[X] ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED APRIL 30, 2012
Commission file number 000-52758
A No.1 Building, ShangDu International Tower,
Indicate by check mark if the Company is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Indicate by check mark if the Company is not required to file reports
pursuant to Section 13 or 15(d) of the Act:
Indicate by check mark whether the Company(1) has filed all reports
required 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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of Company’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the Company 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 if the Exchange Act.
Indicate by check mark whether the Company is a shell company (as defined
in Rule 12b-2 of the Act).
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of October 31, 2011;$265,200.
TABLE OF CONTENTS
ITEM 1. BUSINESS
Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K and other documents we file with the Securities and Exchange Commission contain forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, web casts, phone calls and conference calls. Such forward-looking statements, whether expressed or implied, are subject to risks and uncertainties which could cause our actual results to differ materially from those implied by such forward-looking statements, due to a number of factors, many of which are beyond our control, which include, but are not limited to:
Forward-looking statements also include the assumptions underlying or relating to any of the foregoing or other such statements. When used in this report, the words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict” and similar expressions are generally intended to identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, whether as a result of new information, changes in assumptions, future events or otherwise. Readers should carefully review the factors described in Item 1A: Risk Factors below and other documents we file from time to time with the Securities and Exchange Commission for a more detailed description of the risks and other factors that may affect the forward-looking statements. Readers should understand that it is not possible to predict or identify all such factors. Consequently, readers should not consider any such list to be a complete set of all potential risks or uncertainties.
Unless the context otherwise requires, references in this report to “RainEarth Inc.,” “the Company,” “we,” “us” and “our” refer to “RainEarth Inc.” and its subsidiaries.
We were incorporated in the State of Nevada on March 14, 2006. We are a developing stage corporation. We maintain our statutory registered agent's office at The Corporation Trust Company of Nevada, 6100 Neil Road, Suite 500, Reno, Nevada 89511 and our business office is located at A No.1 Building, Shang Du International Tower, No.8 Dong Da Qiao Road, Beijing, China 100020. This is our mailing address as well. Our telephone number is (852)3005-7220.
In April 2006, Shu-heng Wang, our former president acquired one mining claim containing fourteen cells in British Columbia, Canada (Property) by arranging the registration of the same through James W. McLeod, a geologist, a non affiliated third party. A claim is a grant from the Crown of the available land within the cells to the holder to remove and sell minerals. A cell is an area which appears electronically on the British Columbia Internet Minerals Titles Online Grid. The online grid is the geographical basis for the cell. Mr. McLeod is a self-employed contract stoker, field worker and professional geologist residing in British Columbia.
Our exploration target was to find an ore body containing gold. Our success depended upon finding mineralized material. Mineralized material is a mineralized body, which has been delineated by appropriate spaced drilling or underground sampling to support sufficient tonnage and average grade of metals to justify removal. This included a determination by our consultant if the property contained reserves.
As a continuation of the exploration program, Sookochoff Consultants Inc. completed a prospecting on the Property in November 2008. The purpose of the prospecting program was to locate any indications of copper or gold mineralization or coal bearing horizons with the rocks that are indicated to outcrop on the Property. In this prospecting program, adequate coverage of the property was made to locate outcrop or float material which could have provided indications of copper or gold mineralization and/or coal bearing sediments.
Unfortunately, in the few outcrops found and examined in the northeast, the basalts were fresh with no mineralization or alteration. As a result of this prospecting program, the Property did not warrant any additional exploration and/or expenditures and was recommended to be allowed to expire.
Based on the recommendation from the geologist consultant, the Company started to look for other business opportunities. On March 25, 2009, the Company and Beijing RainEarth Technology Co. Ltd., a company organized and existing under the laws of the People's Republic of China (“China RainEarth”), entered into a Business Cooperation Agreement (the “Agreement”) for a term of twenty years. The purpose of the Agreement was to jointly conduct Hollow Fiber Mambrane Materials’ application and manufacturing business in China.
The Company was to provide Advice and assistance relating to development of marketing and provision of consultancy services, particularly as related to the Business to China RainEarth, and take such action as may be reasonably required to raise up to RM 136 million ($ 20 million U.S. Dollar).
China RainEarth retained the services of the Company in relation to the current and proposed operations of China RainEarth’s business in the People’s Republic of China. China RainEarth was to give 60% of its revenue after deduction of direct operating costs, expenses and taxes to the Company in consideration of the Company’s services.
On May 27, 2009, the Company changed its name to RainEarth Inc. to better reflect this business. In August 2010, the Business Cooperation Agreement was terminated.
We have been issued a going concern opinion and rely upon the sale of our securities and loans from our officers and directors to fund operations.
We may not have enough money to complete our business plan. If it turns out that we have not raised enough money to complete our business plan, we will try to raise additional funds from a second public offering, a private placement or loans. At the present time, we have not made any plans to raise additional money and there is no assurance that we would be able to raise additional money in the future. If we need additional money and cannot raise it, we will have to suspend or cease operations.
Employees and Employment Agreements
We do not intend to hire additional employees at this time. Some work will be conducted by independent contractors that we will hire from time to time.
Our office is located at A No.1 Building, Shang Du International Tower, No. 8 Dong Da Qiao Road, Beijing, China 100020. This is our mailing address as well. Our telephone number is (852) 3005-7220. Our President has donated his office place as our office for free without a written lease agreement.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Risks Related to Our Business
We have no operating history to provide you with an adequate basis to judge our future prospects and results of operations.
We have no operating history to provide a meaningful basis for you to evaluate our business and financial performance.
Our business depends substantially on the continuing efforts of our senior executives, and our business may be severely disrupted if we lose their services.
If one or more of our senior executives were unable or unwilling to continue in their present positions, we might not be able to replace them easily or at all. If any of our senior executives joins a competitor or forms a competing company, we may lose clients, suppliers, key professionals and staff members.
Risks Related to the Common Stock
There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities.
There is currently only a limited public market for our common stock, which is listed on the Over-the-Counter Bulletin Board, and there can be no assurance that a trading market will develop further or be maintained in the future.
The market price of our common stock may be volatile.
The market price of our common stock has been and will likely continue to be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.
Our Common Stock is considered “penny stock.”
The SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share and therefore is a “penny stock.” Brokers and dealers effecting transactions in “penny stock” must disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect your ability to sell shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 2. PROPERTIES
We own no interest in any property.
ITEM 3. LEGAL PROCEEDINGS
We are not presently a party to any litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our shares were traded on the Bulletin Board under the symbol “GRKR”, changed to “RNER” on May 21, 2009. A summary of trading by quarter for last two fiscal years is as follows:
On July 11, 2008, we completed a ten-for-one stock split. The information contained in this report reflects the stock split.
In April 2006, we issued 5,000,000 shares of common stock to Shu-Heng Wang, one of our former officers and directors and in April 2006 we issued 5,000,000 shares of common stock to Jean Jin, one of our former officers and directors. The 10,000,000 shares are restricted securities, as defined in Rule 144 of the Rules and Regulations of the SEC promulgated under the Securities Act.
In October 2007, we completed our public offering and issued 10,000,000 shares of common stock to 42 persons in consideration of $100,000.
In April 2009, the Company issued 32 million restricted common shares to the designated party of Beijing RainEarth Technology Co. Ltd. (“RainEarth Designee”) as additional consideration for entering into the Agreement signed between the Company and Beijing RainEarth Technology Co. Ltd. dated March 25, 2009 (“Agreement”), in an offering intended to be exempt from registration under the Securities Act of 1933, as amended (the “Act”), pursuant to Regulation S promulgated pursuant to the Act. RainEarth Designee will not constitute “U.S. Persons” within the meaning of Regulation S, and the shares may become eligible for sale pursuant to Rule 144 under the Act within one year if certain conditions are met. The consideration received by the Company for the issuance of the shares was the agreement of Beijing RainEarth Technology Co. Ltd. to enter into the Agreement.
As of the date of this report, we have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our board of directors and will depend upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Section Rule 15(g) of the Securities Exchange Act of 1934
Our shares are covered by section 15(g) of the Securities Exchange Act of 1934, as amended, and Rules 15g-1 through 15g-6, and 15g-9 promulgated hereunder. They impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses).
Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.
Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document.
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.
Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.
Rule 15g-6 requires broker-dealers selling penny stocks to provide their customers with monthly account statements.
Rule 15g-9 requires broker-dealers to approve the transaction for the customer’s account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his rights and remedies in cases of fraud in penny stock transactions; and, the FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker-dealers and their associated persons.
The application of the penny stock rules may affect your ability to resell your shares.
Securities authorized for issuance under equity compensation plans
We do not have any equity compensation plans and accordingly we have no securities authorized for issuance hereunder.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
We are a start-up, developing stage Corporation and have not yet generated or realized any revenues from our business activities.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated. Our only other source for cash at this time is investment by others in a private placement.
Our officers and directors are unwilling to make any commitments to loan us any money at this time. At the present time, we have not made any arrangements to raise additional cash. We may have to suspend activities until we do raise the cash, or cease activities entirely. Other than as described in this paragraph, we have no other financing plans.
We do not intend to hire additional employees at this time.
Limited Operating History; Need for Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance. We are a developing stage corporation and have not generated any revenues from activities. We cannot guarantee we will be successful in our business activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the implementation of our business plan, and possible cost overruns due to price and cost increases in services.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities. Equity financing could result in additional dilution to existing shareholders.
Results of Activities
From Inception on March 14, 2006
In April 2006, we acquired the right to explore one property containing fourteen cells. We did not own any interest in any property, but merely had the right to conduct exploration activities on one property. We completed a prospecting program in November 2008 and on April 19, 2009, allowed the claim to expire.
On March 25, 2009, the Company and Beijing RainEarth Technology Co. Ltd., a company organized and existing under the laws of the People's Republic of China (“China RainEarth”), entered into a Business Cooperation Agreement (the “Agreement”) for a term of twenty years.
The purpose of the Agreement was to jointly conduct Hollow Fiber Mambrane Materials’ application and manufacturing business in China.
On August 10, 2010, the Company and Beijing RainEarth Technology Co. Ltd., have signed a termination of Agreement.
As of the date of this report, we have yet to generate any revenues from our business activities.
Costs and Expenses
Total costs and expenses for the year ended April 30, 2012 increased to $63,092 from $49,296 for the same period in 2011. This increase in costs and expenses was due primarily to increased professional fees $53,918 in 2012 compared $40,067 in 2011.
Liquidity and Capital Resources
As of the date of this report, we have yet to generate any revenues from our business activities. Since inception, we have issued 52,000,000 shares of our common stock and received $100,010.
In April 2006, we issued 10,000,000 shares of common stock to our officers and directors pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1993. The purchase price of the shares was $10.00. This was accounted for as an acquisition of shares.
In March 2009, we issued 32,000,000 shares of common stock to the designated party of Beijing RainEarth as additional consideration for entering into the Agreement signed between the Company and Beijing RainEarth dated March 25, 2009, in an offering intended to be exempt from registration under the Securities Act of 1933, as amended (the “Act”), pursuant to Regulation S promulgated pursuant to the Act.
As of April 30, 2012, our total assets were $377 consisting of cash, increased from $346 as of April 30, 2011. This change was due primarily to increased cash balance which is $377 as of April 30, 2012, compared to $346 as of April 30, 2011. As of April 30, 2012, our total liabilities were $159,676, increased from $105,553 as of April 30, 2011. This change was due primarily to increased accrued professional fees.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 2 of our financial statements included in our report on this Form 10-K.
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 have materially effected our results of operations, financial position or liquidity for the periods presented in this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of RainEarth Inc. (formerly Gold Rock Resources Inc.)
I have audited the accompanying balance sheets of RainEarth Inc. (the Company), a development stage company, as of April 30, 2012 and 2011 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years ended April 30, 2012 and 2011 and for the period March 14, 2006 to April 30, 2012. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of RainEarth Inc., a development stage company, as of April 30, 2012 and 2011 and the results of its operations and its cash flows for the years ended April 30, 2012 and 2011 and for the period March 14, 2006 to April 30, 2012 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s present financial situation raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Freeport, New York
RainEarth Inc. (formerly Gold Rock Resources
Note 1. Organization and Business
RainEarth Inc. (the “Company”) was incorporated in the State of Nevada on March 14, 2006 under the name of Gold Rock Resources Inc. In April 2006 (see Note 4), the Company acquired a mineral claim in British Columbia, Canada; the claim was forfeited April 19, 2009. On March 25, 2009 (see Note 5), the Company entered into a Business Cooperation Agreement with Beijing RainEarth Technology Co. Ltd. (“Beijing RainEarth”) to jointly conduct a Hollow Fiber Membrane Materials application and manufacturing business. On March 27, 2009, the Company changed its name to RainEarth Inc. In August 2010 (see Note 5), the Business Cooperation Agreement was terminated.
On July 11, 2008, the Company effected a 10 for 1 forward stock split of its common stock, thereby increasing the number of issued and outstanding common shares from 2,000,000 shares to 20,000,000 shares and the number of authorized common and preferred shares from 100,000,000 shares to 1,000,000,000 shares. The financial statements have been retroactively adjusted to reflect this stock split.
The financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. At April 30, 2012, the Company had cash of $377 and negative working capital of $159,299. For the years ended April 30, 2012 and 2011, the Company had net losses of $63,092 and $49,296, respectively. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to raise additional capital and achieve profitable operations through future business ventures. However, there is no assurance that the Company will accomplish these objectives. The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
RainEarth Inc. (formerly Gold Rock Resources
Note 2. Summary of Significant Accounting Policies
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars.
The preparation of financial statements in conformity with U.S. 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.
The Company computes net income (loss) per share in accordance with Accounting Standards Codification (“ASC”) Topic 260, "Earnings per Share". ASC Topic 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is antidilutive.
ASC Topic 220, “Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. For the years ended April 30, 2012 and 2011 and for the period March 14, 2006 (inception) to April 30, 2012, except for net loss, the Company had no items that represent comprehensive income (loss) and, therefore, has not included a schedule of comprehensive income (loss) in the financial statements.
RainEarth Inc. (formerly Gold Rock Resources
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Mineral claim acquisition costs are capitalized and reviewed periodically for impairment. Exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
The fair values of financial instruments, which include cash, accounts payable and accrued liabilities and due to related party, approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company’s operations are outside the United States which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC Topic 740, “Income Taxes”, as of its inception. Pursuant to ASC Topic 740, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC Topic 830, “Foreign Currency Matters”, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Note 3. Related Party Balances/Transactions
a) During the years ended April 30, 2012 and 2011, the Company recognized a total of $6,000 for donated services at $500 per month and $3,000 for donated rent at $250 per month provided by the President of the Company at no cost.
b) At April 30, 2012, the Company is indebted to a former director of the Company (who resigned September 4, 2008) for $45,021 and to a current director for $4,304. Both liabilities are non-interest bearing, unsecured and due on demand.
Note 4. Mineral Claim
In April 2006, the Company, through its former President and director, acquired 100% of the rights, title and interest in a mining claim representing 14 contiguous cells and covering an area of 725 acres. The property is situated on the eastern-flank of the Summers Creek Valley. It lies about the Rampart Lake road approximately 11 miles due north of the Town of Princeton (formerly known as Vermillion Forks), British Columbia, Canada. Payment of $3,062 was required to record this mining claim and was paid on April 7, 2006. The claim was registered in the name of the former President of the Company, who agreed to hold the claim in trust on behalf of the Company. On April 19, 2009, the claim was forfeited due to non payment of renewal fees.
Note 5. Investment in Beijing RainEarth
The investment in Beijing RainEarth, net, consists of:
The $640,000 fair value of the 32,000,000 shares of RainEarth Inc. common stock was determined using a $0.02 estimated price per share. No trades occurred in the Company’s shares of Common Stock from July 14, 2008 to April 2, 2009. On April 3, 2009, 2,500 shares traded at $0.55 per share and on October 29, 2009, 27,000 shares traded at prices ranging from $0.017 to $0.0175 per share.
From March 25, 2009 to April 30, 2010, the investment was amortized using the straight line method over the 20 years contract term of the Business Cooperation Agreement.
On March 25, 2009, the Company entered into a Business Cooperation Agreement (the “Agreement”) with Beijing RainEarth to jointly conduct a Hollow Fiber Membrane Materials application and manufacturing business. The Agreement provided for the Company to provide marketing and consulting services to Beijing RainEarth and to take actions to raise up to $20,000,000 for Beijing RainEarth. The Agreement also provided for the payment of consulting services fees to the Company equal to 60% of Beijing RainEarth’s quarterly revenues after deduction of direct operating costs, expenses and taxes. The term of the Agreement was 20 years. Pursuant to the Agreement, the Company issued 32,000,000 newly issued shares of its Common Stock (representing approximately 61.5% of the 52,000,000 issued and outstanding shares after the issuance) to a designated party of Beijing RainEarth.
For the years ended April 30, 2012 and 2011 and for the period March 14, 2006 (inception) to April 30, 2012, the Company did not receive or accrue any consulting services fees from Beijing RainEarth.
In the three months ended April 30, 2010, the Company and Beijing RainEarth verbally agreed to terminate the Business Cooperation Agreement. As a result, the Company wrote off the remaining $604,756 unamortized balance of its investment in Beijing RainEarth at April 30, 2010 and recognized an impairment charge of $604,756 in operations for the three months ended April 30, 2010.
In August 2010, the Company and Beijing RainEarth executed a termination of Agreement whereby the Business Cooperation Agreement was terminated in writing.
Note 6. Preferred Stock - Terms and Conditions
The preferred stock may be divided into, and issued, in series. The Board of Directors of the Company is authorized to divide the authorized shares of preferred stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. The Board of Directors of the Company is authorized, within any limitations prescribed by law and this Article, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock including but not limited to the following:
a) The rate of dividend, the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends shall accrue;
b) Whether shares may be redeemed, and, if so, the redemption price and the terms and conditions of redemption;
c) The amount payable upon shares in the event of voluntary or involuntary liquidation;
d) Sinking fund or other provisions, if any, for the redemption or purchase of shares;
e) The terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion;
f) Voting powers, if any, provided that if any of the preferred stock or series thereof shall have voting rights, such preferred stock or series shall vote only on a share for share basis with the common stock on any matter, including but not limited to the election of directors, for which such preferred stock or series has such rights; and,
g) Subject to the foregoing, such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights and preferences, if any, of shares or such series as the Board of Directors of the Company may, at the time so acting, lawfully fix and determine under the laws of the State of Nevada.
The Company shall not declare, pay or set apart for payment any dividend or other distribution (unless payable solely in shares of common stock or other class of stock junior to the preferred stock as to dividends or upon liquidation) in respect of common stock, or other class of stock junior to the preferred stock, nor shall it redeem, purchase or otherwise acquire for consideration shares of any of the foregoing, unless dividends, if any, payable to holders of preferred stock for the current period (and in the case of cumulative dividends, if any, for all past periods) have been paid, are being paid or have been set aside for payments. In the event of the liquidation of the Company, holders of preferred stock shall be entitled to receive, before any payment or distribution on the common stock or any other class of stock junior to the preferred stock upon liquidation, a distribution per share in the amount of the liquidation preference, if any, fixed or determined in accordance with the terms of such preferred stock plus, if so provided in such terms, an amount per share equal to accumulated and unpaid dividends in respect of such preferred stock (whether or not earned or declared) to the date of such distribution.
Neither the sale, lease or exchange of all or substantially all of the property and assets of the Company, nor any consolidation or merger of the Company, shall be deemed to be a liquidation for the purposes of these terms and conditions.
Note 7. Public Offering
On February 1, 2007, the Securities and Exchange Commission declared effective the Company’s Form SB-2 Registration Statement relating to a public offering of up to 20,000,000 shares of common stock at $0.01 per share, or $200,000 total. On October 26, 2007, the Company completed its public offering. A total of 10,000,000 shares of common stock were sold, resulting in gross proceeds to the Company of $100,000.
Note 8. Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. At April 30, 2012, the Company had a net operating loss carryforward of $259,309, which expires $18,050 in 2026, $21,490 in 2027, $25,510 in 2028, $41,358 in 2029, $58,513 in 2030, $40,296 in 2031 and $54,092 in 2032. Pursuant to Accounting Standards Codification (“ASC”) 740, “Income Taxes”, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of the net operating loss carryforward have not been recognized in these financial statements because the Company has not determined it to be more likely than not that it will utilize the net operating loss carryforward in future years. At April 30, 2012, the valuation allowance established against the deferred tax asset is $88,165.
The components of the net deferred tax asset and the amount of the valuation allowance are scheduled below:
Current United States income tax laws limit the amount of loss available to offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.
Changes in Internal Controls
We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, 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. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, 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.
Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of April 30, 2011, the Company’s internal control over financial reporting was effective based on those criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
ITEM 9B. OTHER INFORMATION
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Officers and Directors
Each of our directors serves until his or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees.
The name, address, age and position of our present sole officer and director is set forth below:
The persons named above have held their offices/positions since inception of our company and are expected to hold their offices/positions until the next annual meeting of our stockholders.
Background of Officers and Directors
Zhu, YongFu, 42. Since August 2004, Mr. Zhu was director, president and chief executive officer of APEX Pacific Investment Limited, a BVI company engaging in International investments. From 1998 to 2004, Mr. Zhu served as education consultant and instructor for Xinjian Middle School, located in Zhejiang, China.
Yin, TianHui, 57. Since 2007, Mr. Yin served as Director, President and Chief Executive Officer for High Grow Development Corp., a BVI company specializing in International investments. Prior to joining High Grow Develop, Mr. Yin participated in various investment projects.
Conflicts of Interest
We believe that Mr. Zhu and Mr. Yin will not be subject to conflicts of interest. No policy has been implemented or will be implemented to address conflicts of interest.
In the event both Mr. Zhu and Mr. Yin resign as an officer and director, there will be no one to run our operations and our operations will be suspended or cease entirely.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us for the years ended April 30, 2012, 2011 and 2010 to each or our officers and directors. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid or named executive officers.
SUMMARY COMPENSATION TABLE
We have not paid any salaries in 2012, and we do not anticipate paying any salaries at any time in 2013. We will not begin paying salaries until we have adequate funds to do so.
Our directors do not receive any compensation for serving as members of the board of directors.
As of the date hereof, we have not entered into employment contracts with any of our officers and do not intend to enter into any employment contracts until such time as it is profitable to do so.
Audit Committee and Charter
We have no audit committee of the board or audit committee charter.
Audit Committee Financial Expert
None of our directors or officers has the qualifications or experience to be considered a financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe the services of a financial expert are not warranted.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Section 16(a) of the Securities Exchange Act of 1934
As of the date of this report, none of our officers, directors or owners of 10% or more of our common stock have filed reports required by section 16(a) of the Securities Exchange Act of 1934 and are therefore delinquent in their reporting obligations. We do not know if and when they will ever file the reports required by section 16(a) of the Securities Exchange Act of 1934.
Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order.
The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the date of this report, the total number of shares of common stock beneficially owned by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares, sale of all shares in this offering. The stockholder listed below has direct ownership of its shares and possesses sole voting and dispositive power with respect to the shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
In April 2006, we issued a total of 5,000,000 shares of restricted common stock to Shu-heng Wang, our former president and a former member of the board of directors. This was accounted for as an acquisition of shares of common stock in the amount of $5.00. We also issued a total of 5,000,000 shares of restricted common stock to Jean Jin, our former secretary and a former member of the board of directors. This was accounted for as an acquisition of shares of common stock in the amount of $5.00.
Mr. Wang also caused the property, comprised of one, to be registered at a cost of $3,062. The claim was registered by James McLeod for the $3,062. The terms of the transaction with Mr. McLeod were at arms length and Mr. McLeod was not an affiliate. Mr. Wang would have transfered the claim to us if mineralized material had been found on the claim.
Mr. Wang and Ms. Jin are our only promoters. They have not received nor will they receive anything of value from us, directly or indirectly in their capacities as promoters.
At April 30, 2012, the Company is indebted to a former director of the Company (who resigned September 4, 2008) for $45,021 and to a current director for $4,304. Both liabilities are non-interest bearing, unsecured and due on demand.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
(1) Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
(4) All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:
(5) Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
(6) The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was less than 50%.
PART IV. OTHER INFORMATION
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are included herein:
In accordance with Section 13 or 15(d) of the Securities and Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 17th day of January, 2013.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated: