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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2006
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
MODENA 3 INC.
(Exact name of small business issuer as specified in its charter)
Delaware | 000-50495 | 98-0412433 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
162 M Homestead Avenue, Manchester, Connecticut | 06040 | |
(Address of principal executive offices) | (Zip Code) |
(860) 805-0701
(Issuer's telephone number)
N/A
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act.) [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common equity, as of August 25, 2006: 100,000 shares of common stock.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
SEC 2334 (9-05)
Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
MODENA 3 INC.
FORM 10-QSB
INDEX
Part I-- FINANCIAL INFORMATION
Item 1. Financial Statements
4
Item 2. Management's Discussion and Analysis of Financial Condition
14
Item 3. Control and Procedures
14
Part II-- OTHER INFORMATION
Item 1. Legal Proceedings
15
Item 2. Changes in Securities
15
Item 3. Defaults Upon Senior Securities
15
Item 4. Submission of Matters to a Vote of Security Holders
15
Item 5. Other Information
15
Item 6. Exhibits
15
Signature
16
2
PART I
Item 1. Financial Information
BASIS OF PRESENTATION
The accompanying reviewed financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB and Item 310 under subpart A of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the nine months ended July 31, 2006 are not necessarily indicative of results that may be expected for the year ending October 31, 2006. The financial statements are presented on the accrual basis.
3
MODENA 3, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF JULY 31, 2006
MODENA 3, Inc.
(a development stage company)
Financial Statements Table of Contents
FINANCIAL STATEMENTS Page #
Balance Sheet 5
Statement of Operations and Retained Deficit 6
Statement of Stockholders Equity 8
Cash Flow Statement 9
Notes to the Financial Statements 10
4
MODENA 3, INC.
(a development stage company)
BALANCE SHEET
As of July 31, 2006 and October 31, 2005
July 31, October 31,
2006 2005
ASSETS
CURRENT ASSETS
Cash $ 0 $ 0
--------- --------
TOTAL ASSETS $ 0 $ 0
========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accrued expenses $ 4,350 $ 3,300
--------- --------
TOTAL LIABILITIES 4,350 3,300
STOCKHOLDER'S EQUITY
Common Stock - par value $0.001;
100,000,000 shares authorized;
100,000 issued and outstanding 100 100
Additional paid in capital 0 0
Accumulated Deficit (4,450) (3,400)
--------- --------
Total stockholder's equity (4,350) (3,300)
--------- --------
TOTAL LIABILITIES AND EQUITY $ 0 $ 0
======== ========
The accompanying notes are an integral part of these financial statements.
5
MODENA 3, INC.
(a development stage company)
STATEMENT OF OPERATIONS
For the nine months ending July 31, 2006 and 2005
From inception (November 18, 2003) through July 31, 2006
Nine Months Nine Months From Inception
Jul. 31, 2006 Jul. 31, 2005 Jul. 31,2006
REVENUE
Sales $ 0 $ 0 $ 0
Cost of sales 0 0 0
------------ ----------- ----------
GROSS PROFIT 0 0 0
GENERAL AND ADMINISTRATIVE EXPENSES 1,050 950 4,450
----------- ----------- ---------
NET LOSS (1,050) (950) (4,450)
ACCUMULATED DEFICIT, BEGINNING BALANCE (3,400) (1,850) 0
---------- ----------- ---------
ACCUMULATED DEFICIT, ENDING BALANCE $ (4,450) $ (2,800) $ (4,450)
========== =========== =========
NET EARNINGS PER SHARE
Basic Net Loss Per Share ($.04) ($.03)
Basic Weighted Average
Number of Common Shares Outstanding 100,000 100,000
The accompanying notes are an integral part of these financial statements.
6
MODENA 3, INC.
(a development stage company)
STATEMENT OF OPERATIONS
For the three months ending July 31, 2006 and 2005
Three Months Three Months
Jul. 31, 2006 Jul. 31, 2005
REVENUE
Sales $ 0 $ 0
Cost of sales 0 0
------------ -----------
GROSS PROFIT 0 0
GENERAL AND ADMINISTRATIVE EXPENSES 350 350
----------- -----------
NET LOSS (350) (350)
=========== ===========
The accompanying notes are an integral part of these financial statements.
7
MODENA 3, INC.
(a development stage company)
STATEMENT OF STOCKHOLDER'S EQUITY From inception
(November 18, 2003) through July 31, 2006
SHARES COMMON STOCK ACCUMULATED DEFICIT TOTAL
------------- ------------- ----------------- ------------
Stock issued on acceptance
Of incorporation expenses
November 18, 2003 100,000 $ 100 $ 0 $ 100
Net loss (1,850) (1,850)
------------ ------------ ---------------- ------------
Total at October 31, 2004 100,000 100 (1,850) (1,750)
Net loss (1,550) (1,550)
------------- ------------- --------------- ------------
Total at October 31, 2005 100,000 100 (3,400) (3,300)
------------- ------------- --------------- ------------
Net loss (1,050) (1,050)
------------- ------------- --------------- ------------
Total at July 31, 2006 100,000 $ 100 $ (4,450) $ (4,350)
============ ============= =============== ============
The accompanying notes are an integral part of these financial statements.
8
MODENA 3, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
For the nine months ended July 31, 2006 and 2005
From inception (November 18, 2003) through July 31, 2006
July 31, July 31, From
2006 2005 Inception
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,050) $ (950) $ (4,450)
Stock issued as compensation 0 0 100
Increases (Decrease) in accrued expenses (1,050) 950 4,350
--------- -------- ---------
NET CASH PROVIDED OR (USED) IN OPERATIONS 0 0 0
CASH FLOWS FROM INVESTING ACTIVITIES
None 0 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued on incorporation expenses 0 0 0
CASH RECONCILIATION
Net increase (decrease) in cash 0 0 0
Beginning cash balance 0 0 0
--------- -------- -------
CASH BALANCE AT END OF PERIOD $ 0 $ 0 $ 0
========= ======== =======
The accompanying notes are an integral part of these financial statements.
9
MODENA 3, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
------------------------------------------
Industry:
--------
MODENA 3, Inc. (the Company), a Company incorporated in the state of
Delaware as of November 18, 2003, plans to locate and negotiate with a business
entity for the combination of that target company with The Company. The
combination will normally take the form of a merger, stock-for-stock exchange or
stock- for-assets exchange. In most instances the target company will wish to
structure the business combination to be within the definition of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended. No assurances can be given that The Company will be successful
in locating or negotiating with any target company.
The Company has been formed to provide a method for a foreign or domestic
private company to become a reporting ("public") company whose securities are
qualified for trading in the United States secondary market.
The Company has adopted its fiscal year end to be October 31.
Results of Operations and Ongoing Entity:
----------------------------------------
The Company is considered to be an ongoing entity for accounting purposes; however,
there is substantial doubt as to the Company’s ability to continue as a going
concern. The Company's shareholders fund any shortfalls in The Company's cash flow
on a day to day basis during the time period that The Company is in the development
stage.
Liquidity and Capital Resources:
-------------------------------
In addition to the stockholder funding capital shortfalls; The Company anticipates interested investors that intend to fund the
Company's growth once a business is located.
Cash and Cash Equivalents:
-------------------------
The Company considers cash on hand and amounts on deposit with financial
institutions which have original maturities of three months or less to be cash
and cash equivalents.
Basis of Accounting:
-------------------
The Company's financial statements are prepared in accordance with U.S. generally
accepted accounting principles.
10
MODENA 3, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
Income Taxes:
------------
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to he realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
Fair Value of Financial Instruments:
-----------------------------------
The Company's financial instruments may include cash and cash equivalents,
short-term investments, accounts receivable, accounts payable and liabilities
to banks and shareholders. The carrying amount of long-term debt to banks
approximates fair value based on interest rates that are currently available
to The Company for issuance of debt with similar terms and remaining maturities.
The carrying amounts of other financial instruments approximate their fair
value because of short-term maturities.
Concentrations of Credit Risk:
-----------------------------
Financial instruments which potentially expose The Company to concentrations
of credit risk consist principally of operating demand deposit accounts. The
Company's policy is to place its operating demand deposit accounts with high
credit quality financial institutions. At this time The Company has no deposits
that are at risk.
Recent Accounting Pronouncements:
--------------------------------
In March 2005, the FASB issued FSP No. 46(R) 5, "Implicit Variable Interests under FASB Interpretation No. ("FIN") 46 (revised December 2003), Consolidation of Variable Interest Entities" ("FSP FIN 46R 5"). FSP FIN 46R 5 provides guidance for a reporting enterprise on whether it holds an implicit variable interest in Variable Interest Entities ("VIEs") or potential VIEs when specific conditions exist. This FSP is effective in the first period beginning after March 3, 2005 in accordance with the transition provisions of FIN 46 (Revised 2003), "Consolidation of Variable Interest Entities an Interpretation of Accounting Research Bulletin No. 51" ("FIN 46R"). The Company has determined that the adoption of FSP FIN 46R 5 will not have an impact on its results of operations and financial condition.
In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47"), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about expected future cash outflows associated with those obligations, and (c) more information about investments in long lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets. FIN 47 clarifies that the term "conditional asset retirement obligation" as used in SFAS 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the
11
MODENA 3, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. Early adoption of this interpretation is encouraged. As FIN 47 was recently issued, the Company has not determined whether the interpretation will have a significant effect on its financial position or results of operations.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" ("SFAS 154"), which replaces Accounting Principles Board ("APB") Opinion No. 20, "Accounting Changes", and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements An Amendment of APB Opinion No. 28". SFAS No. 154 provides guidance on the accounting for and reporting of changes in accounting principles and error corrections. SFAS No. 154 requires retrospective application to prior period financial statements of voluntary changes in accounting principle and changes required by new accounting standards when the standard does not include specific transition provisions, unless it is impracticable to do so. SFAS No. 154 also requires certain disclosures for restatements due to correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, and is required to be adopted by the Company as of January 1, 2006. The impact that the adoption of SFAS No. 154 will have on the Company's results of operations and financial condition will depend on the nature of future accounting changes adopted by the Company and the nature of transitional guidance provided in future accounting pronouncements.
2. Related Party Transactions and Going Concern:
--------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. At
this time The Company has not identified the business that it wishes to engage
in.
The Company's shareholders fund The Company's activities while The Company takes
steps to locate and negotiate with a business entity for combination; however,
there can be no assurance these activities will be successful.
3. Accounts Receivable and Customer Deposits:
-----------------------------------------
Accounts receivable and Customer deposits do not exist at this time and
therefore have no allowances accounted for or disclosures made.
4. Use of Estimates:
----------------
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenue
and expenses. Management has no reason to make estimates at this time.
12
MODENA 3, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
5. Revenue and Cost Recognition:
----------------------------
The Company uses the accrual basis of accounting in accordance with generally
accepted accounting principles for financial statement reporting.
6. Accrued Expenses:
----------------
Accrued expenses consist of accrued legal, accounting and office costs during
this stage of the business.
7. Operating Lease Agreements:
--------------------------
The Company has no agreements at this time.
8. Stockholder's Equity:
--------------------
Common Stock includes 100,000,000 shares authorized at a par value of $0.001, of
which 100,000 have been issued for the amount of $100 on November 18, 2003 in
acceptance of the incorporation expenses for the Company.
9. Required Cash Flow Disclosure for Interest and Taxes Paid:
---------------------------------------------------------
The company has paid no amounts for federal income taxes and interest. The
Company issued 100,000 common shares of stock to its sole shareholder in
acceptance of the incorporation expenses for the Company.
10. Income Taxes:
------------
The Company has had a loss from inception in the amount of $4,450 that will expire if not used during the years 2024, 2025, and 2026 in the amounts of $1,850, $1,550 and $1,050, respectively. The net tax asset is $1,000 of which the Company’s management has set an offsetting allowance for the doubtful use of this asset in the amount of $1,000.
11. Earnings Per Share:
------------------
Basic earnings per share ("EPS") is computed by dividing earnings available to
common shareholders by the weighted-average number of common shares outstanding
for the period as required by the Financial Accounting Standards Board (FASB)
under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Shares". Diluted EPS reflects the potential dilution of securities that could
share in the earnings.
13
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations
Plan of Operation
The Company is continuing its efforts to locate a merger Candidate for the purpose of a merger. It is possible that the Company will be successful in locating such a merger candidate and closing such merger. However, if the registrant cannot effect a non-cash acquisition, the registrant may have to raise funds from a private offering of its securities under Rule 506 of Regulation D. There is no assurance the registrant would obtain any such equity funding.
Results of Operation
The Company did not have any operating income from inception (November 18, 2003) through July 31, 2006. For the nine months ended July 31, 2006, the Company recognized a net loss of $1,050. Some general and administrative expenses during the year were accrued. Expenses for the year were comprised of costs mainly associated with legal, accounting and office.
Liquidity and Capital Resources
At July 31, 2006, the Company had no capital resources and will rely upon the issuance of common stock and additional capital contributions from shareholders to fund administrative expenses pending acquisition of an operating company.
Off Balance-Sheet Arrangements
During the nine months ended July 31, 2006, the Company did not engage in any off-balance sheet arrangements as defined in Item 303(c) of the SEC's Regulation S-B.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
The Chief Executive Officer of Modena 3, Inc. maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information which is required to be disclosed is accumulated and communicated to management in a timely manner. Under the supervision and with the participation of management, the certifying officer evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) within 90 days prior to the filing date of this report. Based upon that evaluation, the certifying officer concluded that the Company's disclosure controls and procedures are effective in timely alerting management to material information relative to the Company required to be disclosed in periodic filings with the SEC.
(b) Changes in internal controls.
The Chief Executive Officer has indicated that there were no significant changes in internal controls or other factors that could significantly affect such controls subsequent to the date of his evaluation, and there were no such control actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is currently not a party to any pending legal proceedings and no such action by or to the best of its knowledge, against the Company has been threatened.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the quarter ending July 31, 2006 covered by this report to a vote of the Company's shareholders, through the solicitation of proxies or otherwise.
Item 5. Other Information.
None
Item 6. Exhibits.
(a) Exhibits
31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002
15
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
MODENA 3 INC.
Registrant
Date: August 18, 2006
By: /s/ Abraham Pierce
-----------------------------------
Abraham Pierce
President, Chief Executive Officer,
Chief Financial Officer
16