3. Significant Accounting Policies
The significant accounting policies followed are:
USE OF ESTIMATES - 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.
CASH AND CASH EQUIVALENTS - All cash, other than held in escrow,
is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance
provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered
to be cash equivalents.
RESEARCH AND DEVELOPMENT EXPENSES - Expenditures for research, development,
and engineering of products are expensed as incurred.
COMMON STOCK - The Company records common stock issuances when all
of the legal requirements for the issuance of such common stock have been satisfied.
REVENUE AND COST RECOGNITION - The Company has no current source
of revenue; therefore the Company has not yet adopted any policy regarding the recognition of revenue or cost.
ADVERTISING COSTS - The Company's policy regarding advertising is
to expense advertising when incurred.
INCOME TAXES - Income taxes are provided for the tax effects
of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary
differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial
reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company adopted the provisions of FASB ASC 740-10 "Uncertainty
in Income Taxes" (ASC 740-10), on January 1, 2007. The Company has not recognized a liability as a result of the implementation
of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there
is no unrecognized benefit since the date of adoption. The Company has not recognized interest expense or penalties as a result
of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related
to unrecognized tax benefits in interest expense and penalties in operating expenses.
EARNINGS (LOSS) PER SHARE - Basic loss per share is computed by
dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted
loss per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist
of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock.
In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus
are excluded from the calculation. At September 30, 2012, the Company did not have any potentially dilutive common shares.
FINANCIAL INSTRUMENTS - In September 2006, the Financial Accounting
Standards Board (FASB) introduced a framework for measuring fair value and expanded required disclosure about fair value measurements
of assets and liabilities. The Company adopted the standard for those financial assets and liabilities as of the beginning
of the 2008 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC) 820 "Fair
Value Measurements and Disclosures" (ASC 820) defines fair value as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.. ASC 820 also establishes a fair value hierarchy that distinguishes
between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs)
and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the
circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
||Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.|
||Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.|
||Level 3 - Inputs that are both significant to the fair value measurement and unobservable.|
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of September 30, 2012. The respective carrying value of certain
on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These
financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued expenses.
The fair value of the Company's notes payable is estimated based on current rates that would be available for debt of similar terms
which is not significantly different from its stated value.
On January 1, 2011, the Company applied ASC 820 for all non-financial
assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities
did not have a significant impact on the Company's financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
Except for rules and interpretive releases of the SEC under authority
of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification (ASC)
is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management
has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present
or future financial statements.