n810q123108_12609.htm
 
FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to ____ .

Commission file number: 333-145659

N8 Concepts, Inc.
(Exact name of registrant as specified in its charter)

Colorado
20-8677788
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)

1869 W. Littleton Blvd., Littleton, Colorado 80120
(Address of principal executive offices)

Registrant's telephone number, including area code: (303) 738-8994

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 whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer [ ]  
   Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [X]
 
 
  (Do not check if a smaller  
 
 
  reporting company)  

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

The number of shares of common stock outstanding as of December 31, 2008 was 6,500,000.

 
 
 

TABLE OF CONTENTS

N8 Concepts, Inc.

 
 
 Part I. Financial Information:
  
     
Item 1.
Financial Statements—Unaudited:
  
 
Unaudited Condensed Balance Sheets
4
 
Unaudited Condensed Statements of Operations
5
 
Unaudited Condensed Statements of Operations
6
 
Notes to Unaudited Condensed Financial Statements
7
     
     
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
9
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
10
     
Item 4.
Controls and Procedures
10
     
     
 
Part II. Other Information:
  
     
Item 1.
Legal Proceedings
10
     
Item 1A.
Risk Factors
10
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
10
     
Item 3.
Defaults Upon Senior Securities
11
     
Item 4.
Submission of Matters to a Vote of Security Holders
11
     
Item 5.
Other Information
11
     
Item 6.
Exhibits
11
     
Signatures
11


 
- 2 -
 


Cautionary Language About Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are made in reliance upon the protections provided by such acts for forward-looking statements.  Such statements are not based on historical fact, but are based upon numerous assumptions about future conditions that may not occur.  Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “will,” “should,” “intend,” “estimate,” “believe,” “expect,” “anticipate,” “project” and similar expressions.  Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf.  Any such statement speaks only as of the date the statement was made.  We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware.  Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements.  These forward-looking statements are necessarily estimates reflecting the best judgment of our management and involve a number of risks and uncertainties, some of which may be beyond our control, that could cause actual results to differ materially from those suggested by the forward-looking statements, including, without limitation:
 
l
the pace and sustainability of acceptance of our brands;
   
l
our ability to convert our business model quickly and successfully from a retail model to a wholesale model;
   
l
our ability to compete in a crowded business space with low barriers to entry;
   
l
our ability to generate sustainable revenues and profits through sales by means of limited sales channels, namely, the Internet;
   
l
changing retail environments and fashion trends in the athletic apparel industry; and
   
l
changes in the level of consumer discretionary spending for sports logo apparel in view of general economic conditions;
 
We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks, and uncertainties.  For a further list and description of various risks, relevant factors, and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” section contained in the prospectus prepared in connection with our initial public offering and other filings with the SEC.


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements



 
- 3 -
 


N8 Concepts, Inc.
(A Development Stage Company)
Balance Sheets

   
December 31,
    
June 30,
  
   
2008
    
2008
  
   
(Unaudited)
        
Assets
Assets:
            
Cash
   $ 9,013     $ 35,000  
Total current assets
     9,013       35,000  
                 
Intangible assets:
                
  Website, less accumulated amortization
                
  of $1,802 (unaudited) and $1,013, respectively
     2,933       3,722  
 Trademark
     3,300       2,400  
  Deferred costs
     7,057       7,057  
Deposit
     250       250  
                 
Total assets
   $ 22,553     $ 48,429  
                 
Liabilities and Shareholders’ Equity
Current liabilities:
                
Accounts payable and accrued liabilities
   $ 38     $ 4,297  
Indebtedness to related party (Note 2)
     707       956  
Total current liabilities
     745       5,253  
                 
Shareholders’ equity (Note 4):
                
  Common stock, $.001 par value; 100,000,000 shares authorized,
                
  6,500,000 (unaudited) and 6,500,000 shares issued and
                
  outstanding, respectively
     6,500       6,500  
  Additional paid-in capital
     99,400       99,400  
  Deficit accumulated during development stage
     (84,092 )     (62,724 )
                 
Total shareholders’ equity
     21,808       43,176  
                 
    $   22,553     $  48,429  

See accompanying notes to condensed financial statements

 
- 4 -
 

N8 Concepts, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)


                           
March 21,
  
                           
2007
  
                           
(Inception)
  
   
For The Three Months Ended
    
For The Six Months Ended
    
Through
  
   
December 31,
    
December 31,
    
December 31,
  
   
2008
    
2007
    
2008
    
2007
    
2008
  
                               
                               
Sales
   $ 360     $ 2,127     $ 583     $ 4,254     $ 8,164  
Cost of goods sold
     339       1,915       357       3,829       10,981  
Gross profit
     21       212       226       425       (2,817 )
                                         
Operating expenses:
                                        
Selling, general and administrative expenses
     8,341       9,842       21,594       19,683       80,381  
Contributed rent (Note 2)
     -       900       -       1,800       900  
                                         
Operating loss
     (8,320 )     (10,530 )     (21,368 )     (21,058 )     (84,098 )
                                         
Other income:
                                        
Interest income
     —       2       —       4       6  
                                         
Loss before income taxes
     (8,320 )     (10,528 )     (21,368 )     (21,054 )     (84,092 )
                                         
Provision for income taxes (Note 5)
     —       —       —       —       —  
                                         
Net loss
   $ (8,320 )   $ (10,528 )   $ (21,368 )   $ (21,054 )   $ (84,092 )
                                         
Basic and diluted loss per share
   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )        
                                         
Weighted average common shares outstanding
     6,500,000       5,500,000       6,500,000       5,500,000          

See accompanying notes to condensed financial statements

 
- 5 -
 

N8 Concepts, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)


               
March 21,
  
               
2007
  
               
(Inception)
  
   
For The Six Months Ended
    
Through
  
   
December 31,
    
December 31,
  
   
2008
    
2007
    
2008
  
                   
Cash flows from operating activities:
                  
Net loss
   $ (21,368 )   $ (21,054 )   $ (84,092 )
Adjustments to reconcile net loss to net cash
                        
used by operating activities:
                        
Depreciation and amortization
     789       324       1,802  
Contributed rent
     —       1,800       900  
Changes in operating assets and liabilities:
                        
Receivables
     —       46       —  
Other assets
     —       50       (250 )
Accounts payable and accrued liabilities
     (4,259 )     2,051       38  
Indebtedness to related party
     (249 )     —       707  
Net cash used in
                        
operating activities
     (25,087 )     (16,783 )     (80,895 )
                         
Cash flows from investing activities:
                        
Payments for website development
     —       —       (4,735 )
Payments for trademark
     (900 )     (3,800 )     (3,300 )
Payments for deferred costs
     —       —       (7,057 )
Net cash used in
                        
investing activities
     (900 )     (3,800 )     (15,092 )
                         
Cash flows from financing activities:
                        
Proceeds from issuance of debt
     —       10,000       —  
Proceeds from sale of common stock
     —       2,500       105,000  
Net cash provided by
                        
financing activities
     —       12,500       105,000  
                         
Net change in cash and
                        
cash equivalents
     (25,987 )     (8,083 )     9,013  
                         
Cash and cash equivalents:
                        
Beginning of period
     35,000       10,864       —  
                         
 End of period
   $ 9,013     $ 2,781     $ 9,013  
                         
Supplemental disclosure of cash flow information:
                        
Cash paid during the period for:
                        
Income taxes
   $ —     $ —     $ —  
Interest
   $ —     $ —     $ —  

See accompanying notes to condensed financial statements

 
- 6 -
 

N8 CONCEPTS, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)


(1)   Basis of Presentation

The condensed financial statements presented herein have been prepared by the Company in accordance with the accounting policies in its audited financial statements for the period ended June 30, 2008 as filed in its Form 10-K and should be read in conjunction with the notes thereto.  The Company is in the development stage in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 7.

In the opinion of management, the accompanying condensed financial statements contain all adjustments (consisting only of normal recurring adjustments), which are necessary to provide a fair presentation of operating results for the interim periods presented.  Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted.  The results of operations presented for the three and six months ended December 31, 2008 are not necessarily indicative of the results to be expected for the year.
 
Interim financial data presented herein are unaudited.

(2)   Related Party Transactions

The Company’s president contributed office space to the Company from inception through June 30, 2007.  The office space was valued at $300 per month based on the market rate in the local area and is included in the accompanying financial statements as contributed rent expense with a corresponding credit to additional paid-in capital.

Commencing July 1, 2007, the Company began paying its president for the use of the office space at a rate of $300 per month.  All rent has been paid through December 31, 2008.

During the six months ended December 31, 2008, the president paid certain selling, general and administrative expenses on behalf of the Company.  As of December 31, 2008, the Company owes the president $707, which is included in the accompanying financial statements as indebtedness to related party.

During March 2007, the Company sold 5,000,000 shares of its restricted common stock to its two officers for $5,000 ($.001/share).

(3)   Note Payable

On October 1, 2007, an investor loaned the Company $10,000 in exchange for a promissory note.  The note carried no interest rate and matured on March 1, 2008.  The Company repaid the entire note during February 2008.

 
- 7 -
 

N8 CONCEPTS, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)


(4)      Shareholders’ Equity

During February, March and April 2008, the Company sold 1,000,000 shares of its common stock at a price of $.075 per share for total proceeds of $75,000.  The offering was made pursuant to the Company’s SB-2 registration statement that became effective in February 2008.  All sales were conducted through the Company’s officers and directors.

During the period from May through July 2007, the Company offered for sale 500,000 shares of its common stock at a price of $0.05 per share.  The Company sold all 500,000 shares for gross proceeds of $25,000.  The offering was made in reliance on an exemption from registration of a trade in the United States under Sections 4(2) and 4(6) of Regulation D of the United States Securities Act of 1933, as amended. The Company relied upon exemptions from registration believed by it to be available under federal and state securities laws in connection with the offering.  All sales were conducted through the Company’s officers and director.

(5)      Income Taxes

The Company records its income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”.  The Company incurred net operating losses during all periods presented resulting in a deferred tax asset, which was fully allowed for; therefore, the net benefit and expense resulted in $-0- income taxes.


 
- 8 -
 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Three Months Ended December 31, 2008

Results of Operations

Net sales

Sales for the three months ended December 31, 2008 were $360 compared with $2,127 year over year.  Sales for the period were off dramatically year over year due in large part to the deteriorating economy and consumers' views toward discretionary spending.  Management believes that the declines are beginning to run deeper due to the economy and now holds some reservations about the potential effectiveness of its wholesale model in the near future.

Cost of Goods Sold

Costs of Goods Sold for the three months ended December 31, 2008 were $339. The company’s COGS as a percentage of sales were in line with prior periods.

Selling, General, and Administrative Expenses

Selling, General, and Administrative Expenses for the three months ended December 31, 2008 were $8,341. The Company’s SG&A expenses for the period were in line with the year over year number of $9,842.  The difference continues to primarily be due to promotional product costs that the company is using to seed its wholesale marketing strategy.

Liquidity and Capital Resources

On December 31, 2008, we had $9,013 cash on hand.  There are no known major capital expenses that the Company is either aware of or has not already allocated for.  However, the Company must begin to generate more significant sales over the next Quarter to sustain its operations. The only major capital expenditure that we could foresee in the near future would be some form of trademark dispute similar to the one the Company settled in early 2008 with Callaway Golf Company. That dispute ended without litigation and somewhat positively but still resulted in a cost of roughly $8,000 to the Company. Obviously, the Company has limited resources remaining to continue with the current burn rate and might have to potentially seek other funding alternatives over the next six months.

We are aware that we must begin to move quickly into our next phase of growth in order to sustain our operations. The Company’s long term vision and plan is to promote a licensing strategy for its brands which requires it to generate enough “street” credibility for the marks so as to give the Company the economic power to negotiate independent licensing arrangements with companies with much more manufacturing, marketing and distribution resources than the Company has.

Should the Company not be successful in its next step of establishing some wholesale to retail presence in the marketplace, it will become increasingly difficult to establish the necessary economic power to negotiate such licensing arrangements.
 
We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks, and uncertainties.  For a further list and description of various risks, relevant factors, and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” section contained in the prospectus prepared in connection with our initial public offering and other filings with the SEC.
 
Off-Balance Sheet Arrangements

None Applicable

 
- 9 -
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable
 
Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer (who is also our principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” pursuant to Exchange Act Rule 15d-15(b). Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.  Based upon this evaluation, our principal executive officer concluded that our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting in connection with the evaluation required by Rule 15d-15(d) under the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

At this time, the Company is unaware of any legal proceedings to which it is a potential party.
.
Item 1A. Risk Factors

Not applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any equity securities during the three months ended December 31, 2008.

We did not repurchase any of our securities during the three months ended December 31, 2008.

 
- 10 -
 
 
 
Item 3. Defaults Upon Senior Securities

Not Applicable
 

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable
 
 
Item 5. Other Information

Not Applicable
 

Item 6. Exhibits                     
 
     
Exhibit No.
  
                                  Description
     
31.1
  
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
     
31.2
  
Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
     
32.1
  
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
     
32.2
  
Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
     


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.
 
 
 
     Registrant:
 
N8 Concepts, Inc.
  
       
Date:  January 28, 2009
By:
/s/ James H. Watson, Jr.
  
   
James H. Watson, Jr. , Principal Executive Officer and Principal Financial Officer
  
       
       
 


 
- 11 -
 


Exhibit Index
 
     
Exhibit No.
  
                                  Description
     
31.1
  
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
     
31.2
  
Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
     
32.1
  
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
     
32.2
  
Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
     

- 12 -