g3073.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
Form
10-Q
(Mark
one)
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x
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Quarterly
Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the quarterly period ended March 31,
2009
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o
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Transition
Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the transition period from ______________ to
_____________
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Commission
File Number: 000-28453
Eight
Dragons Company
(Exact
name of registrant as specified in its charter)
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Nevada
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25-1605848
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(State
of incorporation)
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(IRS
Employer ID Number)
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211 West
Wall Street, Midland, TX 79701
(Address
of principal executive offices)
(432)
682-1761
(Issuer's
telephone number)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90
days. YES x NO o
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. (Check one):
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): YES x NO
o
State the
number of shares outstanding of each of the issuer's classes of common equity as
of the latest practicable date: April 16, 2009: 362,200
Transitional
Small Business Disclosure Format (check one): YES o NO
x
Eight
Dragons Company
Form 10-Q
for the Quarter ended March 31, 2009
Table of
Contents
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Page
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Part
I - Financial Information
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3
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13
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15
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16
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Part
II - Other Information
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16
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16
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16
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16
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16
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16
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16
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Part
I
Item 1 - Financial Statements
Eight
Dragons Company
Balance
Sheets
March 31,
2009 and December 31, 2008
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(Unaudited)
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(Audited)
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March
31,
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December
31,
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2009
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2008
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ASSETS
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Current
Assets
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Cash
on hand and in bank
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$ |
1,914 |
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$ |
4,922 |
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Total
Current Assets
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1,914 |
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4,922 |
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Total
Assets
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$ |
1,914 |
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$ |
4,922 |
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LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
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Liabilities
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Current
Liabilities
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Accounts
payable - trade
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$ |
— |
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$ |
— |
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Notes
payable to controlling stockholder
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836,050 |
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833,050 |
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Accrued
interest payable to controlling stockholder
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157,328 |
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133,693 |
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Total
Current Liabilities
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993,378 |
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970,743 |
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Long-Term
Liabilities
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— |
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— |
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Total
Liabilities
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993,378 |
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970,743 |
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Commitments
and Contingencies
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Stockholders’
Equity (Deficit)
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Preferred
stock - $0.001 par value
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50,000,000
shares authorized
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None
issued and outstanding
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— |
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— |
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Common
stock - $0.001 par value.
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100,000,000
shares authorized.
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362,200
shares issued and outstanding
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36 |
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36 |
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Additional
paid-in capital
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31,690,302 |
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31,690,302 |
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Deficit
accumulated during the development stage
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(32,681,802 |
) |
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(32,656,159 |
) |
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Total
Stockholders’ Equity (Deficit)
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(991,464 |
) |
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(965,821 |
) |
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Total
Liabilities and Stockholders’ Equity
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$ |
1,914 |
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$ |
4,922 |
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The
financial information presented herein has been prepared by management without
audit
by
independent certified public accountants.
The
accompanying notes are an integral part of these financial
statements.
Eight
Dragons Company
Statements
of Operations
Six and
Three months ended March 31, 2009 and 2008
(Unaudited)
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Three
months
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Three
months
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ended
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ended
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March
31,
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March
31,
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2009
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2008
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Revenues
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$ |
— |
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$ |
— |
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Operating
Expenses
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Professional
fees
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5,105 |
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7,563 |
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Other
general and administrative expenses
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910 |
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699 |
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Total
operating expenses
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6,015 |
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8,262 |
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Loss
from operations
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(6,015 |
) |
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(8,262 |
) |
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Other
Income (Expense)
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Interest
expense
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(19,635 |
) |
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(19,422 |
) |
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Interest
income
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7 |
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4 |
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Total
other income (expense)
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(19,628 |
) |
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(19,418 |
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Loss
before provision for income taxes
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(25,643 |
) |
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(27,680 |
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Provision
for income taxes
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— |
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— |
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Net
Loss
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$ |
(25,643 |
) |
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$ |
(27,680 |
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Earnings
per share of common stock outstanding
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computed
on net loss - basic and fully diluted
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$ |
(0.49 |
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$ |
(0.53 |
) |
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Weighted-average
number of shares outstanding -
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basic
and fully diluted
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52,000 |
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52,000 |
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The
financial information presented herein has been prepared by management without
audit
by
independent certified public accountants.
The
accompanying notes are an integral part of these financial
statements.
Eight
Dragons Company
Statements
of Cash Flows
Six
months ended March 31, 2009 and 2008
(Unaudited)
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Three
months
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Three
months
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ended
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ended
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March
31,
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March
31,
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2009
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2008
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Cash
Flows from Operating Activities
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Net
loss for the period
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$ |
(25,643 |
) |
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$ |
(27,680 |
) |
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Adjustments
to reconcile net loss to net
cash provided by operating activities
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Depreciation
and amortization
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— |
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— |
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Increase
(Decrease) in
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Accrued
interest payable
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19,635 |
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19,422 |
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Net
cash used in operating activities
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(6,008 |
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(8,258 |
) |
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Cash
Flows from Investing Activities
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— |
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— |
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Cash
Flows from Financing Activities
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Cash
received from notes payable to
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Controlling
stockholder
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3,000 |
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8,000 |
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Net
cash provided by financing activities
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3,000 |
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8,000 |
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Increase
(Decrease) in Cash
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(3,008 |
) |
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(258 |
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Cash
at beginning of period
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4,922 |
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1,121 |
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Cash
at end of period
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$ |
1,914 |
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$ |
863 |
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Supplemental
Disclosure of Interest and Income Taxes Paid
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Interest
paid for the year
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$ |
— |
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$ |
— |
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Income
taxes paid for the year
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$ |
— |
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$ |
— |
|
The
financial information presented herein has been prepared by management without
audit
by
independent certified public accountants.
The
accompanying notes are an integral part of these financial
statements.
Eight
Dragons Company
Notes
to Financial Statements
March 31,
2009 and 2008
Note
A - Organization and Description of Business
Eight
Dragons Company (Company), formerly known as Tahoe Pacific Corporation, Pacific
Holdings, Inc. and Ameri-First Financial Group, respectively, was incorporated
in the State of Nevada on September 27, 1996.
On March
22, 2000, a change in control of Itronics Communications
Corporation occurred in conjunction with closing under an Agreement
and Plan of Reorganization (the "Reorganization Agreement") between Itronics
Communications Corporation and the Company. Upon effectiveness of the
Reorganization Agreement, pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, the Company became the
successor issuer to Itronics Communications Corporation, Inc. for reporting
purposes under the Securities Exchange Act of 1934 and elected to report under
the Act effective March 22, 2000.
The
closing under the Reorganization Agreement consisted of a stock for stock
exchange in which Itronics Communications Corporation acquired all of the then
issued and outstanding common stock of the Company in exchange for the issuance
of 9,386,116 pre-reverse split shares of its common stock. As a
result of this transaction, Itronics Communications
Corporation became a wholly-owned subsidiary of the
Company. This reorganization was approved by the unanimous consent of
the Company’s Board of Directors and qualified as a reorganization within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended.
On
October 24, 2007, the Company changed its state of incorporation from Delaware
to Nevada by means of a merger with and into Eight Dragons Company, a Nevada
corporation formed on September 26, 2007 solely for the purpose of effecting the
reincorporation. The merger was consummated through an exchange of
100 shares in the Nevada corporation for each share then issued and outstanding
in the Delaware corporation. The Articles of Incorporation and Bylaws
of the Nevada corporation are the Articles of Incorporation and Bylaws of the
surviving corporation. Such Articles of Incorporation modified the
Company’s capital structure to allow for the issuance of up to 50,000,000 shares
of $0.0001 par value common stock and up to 10,000,000 shares of $0.0001 par
value preferred stock.
For
periods prior to 2000, the Company participated in numerous unsuccessful
ventures and corporate name changes, as discussed in greater detail in previous
filings with the U. S. Securities and Exchange Commission. Since
2000, the Company has had no operations, significant assets or
liabilities.
The
Company’s current business plan is to locate and combine with an existing,
privately-held company which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged. A
combination may be structured as a merger, consolidation, exchange of the
Company's common stock for stock or assets or any other form which will result
in the combined enterprise's becoming a publicly-held corporation.
Note
B - Preparation of Financial Statements
The
Company follows the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America and has a year-end
of December 31.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
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.
Eight
Dragons Company
Notes
to Financial Statements - Continued
March 31,
2009 and 2008
Note
B - Preparation of Financial Statements - Continued
During
interim periods, the Company follows the accounting policies set forth in its
annual audited financial statements filed with the U. S. Securities and Exchange
Commission on its Annual Report on Form 10-K containing the Company’s financial
statements for the year ended December 31, 2008. The information
presented within these interim financial statements may not include all
disclosures required by generally accepted accounting principles and the users
of financial information provided for interim periods should refer to the annual
financial information and footnotes when reviewing the interim financial results
presented herein.
In the
opinion of management, the accompanying interim financial statements, prepared
in accordance with the U. S. Securities and Exchange Commission’s instructions
for Form 10-Q, are unaudited and contain all material adjustments, consisting
only of normal recurring adjustments necessary to present fairly the financial
condition, results of operations and cash flows of the Company for the
respective interim periods presented. The current period results of
operations are not necessarily indicative of results which ultimately will be
reported for the full fiscal year ending December 31, 2009.
Note
C - Going Concern Uncertainty
The
Company has no significant assets or operating activity as of March 31,
2009.
There are
no assurances that the Company will be able to either (1) consummate a business
combination transaction with a privately-owned business seeking to become a
public company; (2) if successful, achieve a level of revenues adequate to
generate sufficient cash flow from operations; or (3) obtain additional
financing through either private placement, public offerings and/or bank
financing necessary to support the Company's current working capital
requirements. To the extent that funds generated from any private
placements, public offerings and/or bank financing are insufficient to support
the Company, the Company 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 the
Company. If adequate working capital is not available, the Company
may not renew its operations.
The
Company's ultimate continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis.
The
Company’s articles of incorporation authorizes the issuance of up to 50,000,000
shares of preferred stock and 100,000,000 shares of common stock. The
Company’s ability to issue preferred stock may limit the Company’s ability to
obtain debt or equity financing as well as impede potential takeover of the
Company, which takeover may be in the best interest of
stockholders. The Company’s ability to issue these authorized but
unissued securities may also negatively impact our ability to raise additional
capital through the sale of our debt or equity securities.
The
Company anticipates future sales of equity securities to facilitate either the
consummation of a business combination transaction or to raise working capital
to support and preserve the integrity of the corporate
entity. However, there is no assurance that the Company will be able
to obtain additional funding through the sales of additional equity securities
or, that such funding, if available, will be obtained on terms favorable to or
affordable by the Company.
It is the
belief of management and significant stockholders that they will provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for
either management or significant stockholders to provide additional future
funding. Further, the Company is at the mercy of future economic
trends and business operations for the Company’s majority stockholder to have
the resources available to support the Company. Should this pledge
fail to provide financing, the Company has not identified any alternative
sources.
If no
additional operating capital is received during the next twelve months, the
Company will be forced to rely on existing cash in the bank and upon additional
funds loaned by management and/or significant stockholders to preserve the
integrity of the corporate entity at this time. In the event, the
Company is unable to acquire advances from management and/or significant
stockholders, the Company’s ongoing operations would be negatively
impacted.
Eight
Dragons Company
Notes
to Financial Statements - Continued
March 31,
2009 and 2008
Note
C - Going Concern Uncertainty - Continued
While the
Company is of the opinion that good faith estimates of the Company’s ability to
secure additional capital in the future to reach our goals have been made, there
is no guarantee that the Company will receive sufficient funding to sustain
operations or implement any future business plan steps.
Note
D - Summary of Significant Accounting Policies
1. Cash and cash
equivalents
For
Statement of Cash Flows purposes, the Company considers all cash on hand and in
banks, certificates of deposit and other highly-liquid investments with
maturities of three months or less, when purchased, to be cash and cash
equivalents.
2. Income
Taxes
The
Company files income tax returns in the United States of America and may file,
as applicable and appropriate, various state(s). With few exceptions,
the Company is no longer subject to U.S. federal, state and local, as
applicable, income tax examinations by regulatory taxing authorities for years
before 2005. The Company does not anticipate any examinations of
returns filed since 2005.
The
Company uses the asset and liability method of accounting for income
taxes. At March 31, 2009 and 2008, respectively, the deferred tax
asset and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary
differences. Temporary differences generally represent differences in
the recognition of assets and liabilities for tax and financial reporting
purposes, primarily accumulated depreciation and amortization, allowance for
doubtful accounts and vacation accruals.
The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes”, on October 1, 2007. FASB Interpretation
No. 48 requires the recognition of potential liabilities as a result of
management’s acceptance of potentially uncertain positions for income tax
treatment on a “more-likely-than-not” probability of an assessment upon
examination by a respective taxing authority. As a result of the
implementation of Interpretation 48, the Company did not incur any liability for
unrecognized tax benefits.
3. Earnings (loss) per
share
Basic
earnings (loss) per share is computed by dividing the net income (loss)
available to common stockholders by the weighted-average number of common shares
outstanding during the respective period presented in our accompanying financial
statements.
Fully
diluted earnings (loss) per share is computed similar to basic income (loss) per
share except that the denominator is increased to include the number of common
stock equivalents (primarily outstanding options and warrants).
Common
stock equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method, at
either the beginning of the respective period presented or the date of issuance,
whichever is later, and only if the common stock equivalents are considered
dilutive based upon the Company’s net income (loss) position at the calculation
date.
At
December 31, 2008 and 2007, and subsequent thereto, the Company had no
outstanding common stock equivalents.
Eight
Dragons Company
Notes
to Financial Statements - Continued
March 31,
2009 and 2008
Note
D - Summary of Significant Accounting Policies - Continued
4. Recent 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 flows.
Note
E - Fair Value of Financial Instruments
The
carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest
rate risk is the risk that the Company’s earnings are subject to fluctuations in
interest rates on either investments or on debt and is fully dependent upon the
volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to interest rate risk, if any.
Financial
risk is the risk that the Company’s earnings are subject to fluctuations in
interest rates or foreign exchange rates and are fully dependent upon the
volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
Note
F - Note Payable to Officer/Director
On August
1, 2002, the Company issued a $740,000 note to Wilkerson Consulting, Inc.
(Wilkerson) as compensation to replace a guarantee related to a former officer's
debt. This note was unsecured and bore interest at 6% on unpaid
principal and 10% on matured unpaid principal. The note was payable
on demand, or if no demand was made, the entire principal amount and all accrued
interest was due and payable on July 31, 2006. On January 18, 2005,
the Company and Wilkerson entered into a Debt and Stock Purchase Agreement with
Glenn A. Little (Little) pursuant to which Little agreed to purchase the
$740,000 in outstanding debt against the Company and to purchase certain common
stock of the Company owned by Wilkerson for total cash consideration of
$60,000. The note matured on July 31, 2006 and no demand for payment
has been made by Mr. Little.
The
Company and its controlling stockholder and sole officer, Glenn A. Little, have
acknowledged that outside funds are necessary to support the corporate entity
and comply with the periodic reporting requirements of the Securities Exchange
Act of 1934, as amended. Accordingly, Mr. Little agreed to lend the
Company up to $50,000 with a maturity period not to exceed two (2) years from
the initial funding date at an interest rate of 6.0% per annum. In
May 2005, Mr. Little advanced approximately $50,000 under this agreement, with
an initial maturity date in May 2007. During 2007, this agreement was
modified to extend the credit limit to $75,000 and the maturity date was
extended to December 31, 2008. Through March 31, 2009 and December
31, 2008, an aggregate $96,050 and $93,050 have been advanced under this
agreement. This note matured on December 31, 2008 and no demand for
payment has been made by Mr. Little. It is the intent of Mr. Little
and the Company to extend the maturity date of this note to a future date at
some point during 2009.
The
following table is a summary of the notes payable to the Company’s controlling
shareholder as of March 31, 2009 and December 31, 2008,
respectively:
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Wilkerson
note sold to Little
|
|
$ |
740,000 |
|
|
$ |
740,000 |
|
|
Working
capital note payable to Little
|
|
|
96,050 |
|
|
|
93,050 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
836,050 |
|
|
$ |
833,050 |
|
Eight
Dragons Company
Notes
to Financial Statements - Continued
March 31,
2009 and 2008
Note
G - Income Taxes
The
components of income tax (benefit) expense for each of the three month periods
ended March 31, 2009 and 2008, respectively, are as follows:
|
|
|
Three
months
|
|
|
Three
months
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Federal:
|
|
|
|
|
|
|
|
Current
|
|
$ |
— |
|
|
$ |
— |
|
|
Deferred
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
State:
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
— |
|
|
|
— |
|
|
Deferred
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
— |
|
|
$ |
— |
|
As a
result of a 2005 change in control, the Company has a net operating loss
carryforward of approximately $389,000 for Federal income tax
purposes. The amount and availability of any future net operating
loss carryforwards may be subject to limitations set forth by the Internal
Revenue Code. Factors such as the number of shares ultimately issued within a
three year look-back period; whether there is a deemed more than 50 percent
change in control; the applicable long-term tax exempt bond rate; continuity of
historical business; and subsequent income of the Company all enter into the
annual computation of allowable annual utilization of the
carryforwards.
The
Company's income tax expense (benefit) for each of the three month periods ended
March 31, 2009 and 2008, respectively, differed from the statutory federal rate
of 34 percent as follows:
|
|
|
Three
months
|
|
|
Three
months
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Statutory
rate applied to income before income taxes
|
|
$ |
(8,700 |
) |
|
$ |
(9,400 |
) |
|
Increase
(decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
State
income taxes
|
|
|
— |
|
|
|
— |
|
|
Other,
including reserve for deferred tax asset
|
|
|
|
|
|
|
|
|
|
and
application of net operating loss carryforward
|
|
|
8,700 |
|
|
|
9,400 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$ |
— |
|
|
$ |
— |
|
Temporary
differences, which consist principally of net operating loss carryforwards,
statutory deferrals of expenses for organizational costs and statutory
differences in the depreciable lives for property and equipment, between the
financial statement carrying amounts and tax bases of assets and liabilities
give rise to deferred tax assets and/or liabilities, as
appropriate. As of March 31, 2009 and December 31, 2008,
respectively, the deferred tax asset is as follows:
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred
tax assets
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$ |
132,000 |
|
|
$ |
123,000 |
|
|
Less
valuation allowance
|
|
|
(132,000 |
) |
|
|
(123,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
Deferred Tax Asset
|
|
$ |
¾ |
|
|
$ |
¾ |
|
During
the three months ended March 31, 2009 and the year ended December 31, 2008,
respectively, the valuation allowance for the deferred tax asset increased by
approximately $9,000 and $35,000.
Eight
Dragons Company
Notes
to Financial Statements - Continued
March 31,
2009 and 2008
Note
H - Common Stock Transactions
On
September 18, 2006, the Company entered into a unit purchase agreement (Unit
Purchase Agreement) to sell 1,000 Units to Glenn A. Little (Little) for $125,000
cash. Each Unit consisted of 11,100 shares of common stock and 500
common stock purchase warrants or an aggregate of 11,100,000 shares of common
stock and 500,000 common stock purchase warrants. There were no
commissions or underwriting discounts paid in conjunction with this transaction
and the Company believes that the shares and warrants were exempt from
registration under Section 4(2) of the Securities Act of 1933 as
amended.
The
common stock purchase warrants can be exercised at any time from their issuance
on September 18, 2006 through September 18, 2011 at an exercise price of $0.10
per share. The Company assigned a value of $5,000 to these
warrants.
On
September 18, 2006, connected with yet separate from the aforementioned Unit
Purchase Agreement, the Company entered into a Share Purchase Agreement with
Dominion, the Company’s then-majority shareholder, whereby the Company purchased
from Dominion 11,975,000 shares of common stock of the Company for a purchase
price of $1.00. The shares were cancelled upon receipt by the Company
and returned to unissued status.
On
November 14, 2006, the Company filed a Definitive Schedule 14C - Information
Statement Pursuant to Section 14C of the Securities Exchange Act of 1934 noting
actions to be taken without a meeting upon the written consent of the holders of
a majority of the outstanding shares of the voting capital stock of the
Company. The actions at this meeting included 1) to reverse split the
currently issued and outstanding common stock (Reverse Split) of the Company on
a 100,000 shares for one (1) share basis, with no stockholder being reversed to
less than a round lot of 100 shares; and 2) to change the Company’s state of
incorporation from Pennsylvania to Nevada. On January 19, 2006,
shareholders holding a majority of the Company’s common stock voted to rescind
the reverse stock portion of the previous approval.
On June
20, 2007, the Company filed another Preliminary Schedule 14C - Information
Statement Pursuant to Section 14C of the Securities Exchange Act of 1934 noting
the following actions to be taken by the Company’s Board of Directors pursuant
to actions taken by a written consent of a majority of stockholders without
meeting “1. To reverse split the currently issued and outstanding common stock
(the "Common Stock") of the Company on a 12,500 shares for 1 share basis, with
fractional shares paid in cash at the rate of ($.05) cents for each fractional
share and 2. To increase the number of shares the Company is authorized to issue
to 100,000,000 shares of common stock par value $.001 and 50,000,000 shares of
preferred stock par value $.001 to be issued in such services and designations
as determined from time to time by the Board of Directors.
The
Company's Board of Directors initially approved Item No. 1 above on February 28,
2007 and recommended that the Company effect the reverse split of its currently
issued and outstanding Common Stock. The Board of Directors approved
Item No. 2 above on December 1, 2006 in connection with the Company's change of
domicile from Pennsylvania to Nevada at which time the Company's authorized
capital stock was increased from 40,000,000 shares of common stock par value
$0.01 to 100,000,000 shares of Common Stock par value $0.001 and 50,000,000
shares of Preferred Stock par value $0.001 to be issued in such series and
designations as may be determined by the Board of Directors. That
approval was adopted at the same time as a proposed 100,000 to 1 reverse split
with fractional shares rounded up to the nearest whole share and no shareholder
rounded to less than a round lot of 100 shares. The Company’s Board
of Directors decided not to proceed with that reverse split as announced in its
Form 8−K filed on January 19, 2007. The change in domicile, however,
from Pennsylvania to Nevada was completed and as a result the Company's
authorized capital was increased as stated above.
On or
about December 2, 2008, the Company completed the aforementioned reverse stock
split on the basis of one (1) share for each 12,500 shares issued and
outstanding, with fractional shares paid in cash at the rate of five ($.05)
cents for each fractional share. This action reduced the number of
issued and outstanding shares from 22,105,051 to 1,596. The effect of
this action is presented in the accompanying financial statements as of the
first day of the first period presented.
On March
17, 2008, the Company filed a Definitive Schedule 14C - Information Statement
Pursuant to Section 14C of the Securities Exchange Act of 1934 with respect to
the above mentioned 1 for 5 reverse stock split with stockholder’s positions
rounded to the nearest whole share with a contemporaneous 100 for 1 forward
split of the Company’s common stock. This action became effective
immediately and the effects are reflected in the accompanying financial
statements as of the first day of the first period presented.
Eight
Dragons Company
Notes
to Financial Statements - Continued
March 31,
2009 and 2008
Note
H - Common Stock Transactions - Continued
As a
result of the aforementioned reverse and forward splits, the Company’s issued
and outstanding shares of common stock went from 22,105,151 to
52,000.
On May 1,
2008, a total of 398,800 warrants, including 367,075 warrants held by Glenn A.
Little, were exercised at a price of $0.10 per share which resulted in the
issuance of 398,800 shares of restricted, unregistered common stock for a gross
proceeds of $39,880. There were no commissions or underwriting
discounts paid in conjunction with this transaction and the Company believes
that the shares issued upon the exercise of the corresponding warrants were
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended.
Note
I - Stock Warrants
During
August 2006, the Company reached termination agreements with all holders of the
Company’s Common Stock Warrants and terminated all issued and outstanding
warrants. As of March 31, 2009 and 2008, respectively, the only
outstanding warrants relate to the aforementioned September 18, 2006 transaction
with Glenn A. Little. On May 1, 2008, 398,800 warrants were exercised
to acquire an equivalent number of restricted, unregistered shares of common
stock for gross proceeds of $39,880.
|
|
|
Number
of
|
|
|
Weighted
|
|
|
|
|
Warrant
shares
|
|
|
Average
Price
|
|
|
|
|
|
|
|
|
|
|
Balance
at October 1, 2007
|
|
|
500,000 |
|
|
$ |
0.10 |
|
|
Issued
|
|
|
— |
|
|
|
— |
|
|
Exercised
|
|
|
(398,800 |
) |
|
|
(0.10 |
) |
|
Expired
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2008
|
|
|
101,200 |
|
|
$ |
0.10 |
|
|
Issued
|
|
|
— |
|
|
|
— |
|
|
Exercised
|
|
|
— |
|
|
|
— |
|
|
Expired
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2009
|
|
|
101,200 |
|
|
$ |
0.10 |
|
(Remainder
of this page left blank intentionally)
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
(1) Caution
Regarding Forward-Looking Information
Certain
statements contained in this quarterly filing, including, without limitation,
statements containing the words "believes", "anticipates", "expects" and words
of similar import, constitute forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
Such
factors include, among others, the following: international, national and local
general economic and market conditions: demographic changes; the ability of the
Company to sustain, manage or forecast its growth; the ability of the Company to
successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans;
business disruptions; the ability to attract and retain qualified
personnel; the ability to protect technology; and other factors referenced in
this and previous filings.
Given
these uncertainties, readers of this Form 10-Q and investors are cautioned not
to place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce the
result of any revisions to any of the forward-looking statements contained
herein to reflect future events or developments.
(2) Background
Eight
Dragons Company (Company), formerly known as Tahoe Pacific Corporation, Pacific
Holdings, Inc. and Ameri-First Financial Group, respectively, was incorporated
in the State of Nevada on September 27, 1996.
On
October 24, 2007, the Company changed its state of incorporation from Delaware
to Nevada by means of a merger with and into Eight Dragons Company, a Nevada
corporation formed on September 26, 2007 solely for the purpose of effecting the
reincorporation. The merger was consummated through an exchange of
100 shares in the Nevada corporation for each share then issued and outstanding
in the Delaware corporation. The Articles of Incorporation and Bylaws
of the Nevada corporation are the Articles of Incorporation and Bylaws of the
surviving corporation. Such Articles of Incorporation modified the
Company’s capital structure to allow for the issuance of up to 50,000,000 shares
of $0.0001 par value common stock and up to 10,000,000 shares of $0.0001 par
value preferred stock.
For
periods prior to 2000, the Company participated in numerous unsuccessful
ventures and corporate name changes, as discussed in greater detail in previous
filings with the U. S. Securities and Exchange Commission. Since
2000, the Company has had no operations, significant assets or
liabilities.
The
Company’s current business plan is to locate and combine with an existing,
privately-held company which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged. A
combination may be structured as a merger, consolidation, exchange of the
Company's common stock for stock or assets or any other form which will result
in the combined enterprise's becoming a publicly-held corporation.
(3)
Plan of Operations
The
Company had no revenue for either of the three month periods ended March 31,
2009 and 2008, respectively.
General
and administrative expenses of approximately $6,000 and $8,000, respectively,
for the three month periods ended March 31, 2009 and 2008, respectively, have
been directly related maintaining the corporate entity and maintaining
compliance with the Securities Exchange Act of 1934, as amended.
It is
anticipated that future expenditure levels may increase as the Company intends
to fully comply with it’s periodic reporting requirements.
Earnings
per share for the respective three month periods ended March 31, 2009 and 2008
were approximately $(0.49) and $(0.53), respectively, based on the
weighted-average shares issued and outstanding at the end of each respective
period.
The
Company does not expect to generate any meaningful revenue or incur operating
expenses for purposes other than fulfilling the obligations of a reporting
company under the Securities Exchange Act of 1934 unless and until such time
that the Company’s operating subsidiary begins meaningful
operations.
At March
31, 2009 and December 31, 2008, the Company had working capital of approximately
$(991,000) and $(966,000), respectively.
It is the
belief of management and significant stockholders that they will provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for
either management or significant stockholders to provide additional future
funding. Further, the Company is at the mercy of future economic
trends and business operations for the Company’s majority stockholder to have
the resources available to support the Company. Should this pledge
fail to provide financing, the Company has not identified any alternative
sources. Consequently, there is substantial doubt about the Company's
ability to continue as a going concern.
The
Company's need for working capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no
assurance that the Company will identify any such business, product, technology
or company suitable for acquisition in the future. Further, there can
be no assurance that the Company would be successful in consummating any
acquisition on favorable terms or that it will be able to profitably manage the
business, product, technology or company it acquires.
(4)
Plan of Business
General
The
Company intends to locate and combine with an existing, privately-held company
which is profitable or, in management's view, has growth potential, irrespective
of the industry in which it is engaged. However, the Company does not
intend to combine with a private company which may be deemed to be an investment
company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
Pending
negotiation and consummation of a combination, the Company anticipates that it
will have, aside from carrying on its search for a combination partner, no
business activities, and, thus, will have no source of
revenue. Should the Company incur any significant liabilities prior
to a combination with a private company, it may not be able to satisfy such
liabilities as are incurred.
If the
Company's management pursues one or more combination opportunities beyond the
preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common
stock will become worthless and holders of the Company's common stock will
receive a nominal distribution, if any, upon the Company's liquidation and
dissolution.
Combination
Suitability Standards
In its
pursuit for a combination partner, the Company's management intends to consider
only combination candidates which are profitable or, in management's view, have
growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage
attorneys and/or accountants in its efforts to investigate a combination
candidate and to consummate a business combination. The Company may
require payment of fees by such combination candidate to fund the investigation
of such candidate. In the event such a combination candidate is
engaged in a high technology business, the Company may also obtain reports from
independent organizations of recognized standing covering the technology being
developed and/or used by the candidate. The Company's limited
financial resources may make the acquisition of such reports difficult or even
impossible to obtain and, thus, there can be no assurance that the Company will
have sufficient funds to obtain such reports when considering combination
proposals or candidates. To the extent the Company is unable to
obtain the advice or reports from experts, the risks of any combined
enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal stockholders or general
partners:
|
(1)
|
will
have been convicted of securities fraud, mail fraud, tax fraud,
embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those
offenses;
|
|
(2)
|
will
have been subject to a temporary or permanent injunction or restraining
order arising from unlawful transactions in securities, whether as issuer,
underwriter, broker, dealer, or
investment advisor, may be the subject of
any pending investigation or a defendant in a pending lawsuit
arising from or based upon allegations of unlawful transactions in
securities; or
|
|
(3)
|
will
have been a defendant in a civil action which resulted in a final
judgement against it or him awarding damages or rescission based upon
unlawful practices or sales of
securities.
|
The
Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination
candidates. Such persons will also ask pertinent questions of others
who may be involved in the combination proceedings. However, the
officers and directors of the Company will not generally take other steps to
verify independently information obtained in this manner which is
favorable. Unless something comes to their attention which puts them
on notice of a possible disqualification which is being concealed from them,
such persons will rely on information received from the management of the
prospective combination candidate and from others who may be involved in the
combination proceedings.
(5)
Liquidity and Capital Resources
It is the
belief of management and significant stockholders that they will provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for
either management or significant stockholders to provide additional future
funding. Further, the Company is at the mercy of future economic
trends and business operations for the Company’s majority stockholder to have
the resources available to support the Company. Should this pledge
fail to provide financing, the Company has not identified any alternative
sources. Consequently, there is substantial doubt about the Company's
ability to continue as a going concern.
The
Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location
of a merger or acquisition candidate. Accordingly, there can be no
assurance that sufficient funds will be available to the Company to allow it to
cover the expenses related to such activities.
Regardless
of whether the Company’s cash assets prove to be inadequate to meet the
Company’s operational needs, the Company might seek to compensate providers of
services by issuances of stock in lieu of cash.
(6)
Critical Accounting Policies
Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
(“GAAP”). GAAP requires the use of estimates; assumptions, judgments
and subjective interpretations of accounting principles that have an impact on
the assets, liabilities, revenue and expense amounts reported. These
estimates can also affect supplemental information contained in our external
disclosures including information regarding contingencies, risk and financial
condition. We believe our use of estimates and underlying accounting
assumptions adhere to GAAP and are consistently and conservatively
applied. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ materially from these
estimates under different assumptions or conditions. We continue to monitor
significant estimates made during the preparation of our financial
statements.
Our
significant accounting policies are summarized in Note D of our financial
statements. While all these significant accounting policies impact
our financial condition and results of operations, we view certain of these
policies as critical. Policies determined to be critical are those policies that
have the most significant impact on our financial statements and require
management to use a greater degree of judgment and estimates. Actual
results may differ from those estimates. Our management believes that given
current facts and circumstances, it is unlikely that applying any other
reasonable judgments or estimate methodologies would cause effect on our
consolidated results of operations, financial position or liquidity for the
periods presented in this report.
Item 3 - Quantitative and Qualitative Disclosures About Market
Risk
In future
periods, the Company may become subject to certain market risks, including
changes in interest rates and currency exchange rates. At the present
time, the Company has no identified exposure and does not undertake any specific
actions to limit exposures, if any.
Item 4 - Controls and Procedures
(a) Disclosure
Controls and Procedures
Disclosure
controls and procedures are controls and procedures designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms and include controls and
procedures designed to ensure that information we are required to disclose in
such reports is accumulated and communicated to management, including our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to
allow timely decisions regarding required disclosure.
Our
management, under the supervision and with the participation of our CEO and CFO,
have evaluated the effectiveness of our disclosure controls and procedures as
defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the
period covered by this Quarterly Report. Based on such evaluation,
our CEO and CFO have concluded that, as of the end of the period covered by this
Quarterly Report, our disclosure controls and procedures are
effective.
(b) Changes
in Internal Control over Financial Reporting
There was
no change in our internal control over financial reporting that occurred during
the quarter ended March 31, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting which internal controls will remain deficient until such time as the
Company completes a merger transaction or acquisition of an operating business
at which time management will be able to implement effective controls and
procedures.
Part
II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Unregistered Sales of Equity Securities and Use of
Proceeds
None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security
Holders
The
Company has held no regularly scheduled, called or special meetings of
stockholders during the reporting period.
Item 5 - Other Information
None
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.
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Eight
Dragons Company
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Dated:
April 16, 2009
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/s/
Glenn A. Little
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Glenn
A. Little
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President,
Chief Executive Officer,
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Chief
Financial Officer and Sole
Director
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