compression efficiency it will become the preferred standard for a broad range
of applications, such as IP Cameras and surveillance, HDTV, broadcast, DVD,
video conferencing, remote health care, remote online education worldwide,
video-on-demand, streaming and multimedia messaging. H.264 delivers excellent
quality across a wide operating range including 3G and HD. Applications of H.264
include high-quality video mobile phones, iChat, Internet, broadcast or
satellite delivery, because H.264 provides exceptional performance at
impressively low data rates.
We have
spent more than three years and invested approximately $ 3 million dollars in
developing our H.264 IP Cameras, DVS, NVD hardware and software of NVS (“Network
Video System”) and integrating the Huawei chipset into our systems. Now we have
successfully developed five series, and twenty varieties of H.264 IP products.
We believe that every one of our products would require significant lead time
for a potential competitor to replicate.
Presently,
Texas Instrument and Huawei (a large privately owned China-based telecom
equipment manufacturer) are the two largest companies in the world capable of
providing the H.264 chipset. ANV and its OEM factory are one of six Huawei H.264
licensees, and ANV also is a primary partner of Huawei in North
America.
At March
31, 2010, our product line consists of six series and twenty five varieties of H.264 video
surveillance equipment including the following:
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1.
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H.264
IP Camera series:
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All of
our cameras are designed to work with our central management software through a
built in Web Server that allows remote control through a Web
browser
ANV100-50SN
IP Camera is an embedded device designed for network video surveillance
application. It is
basic, full-color, wired, indoor network camera.
ANV101-50SN-IR
is full-color, wireless, day and night dual-use, outdoor network camera with
infrared lights; It is waterproof and has anti fog components. The infrared
range can be up to 30 meters. Applications include banks, supermarkets, office
buildings and other places requiring night video surveillance.
The
ANV102-50SN IP Camera is designed for network video surveillance application.
It is
full-color, wired, infrared, day and night dual-use, indoor dome network
camera.
ANV103
–D1 intelligent high-speed wireless Dome offers a super-clear, high integration
solution for users by remote video surveillance based on local area networks
(LAN) or wide Internet Area Network (WAN).It is equipped with zoom lens, and
high-performance digital signal processing (DSP) cameras, embedded platforms,
and digital decoder integrated. It represents a new generation of high-tech
surveillance product development trend. It supports arbitrary position and
continuous scan, to achieve an omnidirectional surveillance; We believe it is
suitable for large businesses, intelligent buildings, banking security, urban
roads, airport, and railway stations.
The
ANV104-WS wireless IP Camera is designed for network video surveillance
application. It uses the single chip SOC with powerful Linux RTOS (Real-time
Operating System) to realize high performance and low cost digital video
processing. Optimized H.264 video compression algorithm assures clearer and
smoother video transmission.
ANV105-WS-RF-IR
is a specialized integrated IP camera designed for the small and middle-size
commercial or residential application. In addition, this IP camera can work with
a wireless alarm gateway; support and integrate with remote controls and
wireless detectors, such as infrared sensors, PIR, curtain sensors, smoke
detectors, gas detectors and other devices. And there is also an unique
emergency function for summoning help.
ANV106-WS-IR-RF
is a specialized integrated IP camera designed for the small and
middle- size commercial and residential systems. This IP
camera can work with our wireless alarm gateway; support remote control and
wireless detectors, such as infrared sensors, PIR, curtain sensors, smoke
detectors, gas detectors and other devices.
ANV107-WS-IR
is specialized integrated IP camera designed for the small commercial and
residential application. This IP Camera is full-color, wireless, day and night
dual-use, for use indoors where economical integration network cameras with
infrared lights is important and is roughly the size of cell phone.
ANV200-50SN-WS
is an embedded Wireless & Storage IP camera device with WiFi and SD Card
designed for network video surveillance application. It uses the single chips
SOC with powerful Linux RTOS (Real-time Operating System) realize high
performance and low cost digital multimedia process. Furthermore, central
management software can be used for integrated surveillance and management of
multiple network cameras where large video surveillance systems are
required.
ANV201-MP-WS
Series 2.0 mega pixel IP Camera is designed for high definition network
surveillance based on Micron CMOS sensor with a high-performance multimedia
processor. It adopts the embedded Linux OS. It supports H.264 Main Profile,
Baseline Profile, MJPEG, JPEG and other video encoding standards. It has the
advanced mega pixel technology with SD card storage and still image capability.
It can communicate with IPTV terminal devices. It is a set of video capture,
image processing, video transmission, video storage, video management functions
in one type of high-definition, high-performance network camera. The design
concept is all in one (highly integrated), Ready to go (Plug and Play), which
greatly facilitates the user to install, use and maintain. It will be marketed
to customers in the high-end surveillance market , including governments and
banks where sophisticated and elaborate security system are frequently
installed.
Digital
Video Server (ANV H.264 DVS300 -1/2/4 CH -D1-WS) is an embedded surveillance
device specially designed for network applications. It can upgrade the existing
analog CCTV camera to digital IP camera.
This Network Video Decoder is an embedded large-scale decode device specially
designed for network applications. DVR series: It can transfer the digital video
into analog video.
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4.
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Digital
Video Recording Devices
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DVR-4CH-D1-ABDS:
H.264 high-end full D1 realtime 4ch DVR, up to 800 fps PAL/960 fps
NTSC.
DVR-8CH-D1-ABDS:
H.264 high-end full D1 realtime 8ch DVR, up to 800 fps PAL/960 fps
NTSC.
DVR-16CH-D1-ABDS:
H.264 high-end full D1 realtime 16ch DVR, up to 800 fps PAL/960 fps
NTSC.
DVR-4CH-D1-LCD:
H.264 LCD D1 4ch DVR with high quality video and superior network
functions.
DVR-4CH-MOBILE:
new H.264 4ch mobile DVR with special and powerful anti-shock
designing.
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5.
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NVS
Central Video Management Software
(“CMS”).
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The CMS
can manage up to 1728 IP cameras simultaneously, and can set and control every
IP camera separately, support 32 channels output of TV walls, centralized
storage, data transmission and electric map.
ANV
provides a comprehensive line of products due to the many varied climatic and
operational environments in which the products are expected to perform. In
addition to selling from a standard catalog line, the Company at times modifies
an existing product to meet a customer’s requirements. Our products are
concentrated principally among its iCam™ H.264 IP camera, DVS and DVR product
lines.
Our
competitive advantage is to offer our patent pending USCI8™ global network video
alarm services to the end user. This web based service platform provides ANV
users with great ease of functions, including real time video monitoring,
instant remotely video storage, life sharing, and instant e-mail, SMS (text to
cell phone) and voice notification to customers. The systems are designed to
provide instant- remote video storage in ANV server. We offer residential, small
business and large business plans at prices ranging from $25CDN to $80CDN per
month. Our platform capability can contain at least 40,000 registered end-users,
and the bandwidth of our remote storage center is able to accept over 10000 data
streams entering storage at same time. The system is expandable to contain over
millions end-users and ownership is dividable.
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6.
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Mobile
Digital Video Recording Series
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FB Mini
is a small system designed to monitor activity recorded by mini-equipment. It
uses an advanced and embedded operating system, combined with the most advanced
H.264 video compression/decompression technology, network technology, GPS
positioning technology. This equipment is compact, flexible, and easy to
install. It allows the use of SD card storage media (up to 32G) which are hot
swappable and has a good damping effect to ensure the integrity of the video
data in storage in the system and protect it from damage. The system is
specially designed to power-down when required to protect data. , The system is
designed to appear simple and easy to use while being having the ability to
operate over a wide temperature range and being sufficiently rugged to survive
various adverse conditions. It has an Alloy Sealed design to protect fom extreme
temperature, water and dust. The system utilizes Microsoft’s ASF format to
enable PC playback. The system features brown-out protection to protect the SD
card and supports 2D1 +2 CIF, a single card and dual-card options. Some models
also include GPS for mobile use. The models include:
FB6001:
Mini Mobile DVR, 4 channel, SD Card
FB6002:
Mini Mobile DVR, 4 channel, SD Card, GPS, 3G
FB7001:
Mini Mobile DVR, 4 Channel, Hard Disk
FB7002:
Mini Mobile DVR, 4 Channel, Hard Disk,GPS, 3G
FB5000:
Mini Smart Mobile DVR, 1 Channel, SD Card, GPS, 3G,Audio ( for Police
use)
Customers
Our
products are sold principally to wholesalers, independent dealers, installers,
retail stores, system integrators, distributors and franchisees. Sales are made
principally by field sales engineers and inside customer service
representatives. Our sales effort is supported by in-house customer service
coordinators and technical support groups which provide product information,
application engineering, design detail, field project management, and hardware
and software technical support.
As of
March 31, 2010 we had three Canadian franchisees and other potential franchisees
who may purchase franchises under one of two plans in China. Our franchise
agreements require the franchisee to purchase a franchise, to maintain an
inventory, to pay a royalty, an advertising cost contribution and a fee related
to our broadband (USCi8.com) monitoring service. Our ultimate customer is a
property owner who installs the product and pays for both the equipment and a
monthly fee. Our Canadian franchisees pay us $25,000 to $30,000 for their
franchise and are required to maintain certain inventories. Our franchisees
receive approximately 30% price differential from our listed prices and 40% of
the monthly fee paid by the end user.
Internet
Contract
We have
entered into a bandwith service agreement with Peer 1 Network Enterprises, Inc.
(“Peer 1” of Vancouver, B.C.) The agreement with Peer 1 commenced January 21,
2008 and was for a one year term with automatic one year renewals absent notice
of termination. The agreement is in its first renewal term and required that we
make certain up-front payments for equipment and pay a monthly fee that is
dependent on bandwith usage. During the year ended March 31, 2009 the total
amount we paid to Peer 1 was $2,683.39. We incurred a due of $ 1092 to Peer 1
during the quarter ended September 30, 2009. We believe that Peer 1 has
sufficient equipment and bandwith available to meet our needs for the
foreseeable future. However, if Peer 1 were no longer available to serve us or
if we deemed it advisable not to renew our contract with Peer 1, management
believes that many other bandwith service providers are available in the
Vancouver area to meet our requirements at similar prices.
Manufacturing
Contract
On
November 30, 2007 we entered into a manufacturing agreement (the “OEM
Agreement”) with Shenzhen Huanghe Digital Technology Co., Ltd of Guandong, PRC
(“SHDT”). The OEM Agreement is for an one year term with automatic one year
renewals and requires that SHDT manufacture products for us to our specification
and warrant the same to conform to our specifications and be free from defects.
The OEM Agreement sets prices and delivery schedules for our orders and requires
that SHDT be able to fulfill our requirements. We are obligated to defend SHDT
should a claim be made that any of our products infringe on the rights of
others. Management believes that SHDT can meet our requirements for the
foreseeable future. If SHDT were unable to produce products for us, we would
experience delays in receiving product and disruption to our operations, but we
believe we would be able to locate an alternative manufacturer in the
PRC.
Patent
Application
In March
2009 we filed a US patent application, No12/405,147, which followed our
provisional patent application “Systems and Methods for Providing Web Based Self
Serviced Video Monitoring and Security Features for Systems Comprising IP Video
Terminals and Web Severs” in March 2008. This patent relates to our web based
system and management believes that it is central to our business. However, we
cannot give any assurance that a patent will be granted, and that if granted it
will give meaningful protection from others or that our patent would not be
found by a court to infringe upon patents held by others.
Our
patent application includes technology for (i) A video security system having a
server and a video terminal device including; (ii) At least one database for
storing network and physical configuration information relating to the terminal
device operable to remotely communicate with the server through a distributed
network; (iii) One or multiple storage servers for storing video data received
from the terminal devices; and (iv) A method of managing a video terminal device
that includes assigning a unique device ID to the video terminal device then
sending an event and an associated video stream from the video terminal device
to the Server, and storing the event and the associated video stream in a
database and a storage server in association with the unique device ID. Another
method of storage set forth in our patent application involves creating a user
account on a Server, selecting services for associating with the devices,
allocating storage server space for storing video data stream files, and making
available to the user stored video files.
Competition
The video
and alarm security services business is highly competitive and fragmented with a
number of major firms and thousands of smaller regional and local companies.
Competition is based primarily on price in relation to quality of service.
Rather than compete purely on price, we emphasize the quality and special
features of our web-based video alarm security service. Our competitors also
include manufacturers and potential manufacturers of surveillance equipment.
Several of our competitors, such as ADT Worldwide, a subsidiary of Tyco
Industries, Ltd. and Honeywell International, Inc. are large established
multinational corporations with far greater resources than we do. In the PRC we
will compete with large dominant firms including China Security Surveillance and
Technology, Inc. All of these competitors have greater resources and name
recognition than we do. Other competitors include the following companies or
their affiliates: Samsung, Sony, Panasonic, Axis, Tyco, D-link, Linksys,
Vivotek, Basler, Tiandy, etc. Several electronics manufacturers have the ability
to make cameras and other surveillance system components competitive to ours but
have elected not to enter this market to date.
Backlog
We do not
currently have any material backlog and fill customer requirements on a current
basis.
Sales,
Marketing and Advertising
We market
our products to consumers through our wholesaler, dealer, installer, franchisees
as well as direct marketing efforts by our sales staff. We promotes and markets
our products and services through industry trade shows worldwide, product
brochures and catalogues, direct marketing and electronic mailings to existing
and prospective customers, webinars, in-house training seminars for customers
and end users, road shows which preview new products and try usci8.com platform,
and advertising through trade and end user magazines and newspaper, and our web
site (www.anvsecuritygroup.com). ANV’s products are sold principally to
independent wholesalers, dealers, installers, system integrators, and
franchisees. Sales are made principally by field sales engineers and inside
customer service representatives. ANV’s sales effort is supported by in-house
customer service coordinators and technical support groups which provide product
information, application engineering, design detail, field project management,
and hardware and software technical support.
Environmental
Matters
Laws and
regulations relating to protection of the environment have not had a material
impact on our business.
Proprietary
Rights
In
addition to our patent application we have entered into employment agreements
with our key employees that require them to keep all of our proprietary
information confidential and require that any invention of theirs while our
employee, except for those not related to our business, becomes our property.
Our OEM Agreement provides us with similar protections. We can not assure that
such protections will prove adequate should they be challenged in
litigation.
Research
and Development
We are
dependent on continual research and development efforts to maintain our
competitive position with our products. As of March 31, 2010 we had accumulated
$142,274 of research and development expense but did not incur any research and
development expense in the fiscal year ended March 31, 2010. We expect to incur
significant research and development expense in our current fiscal year. Our
research and development effort relates to product design and enhancement as
well as computer source code and other programming matters.
Our
R & D aspects are based on H.264 video techniques, combined with global
advanced internet technology, wired and wireless communication tech,
surveillance and alarm tech, and telecom payment. We give our future R & D
plan as follows:
Develop
peer to peer technologies to enable more convenience in service provision;
develop mobile applications to transmit surveillance video through mobile phones
and automobiles; develop simultaneous charging surveillance of IP Camera and
retail POS terminals; develop downloading and playing images through Google and
YouTube; realize the arbitrary storage of surveillance video; develop
intelligent facial recognition and registration plate recognition; develop real
time , remote health care, remote online education worldwide, and other remote
learning and image-based applications
Employees
As of
March 31, 2010, we had 5 employees in our Vancouver office, All of which are
full-time, including 2 in administrative and management, 2 in engineering and
technical, and 1 in sales and marketing; we had 15 employees in our Shenzhen
China head office, all of which are full-time, including 3 in administrative and
management, 10 in sale and marketing, 2 in technical support.
Seasonality
We do not
anticipate that our business will be seasonal to any material extent although
installation of outdoor security and surveillance systems may be more difficult
during winter months in area with more severe climates.
Item
1A. Risk Factors.
Risks
Relating To Our Business
You
should carefully consider the risks described below before investing in our
publicly traded securities. The risks described below are not the only ones
facing us. Our business is also subject to the risks that affect many other
companies, such as competition, technological obsolescence, labor relations,
general economic conditions, geopolitical events, climate change and
international operations. Additional risks not currently known to us or that we
currently believe are immaterial also may impair our business operations and our
liquidity.
Our
current operating cash flows, which combined with access to the credit markets,
provides us with significant discretionary funding capacity. However, the
current uncertainty arising out of domestic and global economic conditions,
including the recent disruption in credit markets, poses a risk to the economies
in which we operate that has impacted demand for our products and services, and
may impact our ability to manage normal relationships with our customers,
suppliers and creditors. If the current situation deteriorates significantly,
our business could be materially negatively impacted, including such areas as
reduced demand for our products and services from a slow-down in the general
economy, or supplier or customer disruptions resulting from tighter credit
markets.
In
order to grow at the pace expected by management, we will require additional
capital to support our long-term business plan. If we are unable to obtain
additional capital in future years, we may be unable to proceed with our
long-term business plan and we may be forced to curtail or cease our
operations.
We will
require additional working capital to support our long-term business plan, which
includes identifying suitable targets for horizontal or vertical mergers or
acquisitions, so as to enhance the overall productivity and benefit from
economies of scale. Our working capital requirements and the cash flow provided
by future operating activities, if any, will vary greatly from quarter to
quarter, depending on the volume of business during the period and payment terms
with our customers. We may not be able to obtain adequate levels of additional
financing, whether through equity financing, debt financing or other sources.
Additional financings could result in significant dilution to our earnings per
share or the issuance of securities with rights superior to our current
outstanding securities. In addition, we may grant registration rights to
investors purchasing our equity or debt securities in the future. If we are
unable to raise additional financing, we may be unable to implement our
long-term business plan, develop or enhance our products and services, take
advantage of future opportunities or respond to competitive pressures on a
timely basis, if at all. In addition, a lack of additional financing could force
us to substantially curtail or cease operations.
We
sometimes extend credit to our customers. Failure to collect the trade
receivables or untimely collection could affect our liquidity.
We extend
credit to some of our customers while generally requiring no collateral.
Generally, our customers pay in installments, with a portion of the payment
upfront, a portion of the payment upon receipt of our products by our customers
and before the installation, and a portion of the payment after the installation
of our products and upon satisfaction of our customer. Sometimes, a small
portion of the payment will not be paid until after a certain period following
the installation. We perform ongoing credit evaluations of our customers’
financial condition and generally have no difficulties in collecting our
payments. However, if we encounter future problems collecting amounts due from
our clients or if we experience delays in the collection of amounts due from our
clients, our liquidity could be negatively affected.
Our
future success depends in part on the contributions of our management team and
key technical and sales personnel and our ability to attract and retain
qualified new personnel. In particular, our success depends on the continuing
employment of our CEO, Dr. Weixing Wang, our CFO, Ms. Yan Wang; our VP of Sales
and Marketing, Mr. Xiaolin Yang; and our technical Officer, Mr. Tac Jiang. There
is significant competition in our industry for qualified managerial, technical
and sales personnel and we cannot assure you that we will be able to retain our
key senior managerial, technical and sales personnel or that we will be able to
attract, integrate and retain other such personnel that we may require in the
future. Many engineers and technicians obtain post-graduate or professional
degrees, and the increased educational time required at the post-graduate level
further restricts the pool of engineers and technicians available for
employment. We compete for all such personnel with other high tech companies in
various fields. There can be no assurance that we will be successful in hiring
or retaining such qualified personnel. If we are not able to hire and retain
qualified people to fill these positions, our competitive position would be
adversely affected, which would have a material adverse effect on our business,
financial condition and results of operations.
If
we are unable to attract and retain key personnel in the future, our business,
operations, financial condition, results of operations and prospects could be
materially adversely affected.
Our
growth strategy has required us to make acquisitions and to make additional
acquisitions in the future, which could subject us to significant risks, any of
which could harm our business.
Our
growth strategy includes identifying and acquiring or investing in suitable
candidates on acceptable terms. We have from time to time entered into letters
of intent to acquire several other companies. While all but one of these letters
of intent have by their terms expired, the remaining letter of intent, dated
November 12, 2009, is for us to acquire all of the shares of a non-affiliated
equipment manufacturer in the Peoples Republic of China in exchange for
32,000,000 of our shares. The consummation of this transaction is subject to
many conditions including completion of due diligence, entry into a definitive
agreement approval of the transaction by our board of directors and
shareholders. None of these conditions have occurred. The transaction, if
consummated, would result in our integrating manufacture of our products into
our operations, but would also result in a substantial increase of the number of
our shares outstanding. The board of directors will only recommend the adoption
of any definitive agreement to the shareholders if it deem such agreement to be
beneficial and in our best interest of and the best interest our shareholders.
Over time, we may acquire or make investments in other providers of products
that complement our business and other companies in the security industry. The
successful integration of these companies and any other acquired businesses
require us to:
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integrate
and retain key management, sales, research and development, production and
other personnel;
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incorporate
the acquired products or capabilities into our offerings from an
engineering, sales and marketing
perspective;
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coordinate
research and development efforts;
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integrate
and support pre-existing supplier, distribution and customer
relationships; and
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consolidate
duplicate facilities and functions and combine back office accounting,
order processing and support
functions.
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Acquisitions
involve a number of risks and present financial, managerial and operational
challenges, including:
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diversion
of management’s attention from running our existing
business;
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increased
expenses, including travel, legal, administrative and compensation
expenses resulting from newly hired
employees;
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increased
costs to integrate personnel, customer base and business practices of the
acquired company with our own;
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adverse
effects on our reported operating results due to possible write-down of
goodwill associated with
acquisitions;
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potential
disputes with sellers of acquired businesses, technologies, services,
products and potential liabilities;
and
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dilution
to our earnings per share if we issue common stock in any
acquisition.
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Moreover,
performance problems with an acquired business, technology, product or service
could also have a material adverse impact on our reputation as a whole. Any
acquired business, technology, product or service could significantly
under-perform relative to our expectations, and we may not achieve the benefits
we expect from our acquisitions. Geographic distance between business
operations, the compatibility of the technologies and operations being
integrated and the disparate corporate cultures being combined also presents
significant challenges. Acquired businesses are likely to have different
standards, controls, contracts, procedures and policies, making it more
difficult to implement and harmonize company-wide financial, accounting,
billing, information and other systems. If we cannot overcome these challenges,
we may not realize actual benefits from past and future acquisitions, which will
impair our overall business results.
We filed
a current report on Form 8-K on February 5, 2010 relating to the acquisition by
us of large operations in China. However there were various delays in completing
those transactions which are only recently completed. As a result of these
transactions we have recently become a much larger company with several hundred
employees
All of
our facilities, and many of the facilities of our customers and suppliers, are
located in China. Natural disasters, such as floods and earthquakes, occur
frequently in China, and they pose substantial threats to businesses with
operations there. As a developing country, China’s emergency-response ability is
limited, and its ability to provide emergency reconstruction and other aid to
businesses affected by natural disasters is limited. Should a natural disaster
severely damage one of our facilities, or damage a major facility of one or more
of our significant customers or suppliers, our business could be materially
disrupted.
In
the event that adequate insurance is not available or our insurance is not
deemed to cover a claim, we could face liability.
We carry
insurances that our management consider customary and adequate. The laws of the
jurisdictions in which we operate, may limit or prohibit insurance coverage for
punitive or certain other types of damages or liability arising from gross
negligence. If we incur increased losses related to employee acts or omissions,
or system failure, or if we are unable to obtain adequate insurance coverage at
reasonable rates, or if we are unable to receive reimbursements from insurance
carriers, our financial condition and results of operations could be materially
and adversely affected.
Our
quarterly operating results are likely to fluctuate, which may affect our stock
price.
Our
quarterly revenues, expenses, operating results and gross profit margins vary
from quarter to quarter. As a result, our operating results may fall below the
expectations of securities analysts and investors in some quarters, which could
result in a decrease in the market price of our common stock. The reasons our
quarterly results may fluctuate include:
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seasonality
inherent in the surveillance and safety
industry;
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variations
in profit margins attributable to product
mix;
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changes
in the general competitive and economic
conditions;
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delays
in, or uneven timing in the delivery of, customer
orders;
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the
introduction of new products by us or our competitors;
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Period to
period comparisons of our results should not be relied on as indications of
future performance.
We
could face liability for our failure to respond adequately to alarm
activations.
The
nature of the services we provide potentially exposes us to greater risks of
liability for employee acts or omissions or system failures that may be inherent
in other businesses. In the event of litigation with respect to such matters,
our financial condition and results of operations could be materially and
adversely affected. In addition, the costs of such litigation could have an
adverse effect on us.
Our
operations are subject to a variety of laws, regulations and licensing
requirements of national and local authorities in North American and China. In
certain jurisdictions, we are required to obtain licenses or permits and to meet
certain standards in the conduct of our business. The loss of such licenses, or
the imposition of conditions to the granting or retention of such licenses,
could have an adverse effect on us. In the event that these laws, regulations
and/or licensing requirements change, we may be required to modify our
operations or to utilize resources to maintain compliance with such rules and
regulations. In addition, new regulations may be enacted that could have an
adverse effect on us.
Our
limited ability to protect our intellectual property, and the possibility that
our technology could inadvertently infringe technology owned by others, may
adversely affect our ability to compete.
We rely
on a combination of trademarks, patent, copyrights, trade secret laws,
confidentiality procedures and licensing arrangements to protect our
intellectual property rights. A successful challenge to the ownership of our
technology could materially damage our business prospects. Our competitors
may assert that our technologies or products infringe on their patents or
proprietary rights. We may be required to obtain from others licenses that may
not be available on commercially reasonable terms, if at all. Problems with
intellectual property rights could increase the cost of our products or delay or
preclude our new product development and commercialization. If infringement
claims against us are deemed valid, we may not be able to obtain appropriate
licenses on acceptable terms or at all. Litigation could be costly and
time-consuming but may be necessary to protect our technology license positions
or to defend against infringement claims. We have applied for a United States
patent for our web based security systems. No assurance can be given
that we will be granted a patent, that, if granted, any patent will provide us
with meaningful protection from infringement by others or that any patent that
we may be granted will not be held by a court to infringe on the rights of
others. The loss of patent protection could materially adversely
affect our business.
Product
Failure, Marketplace Reputation and Liability
Through
our wholesalers, dealers, installers, franchisees and direct operations we
intend to install hundreds and eventually thousands of security
systems. Should any of our systems fail to perform as promised due to
a product defect or a faulty installation, our reputation could be marred by
adverse publicity. We could be liable for damages suffered by our
customer. Consequently our operating results and stock price could
suffer.
Our
officers have no experience in managing a public company.
Our
present officers have no previous experience in managing a public company and we
do not have a sufficient number of employees to segregate responsibilities and
may be unable to afford increasing our staff or engaging outside consultants or
professionals to overcome our lack of employees. During the course of our
testing, we may identify other deficiencies that we may not be able to remediate
in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance
with the requirements of Section 404. In addition, if we fail to achieve and
maintain the adequacy of our internal controls, as such standards are modified,
supplemented or amended from time to time, we may not be able to ensure that we
can conclude on an ongoing basis that we have effective internal controls over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
Moreover, effective internal controls, particularly those related to revenue
recognition, are necessary for us to produce reliable financial reports and are
important to help prevent financial fraud. If we cannot provide reliable
financial reports or prevent fraud, our business and operating results could be
harmed, investors could lose confidence in our reported financial information,
and the trading price of our common stock, if a market ever develops, could drop
significantly.
Competition
We face a
variety of competitive challenges from other security and surveillance companies
in every market where we operate or plan to operate. Many of our
competitors will be large multinational or market dominant companies whom have
greater financial and marketing resources than we do and may be able to adapt to
changes in consumer preferences or requirements more quickly, devote greater
resources to the marketing and sale of their products or adopt more aggressive
pricing policies than we can.
Control
by Management
Our
company is effectively controlled by management, specifically Weixing Wang,Yan
Wang and Ming Li who beneficially at March 31, 2010 owned an aggregate of
18,640,000 shares or 56.1% of our 33,180,000 issued and
outstanding shares of common stock as of November 25,
2009. Accordingly, they will be able to elect our board of directors
and control our corporate affairs for the foreseeable future.
Dependence
of Third Party Supplier
We have
entered into an OEM Agreement with SHDT and an internet services agreement with
Peer 1. A failure of either of these parties to perform in accordance
with the terms of their agreement with us could have a material adverse effect
on our results of operations and negatively impact our stock
price.
RISKS
RELATED TO OUR INDUSTRY
Our
success relies on our management’s ability to understand the highly evolving
network surveillance and safety industry.
The
network surveillance and safety industry is nascent and rapidly evolving.
Therefore, it is critical that our management is able to understand industry
trends and make good strategic business decisions. If our management is unable
to identify industry trends and act in response to such trends in a way that is
beneficial to us, our business will suffer.
If
we are unable to respond to the rapid changes in our industry and changes in our
customer’s requirements and preferences, our business, financial condition and
results of operations could be adversely affected.
If we are
unable, for technological, legal, financial or other reasons, to adapt in a
timely manner to changing market conditions or customer requirements, we could
lose customers and market share. The network surveillance and safety industry is
characterized by rapid technological change. Sudden changes in customer
requirements and preferences, the frequent introduction of new products and
services embodying new technologies and the emergence of new industry standards
and practices could render our existing products, services and systems obsolete.
The emerging nature of products and services in the network surveillance and
safety industry and their rapid evolution will require that we continually
improve the performance, features and reliability of our products and services.
Our success will depend, in part, on our ability to:
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enhance
our existing products and services;
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anticipate
changing customer requirements by designing, developing, and launching new
products and services that address the increasingly sophisticated and
varied needs of our current and prospective customers;
and
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respond
to technological advances and emerging industry standards and
practices on a cost-effective and timely
basis.
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The
development of additional products and services involves significant
technological and business risks and requires substantial expenditures and lead
time. If we fail to introduce products with new technologies in a timely manner,
or adapt our products to these new technologies, our business, financial
condition and results of operations could be adversely affected. We cannot
assure you that even if we are able to introduce new products or adapt our
products to new technologies that our products will gain acceptance among
our customers. In addition, from time to time, we or our competitors may
announce new products, product enhancements or technological innovations that
have the potential to replace or shorten the life cycles of our existing
products and that may cause customers to refrain from purchasing our existing
products, resulting in inventory obsolescence.
We
may not be able to maintain or improve our competitive position of strong
competition in the network surveillance and safety industry, and we expect this
competition to continue to intensify.
The North
American and Chinese network surveillance and safety industry is highly
competitive, we also face competition from international competitors. Some of
our international competitors are larger than us and possess greater name
recognition, assets, personnel, sales and financial resources. These entities
may be able to respond more quickly to changing market conditions by developing
new products and services that meet customer requirements or are otherwise
superior to our products and services and may be able to more effectively market
their products than we can because they have significantly greater financial,
technical and marketing resources than we do. They may also be able to devote
greater resources than we can to the development, promotion and sale of their
products. Increased competition could require us to reduce our prices, result in
our receiving fewer customer orders, and result in our loss of market share. We
cannot assure you that we will be able to distinguish ourselves in a competitive
market. To the extent that we are unable to successfully compete against
existing and future competitors, our business, operating results and financial
condition could be materially adversely affected.
Our
business and reputation as a OEM manufacturer of high quality H.264 IP products
may be adversely affected by product defects or performance.
We
believe that we offer high quality products that are reliable and competitively
priced. If our products do not perform to specifications, we might be required
to redesign or recall those products or pay substantial damages. Such an event
could result in significant expenses, disrupt sales and affect our reputation
and that of our products. In addition, product defects could result in
substantial product liability. We do not have product liability insurance. If we
face significant liability claims, our business, financial condition, and
results of operations would be adversely affected.
Our
product offerings involve a lengthy sales cycle and we may not anticipate sales
levels appropriately, which could impair our profitability.
Some of
our products and services are designed for medium to large commercial,
industrial and government facilities desiring to protect valuable assets and/or
prevent intrusion into high security facilities. Given the nature of
our products and the customers that purchase them, sales cycles can be lengthy
as customers conduct intensive investigations and deliberate between competing
technologies and providers. For these and other reasons, the sales cycle
associated with some of our products and services is typically lengthy and
subject to a number of significant risks over which we have little or no
control. If sales in any period fall significantly below anticipated levels, our
financial condition and results of operations could suffer.
RISKS
RELATED TO DOING BUSINESS IN CHINA
Adverse
changes in political and economic policies of the PRC government could impede
the overall economic growth of China, which could reduce the demand for our
products and damage our business.
Our
growth strategy includes acquiring or investing in suitable candidates on
acceptable terms in China. We have also from time to time entered
into letters of intent to acquire several other companies in China. We also
produce our products through an OEM in China. Accordingly, our
business, financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in China. The PRC
economy differs from the economies of most developed countries in many respects,
including:
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the
higher level of government
involvement;
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the
early stage of development of the market-oriented sector of the
economy;
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the
higher level of control over foreign exchange;
and
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the
allocation of resources.
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As the
China economy has been transitioning from a planned economy to a more
market-oriented economy, the China government has implemented various measures
to encourage economic growth and guide the allocation of resources. While these
measures may benefit the overall China economy, they may also have a negative
effect on us.
Although
the China government has in recent years implemented measures emphasizing the
utilization of market forces for economic reform, the China government continues
to exercise significant control over economic growth in China through the
allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and imposing policies that impact
particular industries or companies in different ways.
Any
adverse change in the economic conditions or government policies in China could
have a material adverse effect on the overall economic growth and the level of
surveillance and safety investments and expenditures in China, which in turn
could lead to a reduction in demand for our products and consequently have a
material adverse effect on our business and prospects.
Uncertainties
with respect to the China legal system could limit the legal protections
available to you and us.
Our
operating subsidiaries are generally subject to laws and regulations applicable
to foreign investments in China and, in particular, laws applicable to
foreign-invested enterprises. The China legal system is based on written
statutes, and prior court decisions may be cited for reference, but have limited
precedential value. Since 1979, a series of new China laws and regulations have
significantly enhanced the protections afforded to various forms of foreign
investments in China. However, since the China legal system continues to rapidly
evolve, the interpretations of many laws, regulations and rules are not always
uniform and enforcement of these laws, regulations and rules involve
uncertainties, which may limit legal protections available to you and us. In
addition, any litigation in China may be protracted and result in substantial
costs and diversion of resources and management attention.
China’s
government exerts substantial influence over the manner in which we conduct our
business activities.
China’s
government has exercised and continues to exercise substantial control over
virtually every sector of the Chinese economy through regulation and state
ownership. Our ability to operate in China may be harmed by changes in its laws
and regulations, including those relating to taxation, import and export
tariffs, environmental regulations, land use rights, property and other matters.
We believe that our operations in China are in material compliance with all
applicable legal and regulatory requirements. However, the central or local
governments of the jurisdictions in which we operate may impose new, stricter
regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with
such regulations or interpretations.
Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or
particular regions thereof and could require us to divest ourselves of any
interest we then hold in Chinese properties or joint ventures.
Restrictions
on currency exchange may limit our ability to receive and use our sales revenue
effectively.
Some of
our sales revenue and/or expenses are or will occur in China and be denominated
in Renminbi. Under PRC law, the Renminbi is currently convertible under the
“current account,” which includes dividends and trade and service-related
foreign exchange transactions, but not under the “capital account,” which
includes foreign direct investment and loans. In the future, our China operating
subsidiaries may purchase foreign currencies for settlement of current account
transactions, including payments of dividends to us, without the approval of the
State Administration of Foreign Exchange (the “SAFE”), by complying with certain
procedural requirements. However, the relevant China governmental authorities
may limit or eliminate our ability to purchase foreign currencies in the future.
Since a significant amount of our future revenue will be denominated in
Renminbi, any existing and future restrictions on currency exchange may limit
our ability to utilize revenue generated in Renminbi to fund our business
activities outside China that are denominated in foreign
currencies.
Foreign
exchange transactions by China operating subsidiaries under the capital account
continue to be subject to significant foreign exchange controls and require the
approval of or need to register with PRC government authorities, including SAFE.
In particular, if our China operating subsidiaries borrow foreign currency
through loans from us or other foreign lenders, these loans must be registered
with SAFE, and if we finance the subsidiaries by means of additional capital
contributions, these capital contributions must be approved by certain
government authorities, including the Ministry of Commerce, or their respective
local counterparts. These limitations could affect our China operating
subsidiaries’ ability to obtain foreign exchange through debt or equity
financing.
We
may be unable to complete a business combination transaction efficiently or on
favorable terms due to complicated merger and acquisition regulations which
became effective on September 8, 2006.
On August
8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the
Regulation on Mergers and Acquisitions of Domestic Companies by Foreign
Investors, which became effective on September 8, 2006. This new regulation,
among other things, governs the approval process by which a China company may
participate in an acquisition of assets or equity interests. Depending on the
structure of the transaction, the new regulation will require the China parties
to make a series of applications and supplemental applications to the government
agencies. In some instances, the application process may require the
presentation of economic data concerning a transaction, including appraisals of
the target business and evaluations of the acquirer, which are designed to allow
the government to assess the transaction. Government approvals will have
expiration dates by which a transaction must be completed and reported to the
government agencies. Compliance with the new regulations is likely to be more
time consuming and expensive than in the past and the government can now exert
more control over the combination of two businesses. Accordingly, due to the new
regulation, our ability to engage in business combination transactions has
become significantly more complicated, time consuming and expensive, and we may
not be able to negotiate a transaction that is acceptable to our stockholders or
sufficiently protect their interests in a transaction.
The new
regulation allows China government agencies to assess the economic terms of a
business combination transaction. Parties to a business combination transaction
may have to submit to the Ministry of Commerce and other relevant government
agencies an appraisal report, an evaluation report and the acquisition
agreement, all of which form part of the application for approval, depending on
the structure of the transaction. The regulations also prohibit a transaction at
an acquisition price obviously lower than the appraised value of the China
business or assets and in certain transaction structures, require that
consideration must be paid within defined periods, generally not in excess of a
year. The regulation also limits our ability to negotiate various terms of the
acquisition, including aspects of the initial consideration, contingent
consideration, holdback provisions, indemnification provisions and provisions
relating to the assumption and allocation of assets and liabilities. Transaction
structures involving trusts, nominees and similar entities are prohibited.
Therefore, such regulation may impede our ability to negotiate and complete a
business combination transaction on financial terms that satisfy our investors
and protect our stockholders’ economic interests.
In
addition to the above risks, in many instances, we will seek to structure
transactions in a manner that avoids the need to make applications or a series
of applications with Chinese regulatory authorities under these new M&A
regulations. If we fail to effectively structure an acquisition in a manner that
avoids the need for such applications or if the Chinese government interprets
the requirements of the new M&A regulations in a manner different from our
understanding of such regulations, then acquisitions that we have effected may
be unwound or subject to rescission. Also, if the Chinese government determines
that our structure of any of our acquisitions does not comply with these new
regulations, then we may also be subject to fines and
penalties.
Fluctuations
in exchange rates could adversely affect our business and the value of our
securities.
The value
of our common stock will be indirectly affected by the foreign exchange rate
between U.S. dollars and the Renminbi and between those currencies and other
currencies in which our sales may be denominated. Because we OEM and import
products from China and some of our earnings are denominated in Renminbi and our
financial results are reported in U.S. dollars, fluctuations in the exchange
rate between the U.S. dollar and the Renminbi will affect our balance sheet and
our earnings per share in U.S. dollars. In addition, appreciation or
depreciation in the value of the Renminbi relative to the U.S. dollar would
affect our financial results reported in U.S. dollar terms without giving effect
to any underlying change in our business or results of operations. Fluctuations
in the exchange rate will also affect the relative value of any dividend we
issue that will be exchanged into U.S. dollars and earnings from, and the value
of, any U.S. dollar-denominated investments we make in the future.
Since
July 2005, the Renminbi has no longer been pegged to the U.S. dollar. Although
the People’s Bank of China regularly intervenes in the foreign exchange market
to prevent significant short-term fluctuations in the exchange rate, the
Renminbi may appreciate or depreciate significantly in value against the U.S.
dollar in the medium to long term. Moreover, it is possible that in the future
the China authorities may lift restrictions on fluctuations in the
Renminbi exchange rate and lessen intervention in the foreign exchange
market.
Very
limited hedging transactions are available in China to reduce our exposure to
exchange rate fluctuations. To date, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange
risk. While we may enter into hedging transactions in the future, the
availability and effectiveness of these transactions may be limited, and we may
not be able to successfully hedge our exposure at all. In addition, our foreign
currency exchange losses may be magnified by China exchange control regulations
that restrict our ability to convert Renminbi into foreign
currencies.
Currently,
some of our raw materials, components and major equipment are imported. In the
event that the U.S. dollars appreciate against Renminbi, our costs will
increase. If we cannot pass the resulting cost increases on to our customers,
our profitability and operating results will suffer.
Risks
Relating to Our Common Stock
Limitations
upon Broker-Dealers Effecting Transactions in "Penny Stocks"
Trading
in our common stock is subject to material limitations as a consequence of
regulations which limits the activities of broker-dealers effecting transactions
in "penny stocks." Pursuant to Rule 3a51-1 under the Exchange Act,
our common stock is a "penny stock" because it (i) is not listed on any national
securities exchange or The NASDAQ Stock Market™, (ii) has a market price of less
than $5.00 per share, and (iii) its issuer (the Company) has net tangible assets
less than $2,000,000 (if the issuer has been in business for at least three (3)
years) or $5,000,000 (if the issuer has been in business for less than three (3)
years).
Rule
15g-9 promulgated under the Exchange Act imposes limitations upon trading
activities on "penny stocks", which makes selling our common stock more
difficult compared to selling securities which are not "penny
stocks." Rule 15a-9 restricts the solicitation of sales of "penny
stocks" by broker-dealers unless the broker first (i) obtains from the purchaser
information concerning his financial situation, investment experience and
investment objectives, (ii) reasonably determines that the purchaser has
sufficient knowledge and experience in financial matters that the person is
capable of evaluating the risks of investing in "penny stocks", and (iii)
delivers and receives back from the purchaser a manually signed written
statement acknowledging the purchaser's investment experience and financial
sophistication.
Rules
15g-2 through 15g-6 promulgated under the Exchange Act require broker-dealers
who engage in transactions in "penny stocks" first to provide their customers
with a series of disclosures and documents, including (i) a standardized risk
disclosure document identifying the risks inherent in investing in "penny
stocks", (ii) all compensation received by the broker-dealer in connection with
the transaction, (iii) current quotation prices and other relevant market data,
and (iv) monthly account statements reflecting the fair market value of the
securities.
There can
be no assurance that any broker-dealer which initiates quotations for the Common
Stock will continue to do so, and the loss of any such broker-dealer likely
would have a material adverse effect on the market price of our common
stock.
No
Active or Regular Market
Although
our common stock has been quoted on the Pink Sheets since October 31. 1985 and
since January 13, 2010, there has been only limited and sporadic trading n our
stock. Companies quoted for trading on the OTCBB must be reporting issuers under
Section 12 of the Exchange Act and must be current in their reports under
Section 13 of the Exchange Act, in order to maintain price quotation privileges
on the OTCBB. If our common stock is quoted on the OTCBB, and we fail to remain
current on our reporting requirements, we could be removed from the OTBB. As a
result, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary market. In
addition, we may be unable to regain our quotation privileges on the OTCBB,
which may have an adverse material effect on our business.
Accordingly,
there can be no assurance as to the liquidity of any present or future markets
that may develop for our common stock, the ability of holders of our common
stock to sell our common stock, or the prices at which holders may be able to
sell our common stock.
Shares
Eligible for Future Sale
The sale
of a substantial number of shares of our common stock, or the perception that
such sales could occur, could adversely affect prevailing market prices for our
common stock. In addition, any such sale or perception could make it
more difficult for us to sell equity, or equity related, securities in the
future at a time and price that we deem appropriate. If and when this
registration statement becomes effective and we become subject to the reporting
requirements of the Exchange Act, we might elect to adopt a stock option plan
and file a registration statement under the Securities Act registering the
shares of common stock reserved for issuance thereunder. Following
the effectiveness of any such registration statement, the shares of common stock
issued under such plan, other than shares held by affiliates, if any, would be
immediately eligible for resale in the public market without
restriction.
The sale
of shares of our common stock which are not registered under the Securities Act,
known as “restricted” shares, typically are effected under Rule
144. At March 31, 2010 we had outstanding an aggregate of 33,190,071
shares of restricted common stock. All of our shares of common stock,
except those issued in the last six months, might be sold under Rule 144. No
prediction can be made as to the effect, if any, that future sales of
“restricted” shares of our common stock, or the availability of such shares for
future sale, will have on the market price of our common stock or our ability to
raise capital through an offering of our equity securities.
The sale
of a substantial number of shares of our common stock, or the perception that
such sales could occur, could adversely affect prevailing market prices for our
common stock. In addition, any such sale or perception could make it
more difficult for us to sell equity, or equity related, securities in the
future at a time and price that we deem appropriate. If and when this
registration statement becomes effective and we become subject to the reporting
requirements of the Exchange Act, we might elect to adopt a stock option plan
and file a registration statement under the Securities Act registering the
shares of common stock reserved for issuance thereunder. Following
the effectiveness of any such registration statement, the shares of common stock
issued under such plan, other than shares held by affiliates, if any, would be
immediately eligible for resale in the public market without
restriction.
No
Dividends
We never
have paid any dividends on our common stock and we do not intend to pay any
dividends in the foreseeable future.
.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
None
ITEM
2. PROPERTIES.
Our
principal executive offices in China consist of 6100 square feet and are leased
for a term ending April 1, 2018 for RMB 25,000 (approximately $3,680) per
month. We are also responsible for common charges and all operating
expenses associated with the property. We believe that if we are unable to enter
into a lease renewal with our current landlord at the end of the term, we will
be able to locate other appropriate space in the area of our present
offices
Our North
America R & D and sales facility has moved to a new location in Vancouver,
B.C. Canada and consists of 3300 square feet and is leased by ANV Video Alarm
Service Inc., pursuant to a lease that expires on April 1, 2013. The
rent is for varying amounts during the term of the lease and will be $CAN 3,200
through the end of the lease. We believe that if we are not able to
extend the lease we will find other suitable premises in the area of the present
premises at similar costs.
Our
leased premises are presently adequate for our needs. However, if our
business expands we may be required to seek larger premises. Management believes
that other suitable premises are available at reasonable cost in proximity to
our present offices.
ITEM
3. LEGAL PROCEEDINGS.
We
currently have no legal proceedings pending nor have any legal proceeding been
threatened against us or any of our officers, directors or control persons of
which we are aware.
ITEM
4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDERS.
No
matters were submitted to a vote of security holders, through the solicitation
of proxies or otherwise during the Company’s fourth quarter.
PART
II
ITEM
5. MARKET for REGISTRANT’S COMMON EQUITY and ISSUER PURCHASES of
EQUITY SECURITIES.
Market
Information
Since
January 13, 2010, our common stock has trades on the Over the Counter Bulletin
Board under the symbol “ANVS”. During the period ended March 31,
2010, the high and low closing bid prices were $1.05 and $0.38. Prior
to January 13, 2010, our common stock was quoted on the Pink Sheets, but had not
traded for several years.
Reports
to Shareholders
We plan
to furnish our shareholders with an annual report for each fiscal year ending
December 31 containing financial statements audited by our independent certified
public accountants. Additionally, we may, in our sole discretion,
issue unaudited quarterly or other interim reports to our shareholders when we
deem appropriate. We intend to maintain compliance with the periodic
reporting requirements of the Securities Exchange Act of 1934.
Holders
As of
March 31, 2010, we had 226 shareholders of record and 33.190.071 common
shares issued and outstanding. The number of holders does not include
the shareholders for whom shares are held in a "nominee" or "street"
name.
Dividend
Policy
We have
not declared or paid any dividends on our common stock to date. We
anticipate that any future earnings will be retained as working capital and used
for business purposes. Accordingly, it is unlikely that we will
declare or pay any such dividends in the foreseeable future.
Securities
Authorized for Issuance under Equity Compensation Plans
None
Recent
Sales of Unregistered Securities
The
following is a summary of all transactions within the past three years involving
our sales of our securities that were not registered under the Securities
Act. Shares issued for cash consideration paid to us are valued at
the purchase price per share; all other shares are valued as
stated. All shares issued were issued as “restricted” shares of our
common stock except as otherwise expressly stated.
The
Company did not issue any shares of Common Stock during its fiscal years ended
March 31, 2007, 2008 or 2009.
During
the fiscal year ended March 31, 2010, the Company
|
(i)
|
Issued
an aggregate of 3,078,126 shares of its common stock to six consultants at
a price of approximately $0.0022 per share, a price in excess of the then
stock quotation on the pink sheets in consideration for services rendered
over the past two years. These transactions were exempt by
reason of section 4(2) of the Securities Act of 1933, as amended as
transactions by an issuer not involving a public offering. The
Company’s transfer agent has been instructed to place a legend on the
certificates for the shares reflecting lack of registration under the
Securities Act of 1933, as amended, and to maintain stop transfer
instructions with respect to these
certificates.
|
|
(ii)
|
Issued
an aggregate of 29,860,000 shares of its common stock to the 24 former
shareholders of CANVSI in exchange for their shares of
CANCSI. This transaction was exempt by reason of section 4(2)
of the Securities Act of 1933, as amended, as a transaction by an issuer
not involving a public offering. The Company’s transfer agent
has been instructed to place a legend on the certificates for the shares
reflecting lack of registration under the Securities Act of 1933, as
amended, and to maintain stop transfer instructions with respect to these
certificates.
|
|
(iii)
|
During
the 1st quarter of 2010, but prior to the merger, CANVSI raised $ 432,500
of capital from eight accredited investors. The price was
set at $0.25 per share. Each investor submitted a copy of their
ID and signed a subscription agreement. The placement was fully
in compliance with the laws of British Columbia,
Canada.
|
In each
of the above instances, the recipients of the shares evidenced their investment
intent in writing.
ITEM
6. SELECTED FINANCIAL DATA.
Not
applicable
ITEM
7. MANAGEMENT’S DISCUSSION and ANALYSIS of FINANCIAL CONDITIONS and
REULTS OF OPERATION.
Overview
We
caution you that reliance on any forward-looking statement involves risks and
uncertainties, and that although we believe the assumptions on which our
forward-looking statements are based are reasonable, any of those assumptions
could prove to be inaccurate, and as a result, the forward-looking statements
based on those assumptions could be incorrect. In light of these and
other uncertainties, you should not conclude that we will necessarily achieve
any plans and objectives or projected financial results referred to in any of
the forward-looking statements. We do not undertake to release the
results of any revisions of these forward-looking statements to reflect future
events or circumstances. Some of the factors that may cause actual
results, developments and business decisions to differ materially from those
contemplated by such forward-looking statements include the
following:
RESULTS
OF OPERATIONS
FY
2010 v FY 2009
Revenues. We had
revenues of $15,717 in FY 2010 and revenues of $20,820 in FY 2009 as FY 2009 was
devoted to product design and establishing a business model in Canada and FY
2010, especially its last few months, was devoted to establishing a large
operation in the People’s Republic of China. The results in the 2010
FY as described below, reflect management’s decision to concentrate on the
Company’s efforts to enter the larger Chinese market rather than pursue further
development of the Canadian market. Management believes that the Chinese market,
which is much larger than the Canadian market will enable the Company to enjoy
greater revenues in the future. On filed February 5, 2010 filed a
Current Report on Form 8-K indicating that we had made several acquisitions to
facilitate our entry into the Chinese market. Due to various
unforeseen circumstances and the need for various governmental approvals, the
acquisitions were not completed until late May 2010. Accordingly, we
are in the early stages of developing the Chinese market we expect that revenues
and results will fluctuate from quarter to quarter.. We anticipate
opening retail stress in China during calendar 2010. The costs of opening a
Company operated store include inventory, real estate costs, employee expense
and promotional expenses such as advertising. The costs to open a Company owned
in China anticipated to be approximately $10,000 per retail
store. The size and scope of each of these programs will be governed
by management’s assessment of the Company’s capital resources and cannot be
specified at this time.
Cost of Sales; Gross
Profit. Our cost of sales in FY 2010 was $5,376, yielding a
gross profit of 10,341 or 58.0% of sales. Our cost of sales in FY
2009 was $14,790, yielding a gross profit of 6,030 or 28.0% of
sales. Both of these results and ratios are from an early stage
operation and management does not believe that significant conclusions should be
drawn from these limited results.
Operating
Expenses
Operating
expenses decreased to remained fairly constant increasing to $359,439 in FY 2010
from $357,498 in FY 2009 as decreases in general and administrative
expense, research and development and advertising were partially offset by
increased commissions, payroll and professional fees. Again, as the
operations are in an early stage management would caution against drawing any
significant conclusions from these limited results.
Net
Loss; Comprehensive Loss
Our net
loss and comprehensive loss consists of two parts: net operating
gain (loss) and foreign currency translation adjustments. Because all our
transactions are recorded in Canadian dollars, we need to exchange them
into US dollar using the exchange rate for different period when we release the
financial statements to the public. If the exchange rate fluctuates and
if we have a large balance of assets, liabilities or equity, the foreign
currency translation adjustment will be large. As we increase our
operation in the Peoples Republic of China, these factors may be more
pronounced.
For the
2009 FY, the net loss was $(350,455), but foreign currency translation
adjustment loss was s $(270,752), so the comprehensive loss was $(621,201).
(Because we have substantial intangible assets the foreign transaction
adjustment is large). For FY 2010, the net loss was $(369,579) but foreign
currency translation adjustment gain was $318,717 so the comprehensive loss was
$(50,862) (Because we have substantial intangible assets the foreign
transaction adjustment is large) Our foreign currency adjustment was
favorably impacted by the increased strength of the Canadian
Dollar.
LIQUIDITY AND CAPITAL
RESOURCES
Net cash
flows used in operating activities for FY 2010 totaled $3,286 as losses of
$(369,579) were largely offset by $386,002 received from the sale of common
stock.
The
Company had limited cash resources of $31,756 at the end of FY 2010 but has
engaged in private placements since March 31, 2010 that have increased its
liquidity.
Critical
Accounting Policies
ITEM
4. CONTROLS AND PRODCECURES
(a)
Evaluation of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our Principal Executive Officer and
Principal Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, as ours are designed to do, and
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
As of
March 31, 2010, we carried out an evaluation, under the supervision and with the
participation of our management, including our Principal Financial Officer of
the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934. Based upon that evaluation, our Principal
Financial Officer concluded that our disclosure controls and procedures are
effective in enabling us to record, process, summarize and report information
required to be included in our periodic SEC filings within the required time
period.
(b)
Changes in Internal Controls
There
were no changes in our internal controls and procedures in 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. We continue to rely on the members of
the Board of Directors to provide assurance that our entity-level controls
remain effective and we believe our process-level controls remain
effective.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
ITEM
7A. QUANTITATIVE and QUALITATIVE DISCLOSURES about MARKET
RISK.
Not
applicable.
ITEM
8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA.
Our
financial statements for the years ended March 31, 2010 and 2009 and the reports
thereon of Stan J.H. Lee, CPA, respectively are included in this annual
report.
ITEM
9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS on ACCOUNTING and
FINANCIAL DISCLOSURE.
None.
ITEM
9A(T). CONTROLS and PROCEDURES.
Disclosure
Controls and Procedures
We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Exchange Act) that are designed to ensure that information that would be
required to be disclosed in Exchange Act reports is recorded, processed,
summarized and reported within the time period specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our
management, including to our chief executive officer and chief financial
officer, as appropriate, to allow timely decisions regarding required
disclosure.
As
required by Rule 13a-15 under the Exchange Act, our management, including our
chief executive officer and our chief financial officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as of March 31,2010. Based on that evaluation, our
officers concluded that as of March 31, 2010, and as of the date that the
evaluation of the effectiveness of our disclosure controls and procedures was
completed, our disclosure controls and procedures were effective to satisfy the
objectives for which they are intended.
Management’s
Annual Report on Internal Control over Financial Reporting
Section
404 of the Sarbanes-Oxley Act of 2002 requires that management document and test
the Company’s internal control over financial reporting and include in this
Annual Report on Form 10-K a report on management’s assessment of the
effectiveness of our internal control over financial reporting.
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act. Under the supervision and with the participation of
our management, including James Fitzsimons, our chief executive officer and
chief financial officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based upon the framework in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that
evaluation, our management concluded that our internal control over financial
reporting is effective, as of March 31, 2010.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.
Changes
in Internal Controls over Financial Reporting.
During
the fiscal year ended March 31, 2010, there were no changes in our internal
control over financial reporting identified in connection with the evaluation
performed during the fiscal year covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ITEM
9B. OTHER INFORMATION.
We do not
have any information that was required to be reported on Form 8-K during the
fourth quarter.
PART
1II
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS and CORPORATE
GOVERNANCE.
Our
directors and officers as of March 31, 2010 are:
|
Name
|
|
Age
|
|
Position(s)
|
|
|
|
|
|
|
|
Weixing Wang
|
|
46
|
|
Chairman
of the Board, Director and CEO
|
|
|
|
|
|
|
|
Yan
Wang
|
|
43
|
|
Executive
Director, VP and CFO
|
|
|
|
|
|
|
|
Daniel
Sze-Yuen Lee
|
|
61
|
|
Non-Executive Director
|
|
|
|
|
|
|
|
Xiaolin
Yang
|
|
48
|
|
Vice
President
|
Weixing (Wilson) Wang has
served as a director, CEO and Chairman of the Board since our acquisition of
Canada ANV System Inc. (“CANVSI”) in May 2009. He was a founder of
CNVSI and its chairman of the Board since its founding in 2006. Prior
thereto and since 1992 he was the founder, president and CEO of Z&A
Pharmaceutical Group in China. Dr. Wang received a BS in Preventative
Medicine from Shandong Medical University in China in 1986; a MD fin Nurition
from Tianjin Medical University in China in 1989; and did post doctoral work in
Diabities at Freiburg University in Germany until 1992.
Yan ( Serena) Wang has served
as an executive director, Vice President and CFO since our acquisition of CANVSI
in May 2009. She was a founder of CNVSI and a director, CFO and Vice
President since its founding in 2006. From 1999 to
2006, she was a Vice Chairman and CEO of Shanghai Touma Renching
Apparel Co., Ltd. in China. Mrs. Yan Wang holds a BS in costume
design from Qindao University in China awarded in 1989 and an MBA in Business
Management awarded by the Shanghai Faculty of Social Sciences in
2001.
Daniel Sze-Yuen Lee has served
as a non-executive director since our acquisition of CANVSI in May
2009. He was appointed a non-executive director of CANVSI in
January 2008. Since 2003 he has been president of Canada – China
Foundation for the promotion of trade and cultural development and since 1986 he
has been president of C&L Associates International Management Consultants
Group Inc. in Vancouver. Mr. Lee studied accounting at Vancouver
Community College.
Xiaolin ( Tiger) Yang has
served as Vice President – Sales & Marketing since June
2009. From 2001 to 2007 he was CEO of Qaingdao Comins Electronics
Co., Ltd and commencing January 2008 until he joined us he was a sales rep for
ADT Security Services. Mr. Yang holds a BA in Management Engineering
awarded by Xi’an Communication University in 1986.
Family
Relationships
There are
no family relationships, or other arrangements or understandings between or
among any of the directors, executive officers or other person pursuant to which
such person was selected to serve as a director or officer.
Involvement
in certain legal proceedings
Our
directors, executive officers and control persons have not been involved in any
of the following events during the past five years:
any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time;
any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
being
subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; or
being
found by a court of competent jurisdiction (in a civil action), the Securities
and Exchange Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has
not been reversed, suspended, or vacated.
Term
of Office
The term
of office of the current directors shall continue until new directors are
elected or appointed at an annual meeting of shareholders.
Committees of the
Board and Financial Expert
We do not
have a separately-designated audit or compensation committee of the Board or any
other Board-designated committee. Audit and compensation committee functions are
performed by our Board of Directors. We will form such committees in the future
as the need for such committees may arise. In addition, at this time we have
determined that we do not have an “audit committee financial expert” as defined
by the SEC on our Board.
Code
of Ethics
Due to
its small size, the Company has not adopted a code of ethics. The
Company will adopt a code of ethics for our senior officers, including our
principal executive officer, principal financial officer, principal accounting
officer or controller and any person who may perform similar
functions. As required by SEC rules, we will report the nature of any
change or waiver of our code of ethics.
ITEM
11. EXECUTIVE COMPENSATION.
Compensation
of Executive Officers
Executive
Compensation
The
following table sets forth all compensation earned during the fiscal years ended
March 31, 2009, by (i) our Chief Executive Officer (principal executive
officer), (ii) our Chief Financial Officer (principal financial officer), (iii)
the three most highly compensated executive officers other than our CEO and CFO
who were serving as executive officers at the end of our last completed fiscal
year, whose total compensation exceeded $100,000 during such fiscal year ends,
and (iv) up to two additional individuals for whom disclosure would have been
provided but for the fact that the individual was not serving as an executive
officer at the end of our last completed fiscal year, whose total compensation
exceeded $100,000 during such fiscal year ends. We refer to all of these
officers collectively as our “named executive officers”.
Summary
Compensation Table
|
Name
&
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Non-Equity
|
|
|
Other
|
|
|
All
Oher
|
|
|
Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Incentive Plan Comp.
|
|
|
Comp.
|
|
|
Comp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weixing Wang
|
|
2010
|
|
$ |
60,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
CEO
|
|
2009
|
|
$ |
24,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yan
Wang
|
|
2010
|
|
$ |
48,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
CFO
|
|
2009
|
|
$ |
16,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Compensation
of Directors
The
Company has no standard arrangements in place or currently contemplated to
compensate the Company’s directors for their service as directors or as members
of any committee of directors.
Employment
Agreements
We do not
have employment agreements with any of our executive officers or
directors. We have verbal understandings with our executive officers
regarding monthly retainers and reimbursement for actual out-of-pocket
expenses.
Termination
of Employment
There are
no compensatory plans or arrangements, including payments to be received from
the Company, with respect to any person named in the Summary Compensation Table
set forth above that would in any way result in payments to any such person
because of his or her resignation, retirement or other termination of such
person’s employment with us.
Employee
Benefit Plans
None
Indemnification
of Directors and Executive Officers and Limitation of Liability
Nevada
law generally permits us to indemnify our directors, officers, employees and
agents. Pursuant to the provisions of Nevada Revised Statutes 78.7502, we, as a
corporation organized in Nevada, may indemnify our directors, officers,
employees and agents in accordance with the following:
(a) A
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any action, except an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation, against expenses, actually and reasonably incurred by him in
connection with the action, suit or proceeding if he: (a) is not liable for
breach of his fiduciary duties as a director or officer pursuant to Nevada
Revised Statutes 78.138; or (b) acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) A
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any action by or in the right of the corporation to procure a
judgment in its favor, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation against expenses actually and reasonably incurred by
him in connection with the defense or settlement of the action or suit if he:
(a) is not liable for breach of his fiduciary duties pursuant to Nevada Revised
Statutes 78.138; or (b) acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals there from, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
(c) To
the extent that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, or in defense of any claim, issue or matter therein, the corporation
shall indemnify him against expenses, including attorneys’ fees, actually and
reasonably incurred by him in connection with the defense.
Charter
Provisions, Bylaws and Other Arrangements of the Registrant
Our
Certificate of Incorporation, as amended, does not contain any specific language
enhancing or limiting the Nevada statutory provisions referred to
above.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy and is, therefore, unenforceable.
ITEM
12. SECURITY OWNERSHIP of CERTAIN BENEFICIAL OWNERS and
MANAGEMENT and RELATED STOCKHOLDER MATTERS.
Security
Ownership of Certain Beneficial Owners
The
following table sets forth, as of March 31, 2010, the stock ownership of (i)
each of our named executive officers and directors, (ii)all executive officers
and directors as a group, and (iii) each person known by us to be a beneficial
owner of 5% or more of our common stock. No person listed below has
any option, warrant or other right to acquire additional securities from us,
except as may be otherwise noted. We believe that all persons named
in the table have sole voting and investment power with respect to all shares of
common stock beneficially owned by them except as stated therein.
|
Name
and address
|
|
Number
of shares owned
|
|
|
Per
cent of Class (2)
|
|
|
|
|
|
|
|
|
|
|
Weixing
Wang (1)
|
|
|
6,945,000 |
(3) |
|
|
20.95 |
% |
|
|
|
|
|
|
|
|
|
|
|
Yan
Wang (1)
|
|
|
6,945,000 |
(3) |
|
|
20.95 |
% |
|
|
|
|
|
|
|
|
|
|
|
Xiaolin
Yang (1)
|
|
|
0 |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Daniel
Sze-Yuen Lee (1)
|
|
|
0 |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Ming
Li
|
|
|
4,750,000 |
(4) |
|
|
14.3 |
% |
|
7-10111
Gilbert Road
|
|
|
|
|
|
|
|
|
|
Richmond,
BC, Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Haining
Zhang
|
|
|
2,015,185 |
|
|
|
6.1 |
% |
|
RR3
Box 3087
|
|
|
|
|
|
|
|
|
|
East
Stroudsburg, PA 18301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
officers and directors as a group
|
|
|
|
|
|
|
|
|
|
(4)
Persons
|
|
|
13,890,000 |
(3) |
|
|
41.9 |
% |
(1) Each
person named is an executive officer or a director. The address of each such
beneficial owner is c/o ANV Security Group, Inc., 2105-11871 Horseshoe Way,
Richmond, BC, Canada V7A 5H5.
(2) Applicable
percentage ownership is based on 33,190,071 shares of our common stock
outstanding as of November 25, 2009. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to
securities.
|
(3)
|
These
shares are owned by Canada Landmark Enterprise Group Inc., a corporation
owned 50% by Weixing Wang and 50% by Yan
Wang.
|
|
(4)
|
Includes
3,100,000 shares owned by Advanced Network Video Inc., a corporation owned
by Mr. Li.
|
Changes in Control
We know
of no contractual arrangements which may at a subsequent date result in a change
of control in the Company.
ITEM
13. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS, and DIRECTOR
INDEPENDENCE.
Upon its
formation in 2006, CANCSI acquired certain intangible assets consisting of
technical know how and software and non-compete agreements from Canada Landmark
Enterprise Group, Inc., a corporation owned by Weixing Wang and Yan Wang for
13,890 shares of CANVSI common stock. In July 2009, these shares were
exchanged for the same number of shares of the Company upon the closing of a
reorganization agreement described below. See Notes to Financial Statements,
Note 1(m).
In July
2009, Haining Zhang, a more than 5% holder of the Company received 1,844,326
shares of the company’s stock and China Venture Partners, Inc., a corporation he
controls received 335,000 shares of common stock for as a consulting fee for
work previously performed for the Company.
In May
2009, the Company and CANVSI and all of the shareholders of CANVSI entered into
an agreement (the “Securities Purchase Agreement”) that provided
that all of the holders of CANVSI would exchange their shares for
shares of the Company on a one for one basis so that CNVSI would become a wholly
owned subsidiary of the Company. Weixing Wang and Yan Wang became
shareholders, officers and directors of the Company by reason of the Securities
Purchase Agreement closing in July 2009.
Director
Independence
We
believe that the following director of our company is considered “independent”
under Rule 400(a)(15) of the National Association of Securities Dealers listing
standards: Daniel Sze-Yuen Lee.
ITEM
14. PRINCIPAL ACCOUNTANT FEES and SERVICES.
Audit
Fees
The
aggregate fees billed by the Company’s auditors for professional services
rendered in connection with the audit of the Company’s annual financial
statements and reviews of the financial statements included in the Company’s
Form 10-Q or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for fiscal year ended March
31, 2010 was $17,500.
Audit
Related Fees
None
Tax
Fees
None
All
Other Fees
None
Pre-Approval
Policies and Procedures
The board
of directors has not adopted any pre-approval policies and approves all
engagements with the Company’s auditors prior to performance of services by
them.
PART
1V
ITEM
15. EXHIBITS and FINANCIAL STATEMENT SCHEDULES
|
Exhibit
No.
|
Description
|
|
|
|
|
3.1
|
Articles
of Incorporation, dated May 19, 1981 *
|
|
3.2
|
Articles
of Amendment, dated July 12, 1988 *
|
|
3.3
|
Articles
of Amendment, dated November 09, 1989 *
|
|
3.4
|
Certificate
of Revival for a Nevada Corporation, dated September 10, 2007
*
|
|
3.5
|
Articles
of Amendment, dated January 28, 2009 *
|
|
3.6
|
Articles
of Amendment, dated June 23, 2009 *
|
|
3.7
|
Articles
of Amendment, dated June 23, 2009 *
|
|
3.8
|
By
–Laws *
|
|
4.1
|
Form
of Stock Certificate *
|
|
10.1
|
Office
Lease Current Offices
|
|
10.2
|
Lab
Lease *
|
|
10.3
|
Services
Agreement with Peer One *
|
|
10.4
|
OEM
Manufacturing Agreement *
|
|
10.5
|
Form
of Franchise Agreement *
|
|
10.6
|
Form
of Customer Agreement *
|
|
10.7
|
Stock
Purchase Agreement, dated may 22, 2009, by and among Canada ANV Systems
Inc. its shareholders and the Company *
|
|
10.8
|
New
Vancouver Office Lease
|
|
22.1
|
Subsidiaries: Canada
ANV Systems, Inc. a British Columbia, Canada Corporation (100%
owned)
|
|
23.1
|
Consent
of Stan Lee, CPA
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
32.1
|
Certifications
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2
|
Certifications
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
* Incorporated
by reference to the like numbered exhibit to the Company’s Registration
Statement on Form 10
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
ANV
SECURITY GROUP, INC.
|
|
|
|
|
|
|
By:
|
/S/
Weixing Wang
|
|
|
|
Weixing Wang
|
|
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
|
|
|
|
|
By:
|
/S/ Yan Wang
|
|
|
|
Yan Wang
|
|
|
|
VP
and Chief Financial
|
|
|
|
Officer
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
July
15, 2010
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Weixing
Wang
|
|
Director,
CEO and President
|
|
July
15, 2010
|
|
Weixing
Wang
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Yan
Wang
|
|
Director,
VP and CFO
|
|
July
15, 2010
|
|
Yan
Wang
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Daniel Sze-Yuen
Lee
|
|
Director
|
|
July
15, 2010
|
|
Daniel
Sze-Yuen Lee
|
|
|
|
|
ANV Security Group,
Inc.
Consolidated Financial
Statements
March 31,
2010
|
Report
of Independent Registered Public Accounting Firm
|
|
F-1
|
|
|
|
|
|
Balance
Sheets
|
|
F-2
|
|
|
|
|
|
Statements
of Operations
|
|
F-3
|
|
|
|
|
|
Statement
of Cash Flows
|
|
F-5
|
|
|
|
|
|
Statement
of Stockholders’ Equity (Deficit)
|
|
F-4
|
|
|
|
|
|
Notes
to Financial Statements
|
|
F-6
|
Stan
J.H. Lee, CPA
2160
North Central Rd Suite 203 t Fort Lee t NJ 07024
P.O. Box
436402t
San Ysidrot
CA 92143-9402
619-623-7799
t Fax 619-564-3408 t stan2u@gmail.com
Report of Independent
Registered Public Accounting Firm
To the
Board of Directors and Stockholders of
ANV
Security Group Inc. and Subsidiary
We have
audited the accompanying consolidated balance sheet of ANV Security Group Inc.
and Subsidiary (the
“Company”) as of March 31, 2010 and the related consolidated statements of
operation, changes in shareholders’ equity (deficit) and cash flows for the
fiscal year then ended. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of ANV Security Group Inc. and
Subsidiary as of March 31, 2010, and the results of its operation and its cash
flows for the fiscal year then ended in conformity with U.S. generally accepted
accounting principles.
The
financial statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 16 to the financial
statements, the Company’s lack of revenue activities and losses from
operations raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Stan
J.H. Lee, CPA
______________________
Stan J.H.
Lee, CPA
Fort Lee,
NJ 07024
June 18,
2010
ANV
Security Group, Inc.
Consolidated
Balance Sheets
(Expressed
in US dollars)
|
|
|
|
|
As of
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
Notes
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
Note
1-g
|
|
$ |
31,756 |
|
|
$ |
28,470 |
|
|
Accounts
Receivable
|
|
Note
2
|
|
|
- |
|
|
|
508 |
|
|
GST
Receivable
|
|
Note
1-j
|
|
|
2,547 |
|
|
|
1,408 |
|
|
Inventory
|
|
Note
3
|
|
|
81,490 |
|
|
|
55,167 |
|
|
Other
Assets
|
|
Note 4
|
|
|
5,227 |
|
|
|
4,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
|
|
121,020 |
|
|
|
89,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment , net
|
|
Note 5
|
|
|
21,015 |
|
|
|
21,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
Assets
|
|
Note 6
|
|
|
1,379,858 |
|
|
|
1,034,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
$ |
1,521,893 |
|
|
$ |
1,145,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
Note
7
|
|
$ |
7,303 |
|
|
$ |
4,354 |
|
|
Due
to related parties
|
|
Note 9
|
|
|
38,188 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
|
|
45,491 |
|
|
|
4,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
Note
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, Unlimited shares authorized, without par value 33,190,071 and
27,074,500 shares issued and outstanding, respectively
|
|
Note
10
|
|
|
1,999,139 |
|
|
|
1,613,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in Capital for Stock Options
|
|
Note
11
|
|
|
24,836 |
|
|
|
24,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
Accumulated
|
|
|
|
|
(739,448 |
) |
|
|
(369,870 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
|
|
191,875 |
|
|
|
(126,842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Equity
|
|
|
|
|
1,476,402 |
|
|
|
1,141,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity
|
|
|
|
$ |
1,521,893 |
|
|
$ |
1,145,616 |
|
(The
accompanying notes are in an integral part of these financial
statements)
ANV
Security Group, Inc.
Consolidated
Statements of Operations
(Expressed
in US dollars)
|
|
|
|
|
For The Fiscal Years
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
Notes
|
|
2010
|
|
|
2009
|
|
|
Revenue
|
|
Note
1-p
|
|
$ |
15,717 |
|
|
$ |
20,820 |
|
|
Cost
of Sales
|
|
|
|
|
5,376 |
|
|
|
14,790 |
|
|
Gross
profit
|
|
|
|
|
10,341 |
|
|
|
6,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and general and administrative
|
|
|
|
|
359,439 |
|
|
|
357,498 |
|
|
Amortization
|
|
|
|
|
5,792 |
|
|
|
3,731 |
|
|
Total
Expenses
|
|
|
|
|
365,231 |
|
|
|
361,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
- |
|
|
|
956 |
|
|
Rental
Income
|
|
|
|
|
3,026 |
|
|
|
2,927 |
|
|
Customer
Rebate
|
|
|
|
|
- |
|
|
|
2,572 |
|
|
Exchange
Loss
|
|
|
|
|
(14,874 |
) |
|
|
- |
|
|
Interest
Expense
|
|
|
|
|
(2,841 |
) |
|
|
(1,711 |
) |
|
Total
Other Income (Expense)
|
|
|
|
|
(14,689 |
) |
|
|
4,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss) Before Income Tax Expense
|
|
|
|
|
(369,579 |
) |
|
|
(350,455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense, Net of Income Tax Benefit
|
|
Note
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
(369,579 |
) |
|
|
(350,455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Adjustment
|
|
Note 12
|
|
|
318,717 |
|
|
|
(270,752 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income
|
|
|
|
$ |
(50,862 |
) |
|
$ |
(621,206 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Share – Basic and Diluted
|
|
Note 1-t
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
|
|
|
|
28,957,266 |
|
|
|
25,813,000 |
|
(The
accompanying notes are in an integral part of these financial
statements)
ANV
Security Group, Inc.
Consolidated
Statement of Stockholders' Equity
From
December 18, 2006 (Date of Inception) to March 31, 2010
(Expressed
in US dollars)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Development
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Paid-in
|
|
|
Deficit
|
|
|
Income(Loss)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– November 18, 2006 (Date of Inception)
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance
of Common shares for cash at CDN$137.27 per share
|
|
|
10,000 |
|
|
|
1,186,013 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,186,013 |
|
|
Balance
– March 31, 2007
|
|
|
10,000 |
|
|
|
1,186,013 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,186,013 |
|
|
Common
stock split
|
|
|
19,990,000 |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance
of Common shares for cash at CDN$0.04 per share
|
|
|
5,000,000 |
|
|
|
202,080 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
202,080 |
|
|
Foreign
currency translation
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
143,909 |
|
|
|
143,909 |
|
|
Net
loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(19,415 |
) |
|
|
- |
|
|
|
(19,415 |
) |
|
Balance
– March 31, 2008
|
|
|
25,000,000 |
|
|
|
1,388,093 |
|
|
|
|
|
|
|
- |
|
|
|
(19,415 |
) |
|
|
143,909 |
|
|
|
1,512,587 |
|
|
Issuance
of Common shares for cash at CDN$0.25 per share
|
|
|
174,500 |
|
|
|
42,164 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
42,164 |
|
|
Issuance
of Common shares for no consideration
|
|
|
800,000 |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance
of Common shares for cash at CDN$0.20 per share
|
|
|
500,000 |
|
|
|
96,320 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
96,320 |
|
|
Issuance
of Common shares for cash at CDN$0.18 per share
|
|
|
550,000 |
|
|
|
78,630 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
78,630 |
|
|
Issuance
of Common shares for cash at CDN$0.20 per share
|
|
|
50,000 |
|
|
|
7,930 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,930 |
|
|
Additional
Paid-in Capital, Stock-based Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,836 |
|
|
|
|
|
|
|
|
|
|
|
24,836 |
|
|
Foreign
currency translation
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(270,752 |
) |
|
|
(270,752 |
) |
|
Net
loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
(350,455 |
) |
|
|
- |
|
|
|
(350,455 |
) |
|
Balance
– March 31, 2009
|
|
|
27,074,500 |
|
|
|
1,613,137 |
|
|
|
|
|
|
|
24,836 |
|
|
|
(369,870 |
) |
|
|
(126,842 |
) |
|
|
1,141,261 |
|
|
Issuance
of Common shares for cash at CDN$0.12 per share
|
|
|
578,667 |
|
|
|
55,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,510 |
|
|
Issuance
of Common shares for cash at CDN$0.20 per share
|
|
|
50,000 |
|
|
|
8,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,127 |
|
|
Issuance
of Common shares for cash at CDN$0.30 per share
|
|
|
117,141 |
|
|
|
28,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,444 |
|
|
Issuance
of Common shares for cash at CDN$0.20 per share
|
|
|
350,000 |
|
|
|
56,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,553 |
|
|
Issuance
of Common shares for cash at CDN$0.12 per share
|
|
|
258,333 |
|
|
|
25,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,246 |
|
|
Issuance
of Common shares for cash at CDN$0.23 per share
|
|
|
130,000 |
|
|
|
24,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,711 |
|
|
Issuance
of Common shares for cash at CDN$0.39 per share
|
|
|
100,000 |
|
|
|
32,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,500 |
|
|
Issuance
of Common shares for cash at CDN$0.30 per share
|
|
|
167,344 |
|
|
|
40,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,370 |
|
|
Issuance
of Common shares for cash at CDN$0.30 per share
|
|
|
127,181 |
|
|
|
30,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,681 |
|
|
Issuance
of Common shares for cash at CDN$0.20 per share
|
|
|
300,000 |
|
|
|
55,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,506 |
|
|
Issuance
of Common shares for cash at CDN$0.05 per share
|
|
|
606,834 |
|
|
|
28,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,353 |
|
|
Stock
swap agreement and plan of reorganization, June 28, 2009
|
|
|
3,330,071 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Net
loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(369,578 |
) |
|
|
|
|
|
|
(369,578 |
) |
|
Foreign
currency translation
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
318,717 |
|
|
|
318,717 |
|
|
Balance
– March 31, 2010
|
|
|
33,190,071 |
|
|
|
1,999,139 |
|
|
|
|
|
|
|
24,836 |
|
|
|
(739,448 |
) |
|
|
191,875 |
|
|
|
1,476,402 |
|
(The
accompanying notes are in an integral part of these financial
statements)
ANV
Security Group, Inc.
Consolidated
Statements of Cash Flows
(Expressed
in US dollars)
|
|
|
For the
|
|
|
|
|
Fiscal years
|
|
|
|
|
Ended
|
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(369,579 |
) |
|
|
(350,455 |
) |
|
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
5,792 |
|
|
|
3,731 |
|
|
Stock-Based
Compensation
|
|
|
|
|
|
|
24,837 |
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and deposits
|
|
|
(1,016 |
) |
|
|
69,081 |
|
|
Accounts
Receivable
|
|
|
508 |
|
|
|
|
|
|
GST
Receivable
|
|
|
(1,139 |
) |
|
|
(792 |
) |
|
Inventory
|
|
|
(26,323 |
) |
|
|
(55,167 |
) |
|
Accounts
Payable
|
|
|
1,897 |
|
|
|
3,771 |
|
|
Due
to related parties
|
|
|
630 |
|
|
|
(508 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
Cash (Used for) by Operating Activities
|
|
|
(389,230 |
) |
|
|
(305,502 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of equipment and furniture
|
|
|
(5,160 |
) |
|
|
(19,480 |
) |
|
Capitalized
intangible costs
|
|
|
(345,231 |
) |
|
|
(25,376 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
Cash (Used for) Provided by Investing Activities
|
|
|
(350,391 |
) |
|
|
(44,856 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from related party
|
|
|
38,188 |
|
|
|
(8,328 |
) |
|
Issuance
of Common stock
|
|
|
386,002 |
|
|
|
225,044 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
424,190 |
|
|
|
216,716 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
318,717 |
|
|
|
(24,519 |
) |
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease) In Cash
|
|
|
3,286 |
|
|
|
(158,161 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
– Beginning of Period
|
|
|
28,470 |
|
|
|
186,631 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
– End of Period
|
|
$ |
31,756 |
|
|
|
28,470 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Schedule of Cash Flows Disclosures
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
- |
|
|
|
1,711 |
|
|
Income
taxes paid
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Schedule of Non-Cash Flows Activities
|
|
|
|
|
|
|
|
|
|
Stock-based
Compensation, Stock Options Issued
|
|
$ |
- |
|
|
|
24,836 |
|
(The
accompanying notes are in an integral part of these financial
statements)
ANV
Security Group, Inc.
Notes
to Consolidated Financial Statements
March 31,
2010
Note
1. Organization and Summary of Significant Accounting Policies
Organization
Canada
ANV Systems Inc. (the “Company”) was incorporated in British Columbia, Canada on
December 18, 2006. The Company is an innovator in video systems and specialize
in both silicon and software solutions for the video products design and
manufacturing. The Company offers enabling technologies that can provide the
digital consumer and enterprise applications with excellent video quality and
extended hours of portable operations across networks, be it home, enterprise or
telecom networks. Also the Company offers a wide range of video cameras powered
by the next generation H.264 video technologies and our patent pending USCI8.com
services platforms.
Summary
of Significant Accounting Policies
These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company’s fiscal year-end is March 31.
|
|
b)
|
Principles
of Consolidation
|
These
consolidated financial statements include the accounts of ANV Security Group
Inc. and its wholly-owned subsidiary, ANV Video Alarm Service Inc which was
incorporated in British Columbia, Canada on May 30, 2008. All intercompany
accounts and transactions have been eliminated in consolidation.
The
preparation of financial statements in conformity with United States generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and
assumptions related to useful life and recoverability of long-lived assets,
donated expenses, and deferred income tax valuation allowances. The Company
bases its estimates and assumptions on current facts, historical experience and
various other factors that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses that are
not readily apparent from other sources. The actual results experienced by the
Company may differ materially and adversely from the Company’s estimates. To the
extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
Certain
account reclassifications have been made to the financial statements of the
prior year in order to conform to classifications used in the current year.
These changes had no impact on previously stated financial statements of the
Company.
|
|
e)
|
Comprehensive
Income (Loss)
|
SFAS No.
130, “Reporting Comprehensive
Income,” establishes standards for the reporting and display of
comprehensive loss and its components in the financial statements. As at March 31, 2010, the Company’s only
component of comprehensive income consisted of foreign currency translation
adjustments.
|
|
f)
|
Cash
and Cash Equivalents
|
The
Company considers all highly liquid instruments with maturity of three months or
less at the time of issuance to be cash equivalents.
|
|
g)
|
Concentration
of Credit Risks
|
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and trade accounts receivable. The Company
places its cash with high credit quality financial institutions in Canada.
The Company has not experienced any losses in such bank accounts through March
31, 2010. At March 31, our bank deposits were as follows:
|
|
|
March 31,
|
|
|
March 31,
|
|
|
COUNTRY
|
|
2010
|
|
|
2009
|
|
|
Canada
|
|
$ |
31,756 |
|
|
$ |
28,470 |
|
|
Total
cash and cash equivalents
|
|
$ |
31,756 |
|
|
$ |
28,470 |
|
In an
effort to mitigate any potential risk, the Company periodically evaluates the
credit quality of the financial institutions at which it holds
deposits.
Accounts
receivable are presented net of an allowance for doubtful accounts. The Company
maintains allowances for doubtful accounts for estimated losses. The
Company reviews the accounts receivable on a periodic basis and makes general
and specific allowances when there is doubt as to the collectability
of individual balances. In evaluating the collectability of individual
receivable balances, the Company considers many factors, including the age
of the balance, customer's historical payment history, its current
credit-worthiness and current economic trends. Accounts are written off after
exhaustive efforts at collection.
Inventories
are stated at the lower of average cost or market and consist of raw materials
and finished goods. The Company writes down inventory for estimated obsolescence
or unmarketable inventory based upon assumptions and estimates about future
demand and market conditions. If actual market conditions are less favorable
than those projected by the Company, additional inventory write-downs may be
required.
GST
receivable represents tax credit that the Canadian Company receives when the
Company pays GST tax during normal operations. As of March 31, 2010, the Company
had a GST tax receivable of $2,547.
Advances
to suppliers included in other assets represent the cash paid in advance for
purchasing of inventory items from Suppliers and the amount as of March 31, 2010
was none.
|
|
l)
|
Property
and Equipment
|
Property
and equipment consists of furniture, office equipment, computer
equipment/software and leasehold improvement, is recorded at cost. The property
and equipment other than leasehold improvement is depreciated on a straight line
basis over an estimated useful life of three years. Leasehold improvement is
depreciated on a straight line basis over the lease period of ten
years
Intangible
assets consist of two parts. The first is a surveillance recording system,
surveillance software, technical know-how and non-compete agreements, developed
by Jiwei Zhang, Xianbo Fu, Kewei Feng, Mingyue Fan (all individuals), acquired
originally by Landmark Enterprise Group Inc.(“Landmark”) , a related party, and
subsequently sold to the Company in exchange for common shares. The value of
intangible assets acquired from Landmark was established by an independent
valuation report. The second part is incorporation cost of Shell Company
purchasing.
In
accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the Company tests long-lived assets or
asset groups for recoverability when events or changes in circumstances indicate
that their carrying amount may not be recoverable. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair
value.
|
|
o)
|
Financial
Instruments and Fair Value Measures
|
SFAS No.
157 “Fair Value
Measurements” requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. SFAS No.
157 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A
financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value
measurement. SFAS No. 157 prioritizes the inputs into three levels that may be
used to measure fair value:
The
Company follows the guidance of the Securities and Exchange Commission's Staff
Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements". In
general, the Company records revenue when persuasive evidence of an arrangement
exists, services have been rendered or product delivery has occurred, the sales
price to the customer is fixed or determinable, and collectability is reasonably
assured. The following policies reflect specific criteria for the various
revenues streams of the Company:
The
Company generates revenue from the sale of its products and records revenues
from the sale of products when the goods are shipped, title passes, and
collectability is reasonably assured.
Revenue
from periodic maintenance monitoring agreements is generally recognized on a
monthly basis provided no significant obligations remain and collectability of
the related receivable is probable.
Revenue
from the performance of installation services is recognized upon completion of
the service.
The
Company derives the bulk of its revenue from the supply and installation
of surveillance and safety equipment and the two deliverables do not meet the
separation criteria under EITF issue 00-21. The installation is not
considered to be essential to the functionality of the equipment having regard
to the following criteria as set out in SAB 104:
|
|
i)
|
The
surveillance and safety equipment is a standard product with minor
modifications according to customers’
specifications;
|
| |
ii)
|
Installation
does not significantly alter the surveillance and safety equipment’s
capabilities; and
|
| |
iii)
|
Other
companies which possess the relevant licenses are available to perform the
installation services.
|
The
Company reduced its estimate of future warranty requirements to
approximately 1% of contract
installation revenue. In the year ended March 31, 2010, estimated warranty was $
-0-.
Revenue
from the outright sale of surveillance and safety equipment is recognized when
delivery occurs and risk of ownership passes to the customers.
|
|
q)
|
Research
& Development Costs
|
Research
and development costs are expensed as incurred. Research and development costs
included in general and administrative expenses for the year ended March 31,
2010 and 2009, amounted to $-0- and $142,274, respectively. The Research and
Development expenses consist of engineers’ salaries, research expenses paid to
the 3rd party subcontractors, monthly rent fee for research and development
centers and related utility outlay. Up to March 31, 2010, the company has
developed the following products and solutions: (1) USCI8™ Video Alarm Platform,
which offers an all-in-one security system for both commercial and residential
customers, and allows customers to take control of their own security
requirements; (2) iCam H.264 IP Camera, which currently has three series
covering market demand from home and small businesses, large businesses and
government and high-end surveillance users; (3) ANV Digital Video Server, or
H.264 DVS300, which is an embedded surveillance device specially designed for
network application; and (4) NVS Center 500 Management Software, which can
manage 1728 IP cameras simultaneously and set and control every IP camera
separately, supporting 32 channels output of TV walls, centralized storage, data
transmission and electric map.
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted SFAS No. 109 “Accounting for Income Taxes”
as of its inception. Pursuant to SFAS No. 109 the Company is required to compute
tax asset benefits for net operating losses carried forward. Potential benefit
of net operating losses have not been recognized in these financial statements
because the Company cannot be assured it is more likely than not it will utilize
the net operating losses carried forward in future years.
|
|
s)
|
Foreign
Currency Translation
|
The
Company’s functional currency is the Canadian dollar. The financial statements
are translated to United States dollars in accordance with SFAS No. 52 “Foreign Currency Translation”
using period-end rates of exchange for assets and liabilities, and
average rates of exchange for the year for revenues and expenses. Translation
gains (losses) are recorded in accumulated other comprehensive income (loss) as
a component of stockholders’ equity (deficit). Gains and losses arising on
translation or settlement of foreign currency denominated transactions or
balances are included in the determination of income. Foreign currency
transactions are primarily undertaken in United States dollars. The Company has
not, to the date of these financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
|
|
t)
|
Basic
and Diluted Net Income (Loss) Per
Share
|
The
Company computes net income (loss) per share in accordance with SFAS No. 128,
"Earnings per Share".
SFAS No. 128 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.
Basic net
earnings (loss) per share equals net earnings (loss) divided by the weighted
average shares outstanding during the year. The computation of diluted net
earnings per share does not include dilutive common stock equivalents in the
weighted average shares outstanding as they would be anti-dilutive. The
Company's common stock equivalents at March 31, 2010 and 2009 include the
following:
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Options
|
|
|
140,000 |
|
|
|
140,000 |
|
|
Warrants
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
140,000 |
|
|
|
140,000 |
|
|
|
u)
|
Stock-based
Compensation
|
The
Company records stock-based compensation in accordance with SFAS No. 123R “Share
Based Payments”, using the fair value method. The Company provides its officers,
consultants, and directors stock options to purchase common stock of the Company
on a discretionary basis. Generally, options are granted at exercise prices not
less than the fair market value at the date of grant. As of March 31, 2010, the
Company has granted 140,000 shares stock options to its director, consultant and
top manager and the fair market value is $24,836.
Advertising
is expensed as incurred and was $ 28,265 and $58,650 for the year ended March
31, 2010 and 2009, respectively.
| |
w)
|
Recent
Accounting Pronouncements
|
Impact
of New Accounting Standards
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position, or cash flow.
|
Note
2.
|
Accounts
Receivable
|
Accounts
receivable as of March 31, 2010 consists of $-0- and as of March 31, 2009
consists of $ 508 of trade receivable.
At March
31, 2010 and 2009, inventories consisted of:
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Parts
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
Finished
goods
|
|
|
81,490 |
|
|
|
55,167 |
|
|
|
|
|
81,490 |
|
|
|
55,167 |
|
|
Less:
Reserve for slow moving inventory
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
$ |
81,490 |
|
|
$ |
55,167 |
|
Other
assets consist of rental deposit of $5,052 and $4,211 as at March 31, 2010 and
2009, respectively.
|
Note 5.
|
Property
and Equipment
|
Fixed assets are summarized by
classifications as follows
|
|
|
Cost
$
|
|
|
Accumulated
Amortization
$
|
|
|
March 31,
2010
Net Carrying
Value
$
|
|
|
March 31,
2009
Net Carrying
Value
$
|
|
|
Furniture
and equipment
|
|
|
4,362 |
|
|
|
2,763 |
|
|
|
1,599 |
|
|
|
2,460 |
|
|
Computer
equipment
|
|
|
8,352 |
|
|
|
5,005 |
|
|
|
3,347 |
|
|
|
4,143 |
|
|
Customer
software
|
|
|
624 |
|
|
|
492 |
|
|
|
132 |
|
|
|
273 |
|
|
Leasehold
Improvement
|
|
|
18,750 |
|
|
|
2,813 |
|
|
|
15,937 |
|
|
|
14,350 |
|
|
|
|
|
32,088 |
|
|
|
11,073 |
|
|
|
21,015 |
|
|
|
21,226 |
|
|
Note
6.
|
Intangible
Assets
|
Intangible
assets amounted $1,379,858 and $1,034,627 as of March 31, 2010 and 2009,
respectively. As at March 31, 2010 intangible assets consist of incorporation
cost of $54,482 and software of $1,325,376 acquired from Landmark Enterprise
Group Inc., a related party in December 2006.
As at
March 31, 2010, accounts payable amounted $7,303 consists of amounts owing to
Visa $5,487 and government agency payable $1,816, respectively. As at March 31,
2009 accounts payable consisted of amounts owing to Serena Wang $2,464 and
government agency payable $1,890 which has been paid within the year ended March
31, 2010.
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109
requires the recognition of deferred tax assets and liabilities for both the
expected impact of differences between the financial statements and the tax
basis of assets and liabilities, and for the expected future tax benefit to be
derived from tax losses and tax credit carryforwards. SFAS 109 additionally
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. Realization of deferred tax assets is
dependent upon future earnings, if any, of which the timing and amount are
uncertain. Accordingly, the net deferred tax asset related to the Canada net
operating loss carryforward has been fully offset by a valuation allowance. The
Company is governed by the Income Tax Law of the Canadian
government.
The
Company has a net operating loss carry forward for tax purposes totaling
approximately $ 739,448 at March 31, 2010. The net operating loss carries
forwards for Canadian income taxes, which may be available to reduce future
years' taxable income. These carry forwards will expire, if not utilize, through
2030. Management believes that the realization of the benefits from these losses
appears uncertain due to the Company's continuing losses for income tax
purposes. Accordingly, the Company has provided a 100% valuation allowance on
the deferred tax asset benefit to reduce the asset to zero. Management will
review this valuation allowance periodically and make adjustments as
warranted.
|
Note 9.
|
Related
Party Transactions
|
Amounts
owing to the significant shareholder, Serena Wong amounted 38,188 and $nil as of
March 31, 2010 and 2009, respectively.
The
company is authorized to issue unlimited shares of common stocks – Class A and
Class B, no par value share. As of March 31, 2010, the amount of voting common
shares issued and outstanding are 33,190,071.
On June
28, 2009, Company entered in to an agreement and plan of reorganization
(“agreement”) by and among Dini Products, Inc. (“DINP”) , a Nevada corporation
whereas, each of the common share in the Company was exchanged on a share for
share basis so that after such exchange DINP has 33,190,071 shares of common
stock issued and outstanding inclusive of 29,860,000 shares issued to the
Company’s stockholders.
Upon
execution of agreement, the Company has amended its name to ANV Security Group,
Inc.
|
Note 11.
|
Equity
Compensation Plan
|
On
October 1, 2008, the board of directors adopted the Company's Stock Option Plan.
The Company has reserved 1,000,000 shares of common stock for issuance upon
exercise of options granted from time to time under the stock option plan. The
stock option plan is intended to assist the Company in securing and retaining
key employees, directors and consultants by allowing them to participate in the
Company's ownership and growth through the grant of incentive and non-qualified
options. Under the stock option plan, the Company may grant incentive stock
options only to key employees and employee directors, or the Company may grant
non-qualified options to employees, officers, directors and consultants. The
stock option plan is currently administered by the Company's board of directors.
Subject to the provisions of the stock option plan, the board will determine who
shall receive options, the number of shares of common stock that may be
purchased under the options. As at March 31, 2010 the Company has granted
140,000 shares options.
|
Note
12.
|
Foreign
Currency Translation
|
Accounting
for Canada ANV System Inc. and its subsidiary is conducted in Canadian
currency. It converts figures on a period basis in accordance with FASB #
52. The functional currency is in Canadian currency. The Companies
balance sheet as of March 31, 2010 was translated at year ended rate of 0.9844
(Canadian currency to US currency). Statements of operations were reported
on the weighted average for the year ended March 31, 2010 as required by FASB #
52. at the rate of 0.9169 (Canadian currency to US currency). Statement of cash
flows were reported on the weighted average for the 12 months ended March 31,
2010 as required by FASB # 52. at the rate of 0.9169 (Canadian currency to US
currency).
(a)
Concentration of credit risk
Financial
instruments that potentially expose the ANV Security Group Inc. (the “Company”
or “ANV”) to concentration of credit risk consist primarily of cash, accounts
and notes receivable. The Company places its cash with financial institutions
with high credit ratings.
(b)
Country risk
Revenues
of the Company are mainly derived from the sale in Canada. The Company hopes to
expand its operations to countries outside the Canada, however, such expansion
has not been commenced and there are no assurances that the Company will be able
to achieve such an expansion successfully. Therefore, a downturn or stagnation
in the economic environment of Canada could have a material adverse effect on
the Company's financial condition.
(c)
Product risk
ANV might
have to compete with larger companies who have greater funds available for
expansion, marketing, research and development and the ability to attract more
qualified personnel. There can be no assurance that ANV will remain
competitive should this occur.
(d)
Exchange risk
The
Company cannot guarantee that the current exchange rate will remain steady,
therefore there is a possibility that the Company could post the same amount of
profit for two comparable periods and because of a fluctuating exchange rate
actually post higher or lower profit depending on exchange rate of Canadian
dollars converted to U.S. dollars on that date. The exchange rate could
fluctuate depending on changes in the political and economic environments
without notice.
(e) Key
personnel risk
The
Company's future success depends on the continued services of Mr. Wilson Wang.
CEO and Matt Li, CTO. The loss of one of their service would be detrimental to
the Company and could have an adverse effect on business development. The
Company does not currently maintain key man insurance on their life but plan to
implement in near future. Future success is also dependent on the ability to
identify, hire, train and retain other qualified managerial and other
employees.
|
Note
14.
|
Segment
Information
|
The
following information is presented in accordance with SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information. In the nine months
ended March 31, 2010, the Company operated in two reportable business segments -
(1) sales of security devise and units (2) installation service and (3) monthly
monitoring service.
The
Company's reportable segments are strategic business units that offer different
products. The Company's reportable segments, although integral to the success of
the others, offer distinctly different products and services and require
different types of management focus. As such, these segments are managed
separately.
|
Note
15.
|
Commitments
and Contingencies
|
15.1
Lease Commitments
Company
leases its office space and laboratory facility in Richmond, British Columbia
which starts on April 1, 2010 and expires on March 31, 2013. Its total monthly
minimum rental fee is $ 3,285. The minimum obligations under such commitments
for the years ending March 31 until its expiration are $39,420 per
year.
15.2
Litigation
As per
the Company, as of March 31, 2010, there are no actions, suits, proceedings or
claims pending against or materially affecting the Company, which if adversely
determined, would have a material adverse effect on the financial condition of
ANV.
15.3
Acquisitions
In
January 2010, Company has established ANV Security Group (Asia) Co. Ltd. a Hong
Kong Company (“ ANV Asia”) as a wholly- owned subsidiary of the registrant for
the purpose of acquiring operating companies in China. ANV Asia has no operation
to this date.
During
the period this financial statements is presented, Mr. Wilson Wang, president of
the Company acting as legal representative of ANV Asia (to be formed at the time
of contract signing) entered into two separate agreements with Mr Tingyi
Li and Mrs. Xiu Jiang, all Shareholders and legal representative of
Shenzhen Angesi Technology Co. Ltd., based in Shenzhen China and Mr. Zhaohui
Zeng, 100 % shareholder of Flybit Inetrnational Ltd. a Hong Kong company also
based in Shenzen China to acquire 100 % of controlling shares in the sellers.
The closing date was February 1, 2010.
On
January 19, 2010, Mr. Wilson Wang, in the same capacity entered into an
agreement (the “Flybit Agreement”) to acquire all of the issued and outstanding
stock of Flybit International, Ltd., a Hong Kong corporation, from its sole
owner Zhaohui Zeng for three million shares of the Company’s common stock
and $720,000 in cash. The closing under the Flybit Agreement was held on
February 1, 2010. Flybit is in developing and marketing mobile video
security system used on vehicles and it is a certified OEM manufacturer for
Panasonic in mobile video systems.
On
December 24, 2009, Mr.Wilson Wang in the same capacity for ANV Asia entered into
an agreement (the “Angesi Agreement”) with the shareholders of Shenzhen Angesi
Technology Co., Ltd (“Angesi”) to acquire Angesi and its nine affiliated
entities for 32 million shares of common stock. Angesi and its affiliates
are in the business of developing, manufacturing and marketing video cameras
throughout China. Based on unaudited financial information available to
management, Angesi had revenue of $45 million with a net profit of $2 million in
2009. The closing of the acquisition of Angesi was held February 1,
2010.
The
purchase price under each agreement is subject to adjustment, and each agreement
could be cancelled based on the result of an audit of the target company. The
Company intends to utilize the assets of these companies to expand its
manufacturing base and increase its retail operations in China.