CURRENT REPORT FOR ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
For the Fiscal Year Ended December 31, 2007
EMAZING INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
Nevada 333-138111 20-4672080
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
101 C North Greenville, Suite 255, Allen, Texas 75002
(Address of principal executive offices (zip code))
972-983-1453
(Registrant's telephone number, including area code)
(Former address)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 Act of 1934 during the past
12 months and (2) has been subject to such filing requirement for the past
90days Yes [X] No [ ].
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" 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 a check mark whether the company is a shell company (as defined by
Rule 12b-2 of the Exchange Act: Yes [ ] No [ X ].
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 2007: $ 309,500
Shares of common stock outstanding at December 31, 2007: 5,659,500
PART I.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, which we refer
to in this annual report as the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to in this annual
report as the Exchange Act. Forward-looking statements are not statements of
historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project"
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management's beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this annual
report. Factors that can cause or contribute to these differences include those
described under the headings "Risk Factors" and "Management Discussion and
Analysis and Plan of Operation."
If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary materially
from what we projected. Any forward-looking statement you read in this annual
report reflects our current views with respect to future events and is subject
to these and other risks, uncertainties and assumptions relating to our
operations, results of operations, growth strategy and liquidity. All subsequent
written and oral forward-looking statements attributable to us or individuals
acting on our behalf are expressly qualified in their entirety by this
paragraph. You should specifically consider the factors identified in this
annual report which would cause actual results to differ before making an
investment decision. We are under no duty to update any of the forward-looking
statements after the date of this annual report or to conform these statements
to actual results.
ITEM 1. DESCRIPTION OF BUSINESS
We were incorporated on April 21, 2006 in the State of Texas and redomiciled to
become a Nevada corporation in October 2006. In this report, we refer to Emazing
Interactive, Inc. as "we," "us", "eMg" or "Emazing" unless we specifically state
otherwise or the context indicates otherwise. We are a gaming organization that
is working with prominent marketing services connected to the gaming scene. We
specialize in providing marketing awareness of products and services of our
customers to millions of on-line gaming players and enthusiasts.
To date, our business development activities have primarily been concentrated in
web server access and company branding in hosting web based e-games. This
activity is structured whereby our partners and sponsors are provided premium
web site exposure identifying their company, name, and product offerings.
We generate revenues through our partnerships and sponsors. Sponsoring Emazing
will bring a product and/or brand name into the spotlight of gamers worldwide.
Our customer's brand will be synonymous with the youthful intelligent image that
pro-gaming has. Our customers have prime advertising space on our website, IRC
channel every hour 24/7 and clothes, which we will wear at competitive events
all year round. It is primarily through our fee structure for web server access
that we generate revenue. Although our web site creates product awareness for
our sponsors and partners, our revenue is generated by fees which our partners
and sponsors remit to us for that exposure. In the e-gaming industry, partners
and sponsors will pay top dollar for a popular gaming web site as they can
maximize their product and name exposure.
We also generate revenue through renting game servers for players to play a
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computer game of their choice. We rent game servers for over 32 different games,
the most popular being Half Life's Counter Strike and variations of this game.
We rent by the hour, day or month. This rental program is unique for our type of
service as most companies choose to rent by the month. We feel this gives us a
competitive advantage over our competition.
We have three standard packages designed for our prospective partners. Our
"Gold" package is aimed to give maximum publicity to our prospective partners,
forcing their product into the world of pro-Gaming and showing everybody that
their company really cares about the gamers. The "Silver" package is aimed at
companies with a lower budget that are looking to get their product noticed. The
"Bronze" package is for companies with limited budgets but still want
involvement in the eSports industry. Following is a chart outlining the benefits
of our partnerships/sponsors at the Gold, Silver and Bronze levels.
------------------------------------- ----------------------------------- -----------------------------------
GOLD PARTNER FEATURES SILVER PARTNER FEATURES BRONZE PARTNER FEATURES
------------------------------------- ----------------------------------- -----------------------------------
1. High priority branding on 1. Branding on our website 1. Branding on IRC for a
our website, clothing, and IRC limited time
computer cases and IRC channel
2. High priority advertising 2. Limited advertising on 2. Listed as a supporter
on television, radio, eSports television, radio, eSports for a limited time
websites and magazine and magazine special features
interviews
3. Main sponsor image, banner 3. Listed as an official 3. Special features
and description of company on supporter on our website negotiable
our website with a rotational banner and
a small logo
4. Special features on your 4. Special features on your
products: e.g. news and reviews products: e.g. news and
reviews
5. Product/brand endorsement 5. Product endorsement on
on our website and at events our website and limited
endorsement at events
6. Availability for press
attendances and media events.
Product testing and feedback
Price: $5,000.00 per month Price: $2,500.00 per month Price: One time payment of
$1,500.00+
------------------------------------- ----------------------------------- -----------------------------------
During 2006 we filed and had approved form SB-1 to raise funds which we raised
in 2006 and 2007. A portion of the proceeds of the offering are being used to
further develop e-gaming software and lease server capacity and access through
server lease agreements. The development of software is the key aspect of our
business model in that it is through the game itself that a company such as ours
achieves notoriety and industry following thereby affording us the opportunity
to promote our sponsors and partners on a fee structured basis. This software
development is the game itself and as it achieves acceptance and favorability
(more players playing it) the more our company positions it self as a provider
of leading edge e-gaming programs. Part and parcel to this is providing access
to the game itself on the World Wide Web. To achieve this, we lease servers or
portals, web based access points to allow e-game players to access our web site
and therefore our on-line games. These servers are a major source of revenue for
us as we charge access fees to these servers.
BUSINESS OPERATIONS:
GOVERNMENT REGULATION:
At the present time there are no federal government regulations on computer
games over the internet or on dedicated servers.
3
OUR QUALIFICATIONS
Our qualifications are our reputation and experience in the industry. G. Edward
Hancock, President, and our contract workers and volunteers have over 50 years
of experience in the egaming industry between them.
INDUSTRY & COMPETITION:
Market Analysis Summary:
Gamers are just as fanatical about pro-gaming teams as football fans are with
their NFL teams. They watch their matches, attend events, emulate what they
wear, buy the hardware they use, and follow the new trends players bring about.
Counter-Strike 1.6 is the world renown FPS (First Person Shooter) game and is
the #1 online action game in the world. Counter-Strike 1.6 offers the most
competition and biggest prize pots in the gaming industry. With all the new
advancements within the esports community it also brings about new games, such
as Counter-Strike Source. Source is the newest addition to the Counter-Strike
family bringing amazing graphics, new maps, and different techniques than
Counter-Strike 1.6. The graphics on this engine are amazing and offer high
quality details to this game as well. Bringing in this game offers computer
companies and hardware companies more sales due to gamers needing a better
computer to run the video game.
(Source:http://www.csnation.net/articles.php/cssguide_200/)
Online gaming has emerged as one of the biggest growing industries in the new
millennium. The Far East has played a significant role in paving the way for
recognition for online gamers. Multiplayer online games have generated over 1
billion dollars in revenue for the first time, in 2004. A large proportion of
this figure has come from player subscription games such as Everquest and Star
Wars Galaxies, but a significant amount has also come from the first person
shooter game sales. This figure does not include the emergence of sponsored
players and teams as has been seen in Asia over the last 18 months with many
players earning above $100,000 in sponsorship deals. These players have become
cult figures in their respective countries and "national heroes". The way it
stands now, is that this status will start migrating to the already maturing
gaming markets such as the US, where global events here now command higher
earnings for the winners. Typical earnings of a team range between $20,000 and
$40,000 for the larger events, though this is small compared to the events of
Asia.
These events have caused an influx from many large companies wanting to gain
access to this emerging market. Names such as Nike, Pepsi, Red Bull, and Oakley
have begun their sponsorship programs globally with an emphasis on the US
Market. Gaming leagues and competitions such as WSVG, CPL, ESWC, WCG and WEG
have become very popular in the US and the world, culminating in the Asian model
for sponsored clans and players increasingly hugely as a result. News of these
events is starting to hit mainstream television and press with news of the
winning tournaments being broadcasted on channels such as:
1. BBC News Online
2. CNN 3. ABC
4. Fox News
5. MTV
6. Fuse Network 7. CBC Television in Canada
8. Many major online news services such as Yahoo, MSN, Reuters
As more mainstream media becomes involved in promoting gaming events, this
allows more companies outside the gaming community to get involved as named
above.
4
Besides these news sites and television, there are various ways to follow
events. These methods include online radio, such as TSN (www.tsncentral.com),
streaming video and in-game viewing tools such as HalfLife-TV. These programs
allow the viewer to watch the actual in game action from the point of view of
any player they like or if preferred a map overview. Over 30,000 people watched
the last CPL (www.thecpl.com) finals on HalfLife-TV alone. (Source:
http://www20.tomshardware.com/game/200408071/cyberathlete-14.html)
GAMING STATISTICS
1 The global gaming market was approximately $137 Million in 2003 and
industry experts forecasted the industry to grow at an impressive
compound annual growth rate (CAGR) of 40 per cent through 2007 to
become the second largest online gaming sub-sector behind Multi-player
Online Games. (Source: http://www.screendigest.com/ezine/0404/#games)
2 Screen Digest forecasts that the total online PC games market will top
$2.2 Billion by 2007.
(Source:http://www.screendigest.com/ezine/0404/#games)
3 Nick Gibson, a games industry analyst and the author of the report
states: "The casual online gaming market has matured rapidly since the
end of the dotcom boom era and a number of new, high margin revenue
models have emerged that have, following a three year hiatus, returned
rapid growth to this sector. Amazingly, every single one of the major
casual games service providers reported that this growth was being
predominantly fuelled by middle-aged and female gamers, the antithesis
of the MMOG and hard-core gaming markets."
(Source:http://www.screendigest.com/ezine/0404/#games)
4 The barriers that keep the average gamer from having a say in the
future of his or her hobby are falling away and the doors are opening
for new talent. Having just passed the 11 billion dollar mark, the
gaming industry has started to assume a position as a true defining
force in culture and a shaper of our digital future. (Source:
http://www4.tomshardware.com/business/20040401/gdc-11.html#conclusion)
5 Clearly, the most powerful force driving the games market is consumer
demand. According to a new study from the Entertainment Software
Association (ESA), "Essential Facts about the Computer and Video Game
Industry," more than half (54 percent) of all US households have
purchased or plan to purchase one or more games this year.
(Source:http://cgw.pennnet.com/Articles/Article_Display.cfm?Section=
Articles&Subsection=Display&Article_ID=209404)
6 By 2010, 450 million homes worldwide will have broadband connectivity
at speeds greater than 1Gbit/second. In addition, of the more than 2
billion mobile phones in use, at least half will be connected to 3G
networks, which will feature data transfer speeds in excess
100Kbit/second and make the downloading of games and assets practical.
(Source:http://cgw.pennnet.com/Articles/Article_Display.cfm?Section=
Articles&Subsection=Display&Article_ID=209404)
7 The report concludes that the electronic gaming market will expand at
a compound annual growth rate of 20 percent and will top $55 billion
in annual revenue by the end of the decade.
(Source:http://cgw.pennnet.com/Articles/Article_Display.cfm?Section=
Articles&Subsection=Display&Article_ID=209404)
Themis Group (a community and communications services company catering to games,
technology, and entertainment enthusiasts) CEO and co-founder Alex Macris says
"It's clear that the online gaming portion of the industry continues to
experience surging growth, especially in the area of subscription-based games."
The age demographic of videogame and computer game users converges to a median
point of 29 years. Younger players raised on a steady diet of fantasy action
5
shooters were raving about the whole squad concept of working with teammates
online toward a shared goal while living with the reality that one bullet kills
and getting maimed slows a soldier down. The same trend is emphasized by the
success of Half-Life and its squad-based add-ons, Team Fortress Classic and
Counter-Strike.
OUR BUSINESS STRATEGY
Emazing is a gaming organization that works with prominent marketing services
connected to the gaming scene. Currently, the entire team consists of contract
workers including management, sales, technical development, press and our
primary team / players department. We comprise of people who have specific
gaming experience - a pre-requisite for employment with our company is
experience in the gaming world. Combined, our organization holds well over 50
years of experience in management alone.
Management consists of our President and CEO. As CEO, he is responsible for
coordinating and leading the entire organization to achieve optimal results and
goals. This includes directing contract workers and measuring results. He also
manages the budget to satisfy needs for traveling and accommodations to PR
events and tournaments. Additionally, our CEO is responsible for strategic
thinking and placement within the E-Gaming industry, constantly looking for new
opportunities. As such, he is instrumental in building and maintaining sponsor
and partner relationships.
The sales department handles contacts to other companies and controls all
marketing possibilities. They make proper detailed statistics and documentation
on the amount of exposures that the partner in question receives. Also includes
the research of the impact of the investments. These workers are on contract and
are paid only for hours worked.
The technical development area works with the organizations' technical
structure, which includes the website, design material, marketing channels, and
technical equipment. Also provides technical solutions and services with the
integration of the partners' products and the popularity/demand of the latest
hardware. These workers are on contract and are paid only for hours worked.
Team/Players: The current team of players the backbone to the organization. The
team practices and competes in order to keep Emazing as a world leading
organization. The team is the primary marketing channel for sponsors and the
organization. The team wears branded clothing and as they perform and succeed
spectators and other participants are drawn to play the same games. These
workers are on contract and are paid only for hours worked.
Press department: Works to provide the public with the latest updates regarding
the team and e-sports through our website and other means of communication. Also
provides detailed coverage of the teams' progress in tournaments and leagues.
These workers are on contract and are paid only for hours worked.
Emazing has three major financial objectives to reach its goal as the best and
highest-ranking Professional Counter-Strike team in the world:
1. Maintain Equipment on the Cutting Edge - It goes without saying that
when competing in the technologically advanced arena of professional
gaming, you want to remain on the leading edge of the technology
curve. Faster machines, graphics cards, and other equipment can mean
the difference between winning and losing at this level.
2. Ability to Travel to Tournaments - There is no use in being
professional if one can't afford to travel to the various events and
tournaments here at home and abroad. Travel and accommodations
represent majority significant portion of our costs.
3. Ability to Train - Professional gamers train for up to 12 hours per
day, every day to stay at the top of their game. This does not allow
much time for work, and often professional gamers are forced to drop
out because they need financial stability to survive. A monthly living
allowance would not only allow us to focus on training, but it would
also bring greater stability to the team members.
6
Emazing utilizes their website, www.emazinggaming.com, as the portal to which
e-games are accessed on the World Wide Web. Through links on the website we are
able to better manage our visitors, game selection, and visitor profiles,
effectively providing us the ability to ultimately understand our customers and
their playing habits from which we can then develop more challenging and
exciting game content.
All games currently provided by Emazing are third party developed. Through the
proceeds of this offering, we will use a portion of the proceeds to develop our
own game portfolio. Game development is a capital and time intensive process,
usually taking 18-24 months to take a game from concept form to fee based web
play. It is our intent to be an industry leading game developer as well as
content provider through our interactive website.
Industry and Competitors
The Industry:
The eSports industry is highly competitive. eSports is technologically based and
through the medium of the internet is readily accessible to most anyone with a
computer and a credit card. Barriers to entry are high due to server costs
(owned and/or leased), travel expenses, and general living expenses. The more
successful and enthusiastic eSport competitors are reliant on sponsors and
partners to generate funds to undergird living, travel and equipment maintenance
costs. Although highly competitive, it is also highly fragmented. eSports is
worldwide in scope and difficult to assess from a competitive standpoint as
games are often hot and therefore streaky in play before another company puts
out a more desirable game program. Even so, server capacity, speed and graphics
generally determine the amount of play a game will generate.
Marketing Strategy:
We aim to fit our partners' needs and their marketing strategies when
customizing a partnership between eMg and our partners. We are always open to
new input and ideas and we put our partners' needs first.
The following highlights our business sponsorships:
--------------------------------------------------------------------------------------------------
EXPOSURE OF PARTNERS
----------------------- --------------------------------------------------------------------------
PARTNER EXPOSURE
----------------------- --------------------------------------------------------------------------
HEAD PARTNERS CLOTHING (FRONT, BACK), GAME, PC'S, WEB SHOP, HOMEPAGE, CHAT, QUIZ, MISC.
MAIN PARTNERS CLOTHING (COLLAR, SLEEVES AND THIGHS), WEB SHOP, HOMEPAGE, CHAT, MISC.
PARTNERS WEB SHOP, HOMEPAGE, CHAT, MISC.
----------------------- --------------------------------------------------------------------------
EXPOSURE EXPLAINED
----------------------- --------------------------------------------------------------------------
CLOTHING: CHEST, BACK, COLLAR, THIGH AND SLEEVES
PC: STICKERS ON THE SIDE OF PC TOWER
GAME: BANNER IN MESSAGE OF THE DAY IN OUR COUNTER-STRIKE SOURCE SERVER
WEB SHOP: PRINT ON PRODUCTS (IF POSSIBLE)
HOMEPAGE: BANNERS, SPONSOR SECTION AND FRONT PAGE
CHAT: JOIN MESSAGE, TEXT COMMERCIALS
QUIZ: PRODUCT AND COMPANY ENDORSEMENTS
MISC.: CS-MOVIES, WALLPAPERS, CUSTOM CS, SCREENSAVERS ETC.
----------------------- --------------------------------------------------------------------------
7
Future products and services:
The Company plans to gravitate away from leasing servers and instead purchase
their own servers. This will greatly reduce overhead costs associated with
operations. Additionally, the Company will annually be upgrading equipment,
graphics, and technology to increase speed.
Sources and Availability of Raw Material:
We are a service business and do not use raw materials. We use products in
performing our service that are readily available from many sources.
Dependence on One or a Few Major Customers:
We rely heavily on sponsors and partners. Sponsors receive greater visibility
whereas partners are provided advertising and media coverage. We are not
dependent on any one sponsor or partner.
Costs and Effects of Compliance with Environmental Laws:
We are not aware of nor do we anticipate any environmental laws with which we
will have to comply.
Number of Employees:
We have one employee, the President. The day to day duties are performed by the
President, contract workers and volunteers.
Operations and Technology:
We are highly dependent on technology. Our operations and customer service model
is dependent on internet servers, software, computer graphics programs and
memory
Research and Development:
The company has in development numerous products that will require the use of a
material amount of the assets of the company. Since inception, the Company has
capitalized $48,888 on software development. The Company expenses research and
development costs as incurred. Future expenditures will be dependent on the
operating income generated.
ITEM 2. DESCRIPTION OF PROPERTY
The company shares an office at 101 C North Greenville, Suite 255, Allen, Texas
75002.
ITEM 3. LEGAL PROCEEDINGS
The company is not involved in any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote to the security holders during
2007.
8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The common stock is currently quoted on the over-the-counter Bulletin Board
under the symbol "EMZG."
The following table sets forth the quarterly high and low bid prices for the
common stock since the quarter ended March 31, 2006. The prices set forth below
represent inter-dealer quotations, without retail markup, markdown or commission
and may not be reflective of actual transactions.
HIGH LOW
----- ---
Quarter ended March 31, 2006 N/A N/A
Quarter ended June 30, 2006 N/A N/A
Quarter ended September 30, 2006 N/A N/A
Quarter ended December 31, 2006 N/A N/A
Quarter ended March 31, 2007 N/A N/A
Quarter ended June 30, 2007 N/A N/A
Quarter ended September 30, 2007 N/A N/A
Quarter ended December 31, 2007 $0.50 $1.00
At December 31, 2007, the closing price of the common stock was $1.00 and we had
approximately 67 record holders of our common stock. This number excludes any
estimate by us of the number of beneficial owners of shares held in names of
various security brokers, dealers and registered clearing agencies for which the
accuracy cannot be guaranteed. The transfer agent for our common stock is
Signature Stock Transfer Inc.
Dividends
We have not paid cash dividends on any class of common equity since formation
and we do not anticipate paying any dividends on our outstanding common stock in
the foreseeable future.
Warrants
The Company has no warrants outstanding.
ITEM 6. SELECTED FINANCIAL DATA
Not required
ITEM 7. MANAGEMENT DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with our consolidated
financial statements provided in this annual report on Form 10-KSB. Certain
statements contained herein may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve a number of risks, uncertainties and other factors that could
cause actual results to differ materially, as discussed more fully herein.
The forward-looking information set forth in this annual report is as of the
date of this filing, and we undertake no duty to update this information. More
information about potential factors that could affect our business and financial
results is included in the section entitled "Risk Factors" of this annual
report.
9
SUMMARY OF 2007
Since we began, we started testing three approaches with different hardware as
we needed to set a standard performance benchmark. This was done with Intel and
AMD processors and the third differential was the physical memory. We found that
certain configurations had better performance and as we injected these new
configurations into our customer servers we found and created the XDEF service
(proprietary to eMI). This was a great breakthrough for the company as it set us
apart from the competition.
In the latter part of 2006, we filed a registration statement with the U.S.
Securities & Exchange Commission in order to raise funds to expand our business
and execute our business plan. The filing became effective on December 21, 2006
which gave us the opportunity to sell up to 1,000,000 shares of common stock at
$0.50 per share. In September, when we cut off our offering and started trading
on the OTCBB under the symbol EMZG, we had raised $154,750 by selling 309,500
shares of common stock under that registration statement.
In 2007 we revamped our gaming platform and have added some other opportunities
for generating income through the use of popular games and creating competitions
with prizes.
Results for the Twelve Months Ended December 31, 2007 compared to the Period
from April 11 (date of inception) to December 31, 2006 (herein referred to as
the "short period").
Revenues (net of refunds) for the twelve months ended December 31, 2007 were
$35,089 compared to $11,963 for the short period ended December 31, 2006.
Total operating expenses for the twelve months ended December 31, 2007 were
$161,299 compared to $93,352 for the short period in 2006 generating a net
operating loss of $125,126 at December 31, 2007 compared to a loss of $81,389 at
December 31, 2006. Our largest expenses for the year were Computer (server)
Expense of $36,399 in 2007 and $24,234 in 2006, and Contract Services of $11,588
in 2007 compared to $19,869 in 2006. Since we started our business in 2006, we
had many costs that were non-recurring one time costs in 2006 which we estimate
at $10,000.
We had interest income in 2007 of $1,054 and we had none in 2006.
Net loss for the twelve months ended December 31, 2007 was $125,126 compared to
a loss of $81,389 for the short period from April 11, 2006 (date of inception)
to December 31, 2006.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, together with the independent auditors'
report thereon of The Hall Group, CPAs appear on pages F-1 through F-13 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANICAL DISCLOSURES
None.
10
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
------------------------------------------------
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Securities Exchange Act
of 1934, as amended (the "Act") is accumulated and communicated to the issuer's
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. It should be noted that the design of
any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote. As of the end of the period covered by this Annual
Report, we carried out an evaluation, under the supervision and with the
participation of our President, also serving as our Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our President has concluded that the
Company's disclosure controls and procedures are not effective because of the
identification of a material weakness in our internal control over financial
reporting which is identified below, which we view as an integral part of our
disclosure controls and procedures.
Changes in Internal Controls over Financial Reporting
-----------------------------------------------------
We have not yet made any changes in our internal controls over financial
reporting that occurred during the period covered by this report on Form 10-K
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Management's Annual Report on 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 Rules 13a-15(f) and
15d-15(f) of the Exchange Act. Our internal control system was designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes, in accordance
with generally accepted accounting principles. Because of inherent limitations,
a system of internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate due to
change in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal
control over financial reporting using the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control--Integrated Framework. Based on its evaluation, our management concluded
that there is a material weakness in our internal control over financial
reporting. A material weakness is a deficiency, or a combination of control
deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the Company's annual or
interim financial statements will not be prevented or detected on a timely
basis.
The material weakness relates to the lack of segregation of duties in financial
reporting, as our financial reporting and all accounting functions are performed
by xternal accountants who may not always get full information and therefore
something is not recorded appropriately. Our President does not possess
accounting expertise and our company does not have an audit committee. This
weakness is due to the company's lack of working capital to hire additional
staff. To remedy this material weakness, we intend to engage another accountant
to assist with financial reporting as soon as our finances will allow.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
11
reporting. Management's report was not subject to the attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management's report in this annual
report.
The Company's management carried out an assessment of the effectiveness of the
Company's internal control over financial reporting as of December 31, 2007. The
Company's management based its evaluation on criteria set forth in the framework
in Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that assessment, management
has concluded that the Company's internal control over financial reporting was
not effective as of December 31, 2007.
ITEM 9B. OTHER INFORMATION
The Company filed no reports on Form 8-K during the year ended December 31,
2007.
12
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
As of December 31, 2007, the following person serves as a director and officer
of the Company.
G. Edward Hancock 21 Chief Executive Officer, President,
Chief Financial Officer and Director
Since April 11, 2006
G. Edward Hancock, 21, started in eSports at age 13, being a very talented game
player at an early age opened doors for him at such an early age for the level
of competition offered. From the conception of the most popular game he has been
in the in the top 15% of American players. Coupled with his 10 year computer and
internet experience and knowledge of Game Servers this helped him to understand
all aspects of the online gaming industry, particularly game servers and
performance.
In 2001 Mr. Hancock, in conjunction with a few other gamers, opened a game
server rental company in Southern California offering game servers to the west
coast of United States; this was a very good learning experience. One of the
biggest lessons of this venture is the shelf life of the computer equipment and
facilities that housed them. If the data center was not set up for online play
then the performance suffered, and this business is all about performance.
In 2003 Mr. Hancock helped open a LAN Game Center in Lake Forest, California;
this facility offered game play by the hour and was a very profitable business
in both financially and educationally. This business was sold and Mr. Hancock
re-located to Dallas Texas, the home of the biggest online gaming league in the
world, CAL, The Cyber Athletic League and CPL , The Cyber Professional League
where twice a year teams and players from all over the world come to compete for
over 100,000 in money and prizes. Mr. Hancock is now concentrating on managing
teams as well as competing as Emazing's sponsored teams, (called eMg) now
represent over 15 teams throughout the world. Most of the teams are in the US
and Canada and are supplied game servers from the eMg XDEF network.
In late 2005 Mr. Hancock started up eMg's XDEF network, a high end gaming server
rental company specializing in high performance game servers as well as low cost
economical game servers for beginners. Over the next year this business has
grown to one of the top US game server rental companies offering the high end
consistent service game servers demand.
ITEM 11. EXECUTIVE COMPENSATION
Our sole officer and director received the following compensation for the years
of 2007 and 2006. He has no employment contract with the company.
Name of Person Capacity in which he served Aggregate
Receiving compensation to receive remuneration remuneration
---------------------- ---------------------------------------------------
G Edward Hancock President, Secretary 2007 - $ 3,232
and Treasurer 2006 - $ -0-
As of the date of this offering, our sole officer is our only employee. We have
no employment agreements with any officer, director or employee.
13
ITEM 12. SECURITY OWNERSHIP OF MANANGEMENT AND BENEFICIAL OWNERS
As of December 31, 2007, the following person is known to the Company to own 10%
or more of the Company's Voting Stock:
Title / relationship Number of
to Issuer Name of Owner shares owned Percent
--------------------------------------------------------------------------------
President, Secretary
and Director G. Edward Hancock 5,000,000 88.35%
All officers, directors, and
10% shareholders as a group 5,000,000 88.35%
14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTION
As of the date of this filing, there are no other agreements or proposed
transactions, whether direct or indirect, with anyone, but more particularly
with any of the following:
o a director or officer of the issuer;
o any principal security holder;
o any promoter of the issuer;
o any relative or spouse, or relative of such spouse, of the above
referenced persons.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) AUDIT FEES
The aggregate fees billed for professional services rendered by our auditors,
for the audit of the registrant's annual financial statements and review of the
financial statements included in the registrant's Form 10-KSB or services that
are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for fiscal year 2007 was $13,000 and in 2006
was $3,660.
(2) AUDIT-RELATED FEES
NONE
(3) TAX FEES
NONE
(4) ALL OTHER FEES
NONE
(5) AUDIT COMMITTEE POLICIES AND PROCEDURES AUDIT COMMITTEE FINANCIAL EXPERT
The Securities and Exchange Commission has adopted rules implementing Section
407 of the Sarbanes-Oxley Act of 2002 requiring public companies to disclose
information about "audit committee financial experts." As of the date of this
Annual report, we do not have a standing Audit Committee. The functions of the
Audit Committee are currently assumed by our Board of Directors. Additionally,
we do not have a member of our Board of Directors that qualifies as an "audit
committee financial expert." For that reason, we do not have an audit committee
financial expert.
15
PART IV
ITEM 15. EXHIBITS, FINANICAL STATEMENTS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report: Included in Part
II, Item 7 of this report:
Report of Independent Registered Accounting Firm
Consolidated Balance Sheet as of December 31, 2007
Consolidated Statements of Operations - the year ended December 31,
2007 and the period April 11, 2006 (date of inception) to December 31,
2006
Consolidated Statements of Cash Flows for the year ended December 31,
2007 and the period April 11, 2006 (date of inception) to December 31,
2006
Consolidated Statements of Stockholders Equity - the period April 11,
2006 (date of inception) to December 31, 2007
Notes to Financial Statements
(b) The Company filed no reports on Form 8-K during the year ended December 31,
2007.
(c) Exhibits
Exhibit Number Name of Exhibit
31.1 Certification of Chief Executive Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer, pursuant to 18 United States Code Section 1350, as
enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report on Form 10-K to be signed on its
behalf by the undersigned hereunto duly authorized.
EMAZING INTERACTIVE, INC.
By: /s G. Edward Hancock
---------------------
G. Edward Hancock
Chief Executive Officer & Chief Financial Officer
Dated: March 31, 2008
EMAZING INTERACTIVE, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2007
EMAZING INTERACTIVE, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE (S)
BASIC FINANCIAL STATEMENTS
Independent Auditor's Report 1
Consolidated Balance Sheet as of December 31, 2007 2
Consolidated Statements of Operations for the years ended 3
December 31, 2007 and 2006
Consolidated Statements of Cash Flows for the years ended 4
December 31, 2007 and 2006
Consolidated Statement of Stockholders' Equity for the Period from 5
April 11, 2006 (date of inception) to December 31, 2007
Notes to the Consolidated Financial Statements 6-13
i
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Management of
Emazing Interactive, Inc.
Allen, Texas
We have audited the accompanying consolidated balance sheet of Emazing
Interactive, Inc. and subsidiary of December 31, 2007 and the related
consolidated statements of operations, cash flows and stockholders' equity for
the years ended December 31, 2007 and 2006. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit of these consolidated financial statements 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.
We were not engaged to examine management's assertion about the effectiveness of
Emazing Interactive, Inc.'s internal control over financial reporting as of
December 31, 2007 and, accordingly, we do not express on opinion thereon.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Emazing Interactive,
Inc. and subsidiary as of December 31, 2007, and the results of its operations
and its cash flows for the years ended December 31, 2007 and 2006 in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered significant losses and will
require additional capital to develop its business until the Company either (1)
achieves a level of revenues adequate to generate sufficient cash flows from
operations; or (2) obtains additional financing necessary to support its working
capital requirements. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 7. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ The Hall Group, CPAs
-------------------------
The Hall Group, CPAs
Dallas, Texas
March 21, 2008
1
EMAZING INTERACTIVE, INC.
Consolidated Balance Sheet
December 31, 2007
ASSETS
Current Assets
Cash and Cash Equivalents $ 17,513
---------
Total Current Assets 17,513
---------
Fixed Assets
Computer Equipment 27,950
Less: Accumulated Depreciation (11,216)
---------
Total Fixed Assets 16,734
---------
Intangible Assets
Gaming Software 48,488
Less: Accumulated Amortization (23,285)
---------
Total Intangible Assets 25,203
---------
TOTAL ASSETS $ 59,450
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 42,217
Accounts Payable-Related Parties 21,500
Due to Related Parties 5,678
---------
Total Liabilities (All Current) 69,395
---------
Stockholders' Equity
Common stock, $.001 par value, 50,000,000 shares authorized,
5,659,500 shares issued and outstanding 5,659
Additional Paid-In Capital 190,941
Retained Earnings (Deficit) (206,545)
---------
Total Stockholders' Equity (Deficit) (9,945)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 59,450
=========
The accompanying notes are an integral part of these financial statemens.
2
EMAZING INTERACTIVE, INC.
Consolidated Statements of Operations
For the Year Ended December 31, 2007 and
For the Period April 11, 2006 (Date of Inception) to December 31, 2006
2007 2006
----------- -----------
REVENUES $ 35,089 $ 11,963
OPERATING EXPENSES
Accounting and Professional 49,075 5,820
Computer Expenses 6,749 22,434
Contract Services 11,588 19,869
Depreciation & Amortization 20,619 13,882
Licenses and Fees 4,659 4,322
Office Expense 4,592 3,241
Marketing Expense 5,357 0
Server Hosting 36,399 1,800
Telephone & Server Expense 2,331 16,592
Travel Expense 19,930 5,392
----------- -----------
TOTAL OPERATING EXPENSES 161,299 93,352
----------- -----------
NET OPERATING (LOSS) (126,210) (81,389)
OTHER INCOME (EXPENSE)
Interest Income 1,054 0
----------- -----------
TOTAL OTHER INCOME (EXPENSE) 1,054 0
----------- -----------
NET (LOSS) BEFORE INCOME TAXES (125,156) (81,389)
Provision for Income Taxes (Expense) Benefit 0 0
----------- -----------
NET (LOSS) $ (125,156) $ (81,389)
Beginning Retained Earnings (Deficit) (81,389) 0
----------- -----------
ENDING RETAINED EARNINGS (DEFICIT) $ (206,545) $ (81,389)
=========== ===========
EARNINGS PER SHARE
Weighted Average of Outstanding Shares 5,573,709 5,350,000
=========== ===========
Income (Loss) for Common Stockholders $ (0.02) $ (0.02)
=========== ===========
The accompanying notes are an integral part of these financial statemens.
3
EMAZING INTERACTIVE, INC.
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2007 and
For the Period April 11, 2006 (Date of Inception) to December 31, 2006
2007 2006
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $(125,156) $ (81,389)
Adjustments to reconcile net income to net cash
provided by operating activities:
Common Stock Issued for Services 0 1,250
Depreciation & Amortization 20,619 13,882
Increase in Accounts Payable 3,498 60,218
Increase (Decrease) in Due from Related Parties (18,269) 23,948
--------- ---------
Net Cash Provided by Operating Activities (119,308) 17,909
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (18,000) (27,838)
--------- ---------
Net Cash (Used) by Investing Activities (18,000) (27,838)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common Stock for Cash 151,750 10,000
Conversion of Debt to Stock 3,000 0
--------- ---------
Net Cash Provided by Financing Activities 154,750 10,000
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 17,442 71
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 71 0
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 17,513 $ 71
========= =========
SUPPLEMENTAL DISCLOSURES
Cash Paid During the Year for Interest Expense $ 0 $ 0
========= =========
Noncash Investing Activity
Issuance of 5,000,000 shares of Common Stock for the following:
Computer Equipment 0 15,600
Services 0 1,250
Gaming Software 0 15,000
--------- ---------
Total Noncash Investing Activity 0 31,850
========= =========
The accompanying notes are an integral part of these financial statemens.
4
EMAZING INTERACTIVE, INC.
Consolidated Statement of Changes in Stockholders' Equity
From April 11, 2006 (Date of Inception) to December 31, 2007
Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit) Totals
----------- --------------------------- -------------- --------------
Stockholders' Equity at April 11, 2006 (Inception) 0 $ 0 $ 0 $ 0 $ 0
2006
Common Stock Issued For:
Assets 5,000,000 5,000 25,600 30,600
Services 250,000 250 1,000 1,250
Cash 100,000 100 9,900 10,000
Net Income (Loss) 0 0 0 (81,389) (81,389)
----------- ----------- -------------- -------------- --------------
Stockholders' Equity (Deficit) at December 31, 2006 5,350,000 $ 5,350 $ 36,500 (81,389) $ (39,539)
=========== =========== ============== ============== ==============
2007
Common Stock Issued for Cash 303,500 304 151,446 151,750
Conversion of Debt for Stock 6,000 6 2,994 3,000
Net Income (Loss) 0 0 0 (125,156) (125,156)
----------- ----------- -------------- -------------- --------------
Stockholders' Equity (Deficit) at December 31, 2007 5,659,500 $ 5,660 $ 190,940 (206,545) $ (9,945)
=========== =========== ============== ============== ==============
The accompanying notes are an integral part of these financial statemens.
5
EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------
Nature of Activities, History and Organization:
-----------------------------------------------
Emazing Interactive, Inc. (The "Company") operates as an online gaming
facilitator through its subsidiary Emazing Gaming, LLC. Online games
are rented by the hour, day or month. The Company also generates
revenue through partnerships and sponsors.
The Company is located in Allen, Texas and was incorporated on April
11, 2006 under the laws of the State of Texas. On October 2, 2006, the
Company converted its corporate charter to domicile in Nevada.
Significant Accounting Policies:
--------------------------------
The Company's management selects accounting principles generally
accepted in the United States of America and adopts methods for their
application. The application of accounting principles requires the
estimating, matching and timing of revenue and expense. It is also
necessary for management to determine, measure and allocate resources
and obligations within the financial process according to those
principles. The accounting policies used conform to generally accepted
accounting principles which have been consistently applied in the
preparation of these financial statements.
The financial statements and notes are representations of the Company's
management which is responsible for their integrity and objectivity.
Management further acknowledges that it is solely responsible for
adopting sound accounting practices, establishing and maintaining a
system of internal accounting control and preventing and detecting
fraud. The Company's system of internal accounting control is designed
to assure, among other items, that 1) recorded transactions are valid;
2) valid transactions are recorded; and 3) transactions are recorded in
the proper period in a timely manner to produce financial statements
which present fairly the financial condition, results of operations and
cash flows of the Company for the respective periods being presented.
Basis of Presentation:
----------------------
The Company prepares its financial statements on the accrual
basis of accounting. All intercompany balance and transactions
are eliminated. Investments in subsidiaries are reported using
the equity method.
Reclassification:
-----------------
Certain prior year amounts have been reclassified in the
consolidated balance sheets, consolidated statements of
operations and consolidated statements of cash flows to
conform to current period presentation. These
reclassifications were not material to the consolidated
financial statements and had no effect on net earnings
reported for any period.
6
EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 1 - (CONTINUED)
--------------------
Recently Issued Accounting Pronouncements:
------------------------------------------
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. See Note 10 for a discussion of new accounting
pronouncements.
Cash and Cash Equivalents:
--------------------------
Cash and cash equivalents includes cash in bank with original
maturities of three months or less are stated at cost which
approximates market value, which in the opinion of management,
are subject to an insignificant risk of loss in value.
Fixed Assets:
-------------
Fixed assets are depreciated over their useful lives of three
years. Repairs and maintenance is charged to expense as
incurred.
Revenue:
--------
The Company recognizes revenue from the sale of products in
accordance with the Securities and Exchange Commission Staff
Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition
in Financial Statements." Revenue will be recognized only when
all of the following criteria have been met:
o Persuasive evidence of an arrangement exists;
o Ownership and all risks of loss have been transferred
to buyer, which is generally upon shipment;
o The price is fixed and determinable; and
o Collectibility is reasonably assured.
Revenue from game rental is all paid at the point of purchase
online through Paypal.
Earnings (Loss) per Share:
--------------------------
Earnings (loss) per share (basic) is calculated by dividing
the net income (loss) by the weighted average number of common
shares outstanding for the period covered. As the Company has
no potentially dilutive securities, fully diluted earnings
(loss) per share is identical to earnings (loss) per share
(basic).
7
EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 1 - (CONTINUED)
--------------------
Website Software Development Costs:
-----------------------------------
The Company adopted EITF 00-02, "Accounting for website
developments costs". In accordance with EITF 00-02, the costs
incurred for the (i) website application and infrastructure
development; (ii) graphics development; and (iii) content
development, which took the website to a functional stage
where it could receive server and gaming orders, were
capitalized and are being amortized over three years.
Maintenance expenses or costs that do not result in new
revenue producing features or functions, such as updating
information and products or maintenance of the website or
promotion of the website using search engines, are expensed as
incurred. Prior to this development, Emazing had no website.
As of and for the years ended December 31, 2007 and 2006,
$48,488 and $38,488 was capitalized and $11,588 and $790 was
expensed, respectively.
Use of Estimates:
-----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Comprehensive Income:
---------------------
SFAS No. 130, "Reporting Comprehensive Income", establishes
standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial
statements. For the years ended December 31, 2007 and 2006,
the Company had no items of other comprehensive income.
Therefore, the net loss equals comprehensive loss for the
years then ended.
NOTE 2 - FIXED ASSETS
---------------------
Fixed assets at December 31, 2007 are as follows:
Computer Equipment $ 27,950
Less: Accumulated Depreciation (11,216)
---------
Total Fixed Assets $ 16,734
=========
Depreciation expense was $20,619 and $13,882 for the years ended
December 31, 2007 and 2006, respectively.
8
EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 3 - INTANGIBLE ASSETS
--------------------------
Intangible assets at December 31, 2007 are as follows:
Gaming Software $ 48,488
Less: Accumulated Amortization (23,285)
----------
Total Intangible Assets $ 25,203
==========
NOTE 4 - COMMON STOCK
The Company is authorized to issue 50,000,000 common shares at a par
value of $0.001 per share. These shares have full voting rights. At
December 31, 2007, there were 5,659,500 shares outstanding as follows:
Shares
At Inception 5,000,000
During 2006 350,000
During 2007 309,500
---------
Total Shares Outstanding 5,659,500
=========
9
EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 5 - INCOME TAXES
---------------------
The Company follows FASB Statement Number 109, Accounting for Income
Taxes. Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax reporting purposes, and (b) net operating loss carry
forwards. For Federal income tax purposes, the Company uses the cash
basis of accounting, whereas the accrual basis is used for financial
reporting purposes. In addition, certain assets are charged to expense
when acquired under Section 179 of the Internal Revenue Code for income
tax purposes. The cumulative tax effect at the expected tax rate of 25%
of significant items comprising the Company's net deferred tax amounts
as of December 31, 2007 and 2006 are as follows:
12/31/07 12/31/06
Deferred tax assets attributable to:
Prior years $ 20,347 $ 0
Tax benefit for current year $ 47,218 $ 20,347
--------- ---------
Total Deferred Tax Benefit $ 67,565 $ 20,347
========= =========
Components of the current provision (benefit) for taxes on income for
the current year are as follows:
12/31/07 12/31/06
Income tax before extraordinary item:
Tax benefit on current year operations $ (47,218) $ (20,347)
Valuation Allowance $ 47,218 $ 20,347
--------- ---------
Net Provision (Benefit) $ 0 $ 0
========= =========
The realization of deferred tax benefits is contingent upon future
earnings and is fully reserved at December 31, 2007.
NOTE 6 - RELATED PARTY TRANSACTIONS
-----------------------------------
During 2007, the Company was billed $30,341 from entities with common
ownership to shareholders of the Company, of which $21,500 was in
Accounts Payable - Related Party at December 31, 2007.
Amounts due to four different shareholders who have funded operating
expenses totaled $5,678 at December 31, 2007 are reflected as "Due From
Related Parties".
10
EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 7 - FINANCIAL CONDITION AND GOING CONCERN
----------------------------------------------
Emazing has an accumulated deficit through December 31, 2007 totaling
$206,545 and had negative working capital of $51,882. Because of this
accumulated loss, Emazing will require additional working capital to
develop its business operations. Emazing intends to raise additional
working capital either through private placements, public offerings
and/or bank financing. There are no assurances that Emazing will be
able to either (1) achieve a level of revenues adequate to generate
sufficient cash flow from operations; or (2) obtain additional
financing through either private placement, public offerings and/or
bank financing necessary to support Emazing's working capital
requirements. To the extent that funds generated from any private
placements, public offerings and/or bank financing are insufficient,
Emazing will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if available,
will be on terms acceptable to Emazing. If adequate working capital is
not available Emazing may not continue its operations.
Emazing faces many factors in its ability to continue as a going
concern, including but not limited to, the promotion of its gaming
website, competition from larger and better capitalized companies, and
its ability to create traffic to its website and virtual store. To
date, much of Emazing's activities have been focused on advertising and
promotion to create its identity in the community, and its continued
existence is dependent upon the gaming public purchasing more time on
its gaming servers.
Should the above concerns materialize, it is conceivable that Emazing
would have to suspend or discontinue operations. Management believes
that the efforts it has made to promote its site will continue for the
foreseeable future. These conditions raise substantial doubt about
Emazing's ability to continue as a going concern. The financial
statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might be necessary should
Emazing be unable to continue as a going concern.
NOTE 8 - SUBSEQUENT EVENT
-------------------------
In March 2008, the Company secured an increase in their line of credit
from $20,000 to $40,000. The line of credit is secured by 100% of the
common stock owned by the President of the Company.
11
EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9 - NEW ACCOUNTING PRONOUCEMENTS
-------------------------------------
In June 2003, the Securities and Exchange Commission ("SEC") adopted
final rules under Section 404 of the Sarbanes-Oxley Act of 2002
("Section 404"), as amended by SEC Release No. 33-8760 on December 15,
2006. Commencing with the Company's Annual Report for the year ending
December 30, 2008, the Company is required to include a report of
management on the Company's internal control over financial reporting.
The internal control report must include a statement of management's
responsibility for establishing and maintaining adequate internal
control over financial reporting for the Company; of management's
assessment of the effectiveness of the Company's internal control over
financial reporting as of year-end and of the framework used by
management to evaluate the effectiveness of the Company's internal
control over financial reporting. Furthermore in the following year the
Company's independent accounting firm has to issue an attestation
report separately on the Company's internal control over financial
reporting on whether it believes that the Company has maintained, in
all material respects, effective internal control over financial
reporting.
In July 2006, the FASB issued FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the
accounting for income taxes by prescribing a minimum probability
threshold that a tax position must meet before a financial statement
benefit is recognized. The minimum threshold is defined in FIN 48 as a
tax position that is more likely than not to be sustained upon
examination by the applicable taxing authority, including resolution of
any related appeals or litigation processes, based on the technical
merits of the position. The tax benefit to be recognized is measured as
the largest amount of benefit that is greater than fifty percent likely
of being realized upon ultimate settlement. FIN 48 must be applied to
all existing tax positions upon initial adoption. The cumulative effect
of applying FIN 48 at adoption, if any, is to be reported as an
adjustment to opening retained earnings for the year of adoption. FIN
48 is effective for the Company's year-end 2007, but is not expected to
have a material impact on our consolidated financial statements, with
the possible exception of certain disclosures relative to our net
operating loss carryovers and the related valuation allowance.
In 2006, the Financial Accounting Standards Board issued the following:
- SFAS No. 155: Accounting for Certain Hybrid Financial
Instruments
- SFAS No. 156: Accounting for Servicing of Financial Assets
- SFAS No. 157: Fair Value Measurements
- SFAS No. 158: Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans
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EMAZING INTERACTIVE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9 - (CONTINUED)
--------------------
In 2007, the Financial Accounting Standards Board issued the following:
- SFAS No. 159: The Fair Value Option for Financial Assets and
Financial Liabilities; Including an amendment of FASB
Statement No. 115
- SFAS No. 141: (Revised 2007), Business Combinations
- SFAS No. 160: Noncontrolling Interest in Consolidated
Financial Statements
Management has reviewed these new standards and believes that they have
no impact on the financial statements of the Company.
NOTE 10 - LINE OF CREDIT
------------------------
The Company entered into a line of credit ("LOC") in November 2007. The
LOC had a credit line of $20,000 and accrues interest at a rate of 10%
per annum, compounded monthly. It is secured by 100% of the stock of
Emazing Interactive, Inc. that is beneficially owned by the President
and his father.
As of December 31, 2007, the balanced owed pursuant to the LOC was $0.
As discussed in Note 8, the LOC increased in March 2008 to $40,000. The
Company borrowed $20,000 from this LOC during the first quarter of
2008. The LOC is due in full on May 31, 2008.
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