lunljune30-2009_10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
One)
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
|
|
For
the Quarterly Period Ended June 30, 2009
|
|
[ ]
|
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 0-28315
LUMONALL,
INC.
(Exact
Name of Small Business Issuer as Specified in Its Charter)
|
Nevada
|
84-1517404
|
|
(State
or Other Jurisdiction of Incorporation)
|
(I.R.S.
Employer Identification No.)
|
3565
King Road, Suite 102
King
City, Ontario, L7B 1M3, Canada
(Address
of Principal Executive Offices)
(905)
833-9845
(Issuer’s
Telephone Number, Including Area Code)
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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes
[ ] 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
file
|
[ ]
|
|
Non-accelerated
filer
|
[ ]
(Do not check if a smaller reporting company)
|
Smaller
reporting company
|
[X ]
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
[ ] No [X]
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
The
number of shares of common stock outstanding as of August 11, 2009:
136,659,671
Lumonall,
Inc.
INDEX
|
PART
I
|
Financial
Information
|
|
|
|
|
|
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Item
1.
|
Condensed
Financial Statements (unaudited)
|
|
|
|
Condensed
Balance Sheets
|
3
|
|
|
Condensed
Statements of Operations
|
4
|
|
|
Statement
of Change in Stockholders’ Deficiency
|
5
|
|
|
Condensed
Statements of Cash Flows
|
6
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|
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Notes
to Condensed Financial Statements
|
7
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|
|
|
|
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Item
2.
|
Management's
Discussion and Analysis
|
13
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|
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|
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
|
15
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|
|
|
|
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Item
4.
|
Controls
and Procedures
|
15
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|
|
|
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PART
II.
|
Other
Information
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
17
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|
|
|
|
|
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
|
17
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|
|
|
|
|
Item
3.
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Defaults
Upon Senior Securities
|
17
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|
|
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Item
4.
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Submission
of Matters to a Vote of Security Holders
|
17
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|
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Item
5.
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Other
Information
|
17
|
|
|
|
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|
Item
6.
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Exhibits
and Reports on Form
8-K
|
17
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| |
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|
| Signatures |
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|
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PART I.
Financial Information
Item
1. Condensed Financial Statements
LUMONALL,
INC.
CONDENSED
BALANCE SHEETS
(Stated
in US dollars)
|
|
|
June
30,
2009
(UNAUDITED)
|
|
|
March
31, 2009
|
|
|
ASSETS
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
|
|
$ |
- |
|
|
$ |
201 |
|
|
Accounts
receivable, net
|
|
|
5,152 |
|
|
|
4,868 |
|
|
Prepaid
expenses
|
|
|
- |
|
|
|
938 |
|
|
Inventory
|
|
|
122,602 |
|
|
|
123,441 |
|
|
Total
current assets
|
|
|
127,754 |
|
|
|
129,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
assets
|
|
$ |
127,754 |
|
|
$ |
129,448 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
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Current
liabilities
|
|
|
|
|
|
|
|
Bank
overdraft
|
|
$ |
3,213 |
|
|
$ |
- |
|
|
Accounts
payable and accrued liabilities
|
|
|
386,414 |
|
|
|
377,863 |
|
|
Due
to related parties (Note 3)
|
|
|
965,811 |
|
|
|
809,179 |
|
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Deposits
(Note 4)
|
|
|
121,367 |
|
|
|
121,367 |
|
|
Total
current liabilities
|
|
$ |
1,476,805 |
|
|
$ |
1,308,409 |
|
|
|
|
|
|
|
|
|
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|
STOCKHOLDERS’
DEFICIENCY
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 5,000,000
shares
authorized, no shares issued and outstanding
|
|
|
- |
|
|
|
- |
|
|
Common
stock, $0.001 par value; 200,000,000 shares
authorized,
136,659,671 shares issued and outstanding (March 31, 2009:
126,659,671)
|
|
|
136,660 |
|
|
|
126,660 |
|
|
Common
stock units subscribed (Note 5 )
|
|
|
- |
|
|
|
300,000 |
|
|
Additional
paid-in capital
|
|
|
3,242,419 |
|
|
|
2,952,419 |
|
|
Accumulated
deficit
|
|
|
(4,728,130 |
) |
|
|
(4,558,040 |
) |
|
Total
stockholders’ deficiency
|
|
|
(1,349,051 |
) |
|
|
(1,178,961 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficiency
|
|
$ |
127,754 |
|
|
$ |
129,448 |
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
LUMONALL,
INC.
(UNAUDITED)
|
|
|
Three
months ended
June
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
3,970 |
|
|
$ |
76,208 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
2,170 |
|
|
|
60,420 |
|
|
Gross
profit
|
|
|
1,800 |
|
|
|
15,788 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
|
53,117 |
|
|
|
95,288 |
|
|
Office
and general
|
|
|
41,364 |
|
|
|
67,233 |
|
|
Professional
and consulting
|
|
|
11,449 |
|
|
|
99,797 |
|
|
Total
operating expenses
|
|
$ |
105,930 |
|
|
$ |
262,318 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before other expenses and income taxes
|
|
|
(104,130 |
) |
|
|
(246,530 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other
expenses
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
8,165 |
|
|
|
12,804 |
|
|
Foreign
exchange loss
|
|
|
57,795 |
|
|
|
1,086 |
|
|
Total
other expenses
|
|
$ |
65,960 |
|
|
$ |
13,890 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before income taxes
|
|
|
(170,090 |
) |
|
|
(260,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(170,090 |
) |
|
|
(260,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding – Basic and
diluted
|
|
|
134,993,004 |
|
|
|
122,472,491 |
|
|
Loss
per share of common stock - Basic and diluted
|
|
$ |
(0.001 |
) |
|
$ |
(0.002 |
) |
The
accompanying notes are an integral part of these financial
statements
LUMONALL,
INC.
CONDENSED
STATEMENT OF CHANGES
IN
STOCKHOLDERS’ DEFICIENCY
MARCH 31,
2009 TO JUNE 30, 2009
(UNAUDITED)
| |
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
Value Amount
|
|
|
Additional
Paid – In Capital
|
|
|
Common
Stock Subscribed
|
|
|
Accumulated (Deficit)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2009
|
|
|
126,659,671 |
|
|
$ |
126,660 |
|
|
$ |
2,952,419 |
|
|
$ |
300,000 |
|
|
$ |
(4,558,040 |
) |
|
$ |
(1,178,961 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock pursuant to private placement
|
|
|
10,000,000 |
|
|
|
10,000 |
|
|
|
290,000 |
|
|
|
(300,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for period ended June 30, 2009
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(170,090 |
) |
|
|
(170,090 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2009
|
|
|
136,659,671 |
|
|
$ |
136,660 |
|
|
$ |
3,242,419 |
|
|
$ |
- |
|
|
$ |
(4,728,130 |
) |
|
$ |
(1,349,051 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
LUMONALL,
INC.
(UNAUDITED)
|
|
|
Three
months ended
June
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operations
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(170,090 |
) |
|
$ |
(260,420 |
) |
|
Adjustments
to reconcile net loss
to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(284 |
) |
|
|
(30,457 |
) |
|
Accounts
payable and accrued liabilities
|
|
|
8,551 |
|
|
|
26,083 |
|
|
Inventory
|
|
|
839 |
|
|
|
- |
|
|
Prepaid
expenses
|
|
|
938 |
|
|
|
- |
|
|
Deposits
|
|
|
- |
|
|
|
(11,438 |
) |
|
Net
cash used in operating activities
|
|
|
(160,046 |
) |
|
|
(276,232 |
) |
|
Cash
flows provided by financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from the Issuance of common stock
|
|
|
- |
|
|
|
70,000 |
|
|
Proceeds
from related parties
|
|
|
156,632 |
|
|
|
197,261 |
|
|
Bank
overdraft
|
|
|
3,213 |
|
|
|
- |
|
|
Net
cash provided by financing activities:
|
|
|
159,845 |
|
|
|
267,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash
|
|
|
(201 |
) |
|
|
(8,971 |
) |
|
Cash, beginning
of period
|
|
|
201 |
|
|
|
9,335 |
|
|
Cash, end of
period
|
|
$ |
- |
|
|
$ |
364 |
|
|
|
|
|
|
|
|
|
|
|
Non cash
financing activities:
During
the three month period ended June 30, 2009, the Company:
|
1.
|
Issued
10,000,000 common shares valued at $300,000 pursuant to common stock units
subscribed during the fiscal period ended March 31,
2009.
|
During
the three month period ended June 30, 2008, the Company:
|
1.
|
Issued
313,131 common shares valued at $15,625 for consulting
services.
|
|
2.
|
Issued
9,100,000 common shares valued at $132,490 pursuant to a settlement with a
related party.
|
The
accompanying notes are an integral part of these financial
statements
LUMONALL,
INC.
NOTES TO
THE FINANCIAL STATEMENTS
JUNE 30,
2009
(UNAUDITED)
Note 1 – Description of
Business and Basis of Presentation
Going
concern basis of presentation
The
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the liquidation of liabilities in the
ordinary course of business. As shown in the accompanying financial
statements, the Company has a working capital deficit of $1,349,051 and an
accumulated deficit of $4,728,130 at June 30, 2009. As a result,
substantial doubt exists about the Company’s ability to continue to fund future
operations using its existing resources.
For the
three month period ended June 30, 2009, the Company’s operations were
substantially funded by related parties. In order to ensure the
success of the business, the Company will have to raise additional financing to
satisfy existing liabilities and to provide the necessary funding for future
operations.
The
Company heavily relies upon loans from related parties, specifically Newlook
Industries Corp. (“Newlook”), to further provide capital contributions. As at
June 30, 2009 the Company was indebted to Newlook in the amount of
$644,741.
Newlook
is an investment and merchant banking enterprise focused on the development of
its technology investments. Newlook’s investments have suffered due to
unforeseen events and the global financial crisis. Newlook may not be able to
provide additional capital over the next year to the Company in order to satisfy
existing liabilities and make further capital contributions. Failure to obtain
such capital could adversely impact the Company’s operations
The
accompanying condensed unaudited financial statements of Lumonall, Inc. (the
“Company”) have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of management of
the Company, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended June 30, 2009 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2010. For further information, refer to the financial statements and footnotes
thereto included in the Company’s annual report on Form 10-K for the year ended
March 31, 2009.
Subsequent
events were evaluated through August 12, 2009, the date the financial statements
were issued.
Description
of business
We were
originally incorporated in the State of Colorado on May 1, 1996 as Grand Canyon
Ventures Two, Incorporated. The Company changed its name to Azonic Engineering
Corporation on September 23, 1998. On November 12, 1999 is was re-domiciled to
the State of Nevada by merging into its wholly owned subsidiary Azonic
Corporation, a Nevada corporation. On July 21, 2005 the Azonic Corporation
changed its name to Midland International Corporation (referred to herein as
“Midland,” the “Company,” Registrant” and “Issuer”).
In
February 2007, the Company adopted a new business plan to become a global
supplier of innovative photo luminescent (PLM) products, with a concentration on
Exit Signs and Safety Way Guidance Systems (SWGS). In order to
accurately reflect the nature of the Company’s business, the Company changed its
name from Midland International Corporation to Lumonall,
Inc. effective August 16, 2007.
Our
present business strategy and direction is to become a global leader in the
development and distribution of photoluminescent (PLM) emergency egress
systems.
Lumonall
is committed to being at the forefront of the development and distribution of
applied photo luminescent technologies. Through a network of industrial
designers, manufacturing experts and sales professionals, Lumonall brings to
market products that leverage the inherent characteristics of photoluminescence
to enhance safety, reduce energy consumption and improve the
environment.
LUMONALL,
INC.
NOTES TO
THE FINANCIAL STATEMENTS
JUNE 30,
2009
(UNAUDITED)
Improving
emergency egress is currently the primary focus of the Company's efforts,
providing failsafe systems that save lives and prevent injuries by providing
critical illumination along exit pathways. These efforts are timed to coincide
with changes to building codes in various markets that address the need for
improved emergency egress. The systems Lumonall develops not only meet the
standards established in these codes, but offer additional options that further
promote safe egress.
Concurrent
with these efforts, the Company is engaged in the development of applications of
photo luminescent technology for other markets including transportation
industries, residential safety and decorative uses.
Recent
Developments
Change in
Management
On March
12, 2009, Mr. Michael Hetherman resigned as Chief Executive Officer and as a
member of the Board of Directors. Mr. Hetherman’s resignation was voluntary and
did not involve a dispute or disagreement with the Company or any of its
officers or directors with respect to the Company’s operations, policies or
practices. At a meeting of the Board of Directors on March 16, 2009, the Board
accepted the resignations of Mr. Michael Hetherman and appointed Mr. John G.
Simmonds, Chairman of the Board of Directors and former CEO as interim
CEO.
Review of
Operations
In light
of general economic conditions and the Company’s current financial performance
and financial position the Company is performing a complete analysis of the
business including reviewing and reconsidering channels to market; sharing of
gross margin with distributors and various other business processes. Management
plans to take steps to restructure the manner in which the Company
operates.
Distributors
In 2007,
we signed a number of distributors to take this PLM product to market. Those
partners cover a majority of North America; now include the Willis Group of
Companies in Canada, and Designer Building Solutions, Butler-Johnson
Corporation, Hallmark Building Supplies and Parksite, Inc. in the United
States.
Industry
Overview
Photoluminescent
Products, Safety and Energy Conservation
Recent
increases in “green” initiatives, tied with improved awareness regarding energy
use and saving the environment, as well as the tragic events of 9/11, have all
contributed to creating this market. Building safety alone provides significant
business opportunity for our Exit Signs and Safety Way Guidance Systems, but the
potential in energy saving measures in new building developments, as well as
retrofitting current, out-of-date premises to lower their energy usage, is
enormous. The latter initiative is also highly political in nature, with all
levels of government, in both Canada and the United States striving to improve
the “green” element(s) of their political platforms.
Since
9/11, there has been an increase in safety measures and initiatives in
buildings. New York City created Bylaw 26 in the wake of the tragedy, requiring,
amongst other things, any building over six storeys high to install Safety Way
Guidance Systems in their stairwells and escape routes.
In March,
2009 the International Code Council (IBC 2009) published the 2009 International
Building Code, a foundation document used by most jurisdictions in the United
States as a starting point for their own building codes. IBC 2009 mandates
the use of non-electrically powered emergency egress systems in most new and
existing buildings with occupied floors 75’ above fire emergency vehicle access.
LUMONALL,
INC.
NOTES TO
THE FINANCIAL STATEMENTS
JUNE 30,
2009
(UNAUDITED)
As IBC
2009 addresses existing as well as new construction, the market for PLM
materials is expected to expand.
In
Canada, similar changes to code are expected in 2010.
Competition
Our
primary competition comes from American Permalight, Jalite USA, Brady, Jessup,
and Lunaplast, all of which offer PLM Exit Signs and Safety Way Guidance Systems
in Canada and/or the United States. With the exception of Brady and Jessup, all
of these competitors deal exclusively in PLM products like us.
Government
Regulations
Exit
Signs must be approved by the Underwriters Laboratory in both Canada and the
United States. MEA (Materials and Equipment Acceptance) approvals are
required at the State level. We are also an Energy Star Partner in Canada and
the United States. Our PLM formulation meets most current building code
standards.
Employees
As of the
date of this report, we have 3 employees, including our current officers, and
independent contractors. Our operations are non-union and there hasn’t been any
history of labor strikes or unrest at any of our facilities. We believe that our
relationship with our employees is satisfactory and management is confident that
there is ample available labour force in the geographic areas where are
facilities are, and will be located to support expected expansion over the next
12 months.
Risk
Factors
While
there are relatively few competitors to date, ours is a highly competitive
industry, based on maintaining standards and keeping ahead of government
regulations and initiatives. Our failure to compete effectively could adversely
affect our market share and results in operations.
There is
also a significant learning curve and a certain level of acceptance of PLM Exit
Signs, not only at all levels of government, but there is also a shift in
thinking for our customers to accept them in place of traditional,
electrically-powered signs. The status quo is difficult to change and the
adoption for our product may be slow.
Similarly,
despite increased awareness regarding safety measures in buildings, the
acceptance and subsequent seriousness of installing Safety Way Guidance Systems
to guide people to safety in the event of a blackout, fire or other emergency
situation is not a foregone conclusion.
Due to
the relative early stages of this industry, the authorities that create the
guidelines are not always consistent in their standards. The Underwriters
Laboratory seems to have some inconsistencies in its approval processes, the
costs involved in getting approvals, the time required in testing and, more
specifically, what they do, and do not accept with regard to PLM Exit Sign
standards, possibly making it an uneven playing field in regards to the
competitive landscape.
In
addition, potential roadblocks could be created by differing interpretations of
building and fire codes in a state or local code.
Note 2 – Summary of
Significant Accounting Policies
The
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States.
The
financial statements have, in management’s opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
LUMONALL,
INC.
NOTES TO
THE FINANCIAL STATEMENTS
JUNE 30,
2009
(UNAUDITED)
Use
of estimates
The
preparation of financial statements in conformity with 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.
Actual results could differ from those estimates.
Revenue
Recognition
The
Company recognizes revenue upon transfer of title at the time of shipment (F.O.B
shipping point), when all significant contractual obligations have been
satisfied, the price is fixed or determinable, and collectability is reasonably
assured.
Inventory
Photo
luminescent inventory is recorded at lower of cost or market.
Research
and development
The
Company did not engage in any material research and development activities
during the past two years.
Shipping and Handling
Costs
Amounts
charged to customers and costs incurred by the Company related to shipping and
handling are included in office and general expenses.
Accounts Receivable and Allowance for
Doubtful Accounts
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
collectability of outstanding client invoices is continually assessed. The
Company maintains an allowance for estimated losses resulting from the inability
of clients to make required payments. In estimating the allowance, the Company
considers factors such as historical collections, a client’s current
creditworthiness, age of the receivable balance both individually and in the
aggregate and general economic conditions that may affect a client’s ability to
pay.
Fair
value of financial instruments
The
carrying value of accounts receivable, accounts payable and accrued liabilities
approximates fair value because of the short maturity of these instruments. The
carrying value of notes payable and due to related parties also approximates
fair value. Unless otherwise noted, it is management’s opinion that the Company
is not exposed to significant interest, currency or credit risk arising from
these financial instruments.
Income
taxes
The
Company provides for income taxes using the asset and liability method as
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 109,
“Accounting for Income
Taxes”. Under the asset and liability method deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amount of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Additionally, a valuation allowance is established when
necessary to reduce deferred income tax assets to the amounts expected to be
realized. Under SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Earnings
and loss per common share
The
Company reports loss per share in accordance with SFAS No. 128, “Earnings Per
Share”. Basic loss per share is computed using the weighted
average number of shares outstanding during the year. Diluted
earnings per share includes the potentially dilutive effect of outstanding
common stock options and warrants, which are convertible to common shares.
Diluted loss per share is not presented as results would be
“anti-dilutive”.
LUMONALL,
INC.
NOTES TO
THE FINANCIAL STATEMENTS
JUNE 30,
2009
(UNAUDITED)
Valuation
of Warrants
The
Company estimates that value of common share purchase warrants issued using the
Black-Scholes pricing model.
Recent
Pronouncements
In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles”. SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States. SFAS 162 is effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles. The Company is currently evaluating the impact of SFAS
162 on its financial statements but does not expect it to have a material
effect.
In May
2009, the FASB issued Statement of Financial Accounting Standards No. 165,
“Subsequent Events” (“FAS 165”). FAS 165 established general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued. FAS 165 will be effective in the
second quarter of fiscal 2010. We do not expect the adoption of FAS 165 to have
a material effect on our financial position, cash flows, or results of
operations.
In June
2009, the FASB issued Statement No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles—a
replacement of FASB Statement No. 162”, to formally establish the FASB
Accounting Standards Codification as the single source of authoritative,
nongovernmental U.S. GAAP, in addition to guidance issued by the SEC. On the
effective date, the Codification will supersede existing non-SEC accounting and
reporting standards. All other nongrandfathered non-SEC accounting literature
not included in the Codification becomes nonauthoritative. Therefore, from the
effective date of the Codification, there will no longer be levels of
authoritative GAAP, rather there will only be authoritative and nonauthoritative
GAAP. All content within the Codification carries the same level of authority.
The Statement makes the Codification effective for interim and annual periods
ending after September 15, 2009. The Company does not expect the
impact of SFAS No. 168 to have a material effect on its consolidated financial
statements.
Reclassification
of Prior Year Statement of Operations
For the
three months ended June 30, 2008, the Company has reclassified foreign exchange
loss from selling and administrative costs to other expenses, to facilitate a
year over year comparison with three month period ended June 30,
2009.
Note 3 – Related Party
Transactions
At June
30, 2009, amounts due to related parties amounted to
$965,811. Related parties of the Company include entities under
common management and Officers and Directors of the Company.
Newlook
Industries Corp., a related party (due to common officers with the Company)
agreed to fund the development of the Company’s business at an interest rate of
Prime + 3% per annum and general security over all the Company’s assets in event
of default. During the three month period ended June 30, 2009, amounts owed
to Newlook increased $79,238, a result of $22,652 of cash advances, $8,165 of
accrued interest and $48,421 relating to a foreign exchange loss. Amounts
received from Newlook are recorded in Canadian Dollars and for the three month
period ended June 30, 2009, the Canadian dollar appreciated significantly in
value to the U.S. Dollar which led to the foreign exchange loss.
The
Company was obligated to pay $6,000 per month through June 2009 for financial
and administrative services to Wireless Age Communications Inc. (“Wireless
Age”).
LUMONALL,
INC.
NOTES TO
THE FINANCIAL STATEMENTS
JUNE 30,
2009
(UNAUDITED)
At June
30, 2009 and March 31, 2009, the amounts due to related parties
were:
|
|
|
June
30, 2009
|
|
|
March
31, 2009
|
|
|
Newlook
Industries Corp.
|
|
$ |
644,741 |
|
|
$ |
565,503 |
|
|
Wireless
Age Communications, Inc.
|
|
|
51,147 |
|
|
|
35,830 |
|
|
Directors
and/or Officers of the Company *
|
|
|
269,923 |
|
|
|
207,846 |
|
|
|
|
$ |
965,811 |
|
|
$ |
809,179 |
|
* Including a former director
and officer.
Note 4 –
Deposits
The
Company has entered into strategic partnerships for the distribution of PLM
products across the North American market place. Deposits have been
made by certain distribution partners for future purchase of PLM products.
Deposits held by the Company totalled $121,367 at June 30, 2009 and March 31,
2009.
Note 5 –Common stock Units
Subscribed.
In fiscal
2009, 10,000,000 common stock units were subscribed for, valued at
$300,000. Each common stock unit consisted of one common share and
one purchase warrant exercisable at $0.05 for a duration of six
months. As at June 30, 2009 all common stock units were
issued.
Note 6– Segment Data,
Geographic Information and Significant Customers:
Lumonall
products are currently sold through distribution agreements covering most
regions of North America. Distributors include Willis Group of Companies in
Canada, Designer Building Solutions, Butler-Johnson Corporation and Hallmark
Building Supplies in the United States. The Company is not organized by market
and is managed and operated as one business. A single management team reports to
the chief operating decision maker who comprehensively manages the entire
business. The Company does not operate any material separate lines of business
or separate business entities. Accordingly, the Company does not accumulate
discrete financial information, other than product revenue and material costs,
with respect to separate product lines and does not have separately reportable
segments as defined by Statement of Financial Accounting Standards (SFAS) No.
131, “Disclosures about Segments of an Enterprise and Related
Information.
For the
three months ended June 30, 2009 and 2008, Willis Group of Companies and
Hallmark Building Supplies accounted for approximately 100% and 70% of sales,
respectively.
Item 2. Managements Discussion and
Analysis or Plan of Operation
The
following discussion should be read in conjunction with our financial statements
and notes thereto included herein. In connection with, and because we
desire to take advantage of, the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, we caution readers regarding certain
forward looking statements in the following discussion and elsewhere in this
report and in any other statement made by, or on our behalf, whether or not in
future filings with the Securities and Exchange
Commission. Forward-looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward looking statements
are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond our control and many of which, with
respect to future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could cause actual
results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to
update forward looking statements.
Overview
Our
present business strategy and direction is to distribute of photoluminescent
(PLM) emergency egress systems.
Lumonall
is committed to the development and distribution of applied photoluminescent
technologies. Through a network of industrial designers, manufacturing and sales
professionals, Lumonall brings to market products that leverage the inherent
characteristics of photoluminescence to enhance safety, reduce energy
consumption and improve the environment.
Improving
emergency egress is currently the focus of the company's efforts, providing
systems that prevent injuries by providing critical illumination along exit
pathways. These efforts are timed to coincide with changes to building codes in
various markets that address the need for improved emergency egress. The systems
Lumonall develops not only meet the standards established in these codes, but
offer additional options that further promote safe egress.
Concurrent
with these efforts, the Company is engaged in the development of applications of
photoluminescent technology for other markets including transportation
industries, residential safety and decorative uses.
RESULTS
OF OPERATION
Comparison
of Results of Operations for the Three Months Ended June 30, 2009 and
2008
We
generated $3,970 in revenues from the sale of PLM product in the three-month
period ended June 30, 2009, compared to revenues of $76,208 in the same three
month period for 2008. Gross profit on sales during the three month
period was $1,800 in comparison to $15,788 in the prior year. Year
over year for the three months ended June 30, 2009 revenues declined
$72,238. The reduction in sales is a result of the
Company performing a complete analysis of the business including
reviewing and reconsidering our channels to market.
We
incurred management fees of $53,117 in the three-month period ended June 30,
2009, compared to $95,288 in the same period ended June 30, 2008. Management
fees, during the three month period ended June 30, 2009 accrued and/or paid
consisted of $15,750 to John Simmonds, CEO, $11,025 to Carrie Weiler, Corporate
Secretary, and $11,025 to Gary Hokkanen, CFO. In addition, $15,317 was paid to
Wireless Age Communications, Inc. a related party due to certain common
officers, directors and ownership, for the services of managerial level
accounting and finance personnel. Year over year management fees
decreased $42,171 primarily a result in a change in
management. Management fees during the three-month period ended June
30, 2008 were for the services of Mike Hetherman, CEO; Carrie Weiler, our
Corporate Secretary; Gary Hokkanen, our CFO; and a related party due to certain
common officers, directors and ownership for the service of managerial level
accounting and finance personnel.
We
incurred office and general expenses of $41,364 in the three-month period ended
June 30, 2009, compared to $67,233 in the same period ended June 30, 2008, a
decrease of $25,869. During the three month period ended June 30,
2008 the new PLM business plan was initiated and required significantly more
resources during the Company’s current state of evolution. In addition, during
the three month period ended June 30, 2009 the Company has focused on strict
cost control measures to address the global financial crisis. Office
and general expenses include travel, communications and other similar costs
associated with operating the business in its current state of
evolution. During the three month period ended June 30, 2009, wages
and consulting costs accounted for $30,889, and general office and miscellaneous
expenses $10,475. The costs are primarily related to management’s strategy to
improve awareness of PLM Exit Signs and Safety Way Guidance Systems in order to
develop and exploit the North American market place. We expect operating costs
to increase as we pursue new business.
We also
incurred professional and consulting fees of $11,449 in the three-month period
ended June 30, 2009, compared to $99,797 in the same period ended June 30, 2008
a decrease of $88,348. Higher costs during fiscal 2009 are a result
of the Company’s initial development of the Company’s business and
strategy.
We
incurred interest expense of $8,165 during the period ended June 30, 2009,
compared to $12,804 during the three month period ended June 30, 2008 arising
from related party liabilities.
We
recorded a foreign currency loss of $57,795 for the three month period ended
June 30, 2009 in comparison to a loss of $1,086 for the comparative period ended
June 30, 2008. A substantial portion of the Company’s liabilities
and
expenses
are recorded in Canadian Dollars. For the three month period ended
June 30, 2009, the Canadian Dollar appreciated significantly in value to the
U.S. Dollar which led to the foreign exchange loss.
As a
result, we incurred a net loss of ($170,090) during the three month period ended
June 30, 2009, (approximately $0.001 per share) compared to a net loss of
($260,420) in the same period ended June 30, 2008 (approximately $0.002 per
share)
Management
expects the operating losses to continue until breakeven operations are achieved
under the PLM business plan. Additional financing will be required in order to
offset pre-breakeven operating losses.
LIQUIDITY
AND CAPITAL RESOURCES
Our total
assets decreased from $129,448 at March 31, 2009 to $127,754 at June 30,
2009.
Our total
liabilities increased from $1,308,409 at March 31, 2009 to $1,476,805 at
June 30, 2009, an increase of $168,396. Accounts payable increased to
$386,414 from $377,863, an increase of $8,551, amounts of which are primarily
due to costs incurred for professional and consulting services. At June 30,
2009, due to related parties balance increased from $809,171 at March 31, 2009
to $965,811 at June 30, 2009. Due to related party amounts do not have specific
repayment terms and it is expected that these amounts will be repaid as the
financial position of the Company improves. Distributor deposits for the future
purchase of photo luminescent products remained unchanged at
$121,367. At June 30, 2009 bank indebtedness was $3,213 compared to
$Nil at March 31, 2009.
The
stockholders’ deficiency increased from ($1,178,961) at March 31, 2009 to
($1,349,051) at June 30, 2009. The increase is attributable to our
loss of $170,090 for the three months ended June 30, 2009.
At June
30, 2009, we had a working capital deficit of $ 1,349,051. We had
cash balances of $Nil at June 30, 2009 and we are largely reliant upon our
ability to arrange equity private placements or alternatively advances from
related parties to pay expenses as incurred. In addition to normal
accounts payable of $386,414 we also owe related parties $965,811 without
specific repayment terms and $121,367 in distributor deposits. Our only source
for capital could be loans or private placements of common stock.
During
the three months ended June 30, 2009 we; 1) used $160,046 in cash in operating
activities arising primarily from operating losses, 2) generated $159,845 in
cash from financing activities. Financing activities included $156,632 funded
from related parties.
For the
three month period ended June 30, 2009, the Company’s operations were
substantially funded by related parties. In order to ensure the
success of the business, the Company will have to raise additional financing to
satisfy existing liabilities and to provide the necessary funding for future
operations.
The
Company heavily relies upon loans from related parties, specifically Newlook, to
further provide capital contributions. As at June 30, 2009 the Company was
indebted to Newlook in the amount of $644,741. During the three month
period ended June 30, 2009, amounts owed to Newlook increased $79,238, a result
of $22,652 of cash advances, $8,165 of accrued interest and $48,421 relating to
a foreign exchange loss. Amounts received from Newlook are recorded in Canadian
Dollars and for the three month period ended June 30, 2009, the Canadian dollar
appreciated significantly in value to the U.S. Dollar which led to the foreign
exchange loss.
Newlook
is an investment and merchant banking enterprise focused on the development of
its technology investments. Newlook’s investments have suffered due to
unforeseen events and the global financial crisis. Newlook may not be able to
provide additional capital over the next year to the Company in order to satisfy
existing liabilities and make further capital contributions. Failure to obtain
such capital could adversely impact the Company’s operations.
Our
current cash resources are insufficient to support the business over the next 12
months and we are unable to continue toward attaining break even operations
without additional funding. The inability to obtain sufficient funds
from external sources when needed will have a material adverse affect on our
results of operations and financial condition. In light of general economic
conditions and the Company’s current financial performance and financial
position we are performing a complete analysis of the business
including reviewing and reconsidering our channel to market; sharing of gross
margin with distributors and various other business processes. We cannot predict
to what extent our current lack of liquidity and capital resources will impair
our new business operations. However management does believe we will incur
further operating losses. There is no assurance that we can continue as a going
concern without incremental funding.
It will
require additional financing to cover legal, accounting, transfer, consulting,
management fees and the miscellaneous costs of being a reporting company in the
next fiscal year. We do not intend to pursue or fund any research or development
activities during the coming year. We do not intend to add any additional
part-time or full-time employees until our activities can support it. Our
business plan calls for us to not make any large capital expenditures in the
coming year.
Going
concern qualification: We have incurred significant losses from
operations for the three months ended June 30, 2009, and such losses are
expected to continue. In addition, we have a working capital deficit
of $1,349,051 and an accumulated deficit of $4,728,130. The
foregoing raises substantial doubt about the Company's ability to continue as a
going concern. Management's plans include seeking additional capital
and/or debt financing. There is no guarantee that additional capital
and/or debt financing will be available when and to the extent required, or that
if available, it will be on terms acceptable to us. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
Disclosure
controls and procedures
Our
management evaluated, with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Form 10-Q. Based on
this evaluation, our Chief Executive Officer and Chief
Financial
Officer have concluded that our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the Exchange Act)), as of the end of such period, are effective to
ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
There
have been no significant changes in our internal controls over financial
reporting during the first quarter ended June 30, 2009 that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.
This
Quarterly Report does not include an attestation report of the Company’s
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management’s
report in this Quarterly Report.
Management
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Exchange Act. Those rules define internal control over
financial reporting as a process 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 and includes those policies and procedures
that:
• Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the
company;
• Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and the receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the Company; and
• Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisitions, use or disposition of the company's assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal controls over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management
assessed the effectiveness of our internal control over financial reporting as
of June 30, 2009. In making this assessment, our management used the criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
PART II. Other
Information
None
|
Date
|
Issued To:
|
|
# of Shares
|
|
|
|
|
|
|
|
|
April
8, 2009
|
Katemy
Holdings Inc.
|
|
1,500,000
|
|
|
|
|
|
|
|
|
April
8, 2009
|
Carrie
Weiler
|
|
1,000,000
|
|
|
|
|
|
|
|
|
April
8, 2009
|
Adam
Sykes
|
|
500,000
|
|
|
|
|
|
|
|
|
April
8, 2009
|
John
Simmonds
|
|
1,500,000
|
|
|
|
|
|
|
|
|
April
8, 2009
|
Bram
Potechin Holdings Ltd.
|
|
1,500,000
|
|
|
|
|
|
|
|
|
April
8, 2009
|
Chuckfam
Holdings Ltd.
|
|
1,500,000
|
|
|
|
|
|
|
|
|
April
8, 2009
|
Linda
Hoffer
|
|
1,500,000
|
|
|
|
|
|
|
|
|
April
8, 2009
|
Gary
Hokkanen
|
|
1,000,000
|
|
|
|
|
|
|
|
None
None
None
|
Exhibit 31.1
|
Rule
13a-14(a) Certification of Chief Executive Officer. *
|
|
|
|
|
Exhibit 31.2
|
Rule
13a-14(a) Certification of Chief Financial Officer. *
|
|
|
|
|
Exhibit 32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*
|
|
|
|
|
Exhibit 32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*
|
* Filed
herein.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
Lumonall
Inc.
|
|
|
|
|
|
|
|
Date:
August 12, 2009
|
By:
|
/s/
John Simmonds
|
|
|
|
|
Name:
John Simmonds
|
|
|
|
|
Title:
Chief Executive Officer and Chairman
|
|
|
|
|
|
|
|
|
By:
|
/s/
Gary N Hokkanen
|
|
|
|
|
Name:
Gary N. Hokkanen
|
|
|
|
|
Title:
Chief Financial Officer
|
|
|
|
|
|
|