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CWNM > SEC Filings for CWNM > Form 10-K on 2-Oct-2013All Recent SEC Filings

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Form 10-K for CROWN MARKETING


2-Oct-2013

Annual Report


Item 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Disclaimer Regarding Forward-Looking Statements

This Current Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "believes," "management believes" and similar language.
Except for the historical information contained herein, the matters discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this report are forward-looking statements that involve risks and uncertainties. The factors listed in the section captioned "Risk Factors," as well as any cautionary language in this report; provide examples of risks, uncertainties and events that may cause our actual results to differ materially from those projected. Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this Form 10-K.

Critical Accounting Policies and Estimates

Principles of consolidation. The condensed consolidated financial statements include the accounts of the Company and its subsidiary. All significant inter-company balances and transactions are eliminated on consolidation.

Use of estimates. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation on useful lives of property, plant and equipment. Actual results could differ from those estimates.

Results of Operations

We had losses of $108,800 and $56,261 for the years ended June 30, 2013 and 2012. The increase in loss is due to the increase in operating expenses, primarily related to the costs of the new nutraceuticals division, which commenced in the third fiscal quarter, as well as increased operating costs related to developing and marketing the controlled release technology acquired in September 2012. . In contrast, our business in fiscal 2012 was primarily focused on wholesaling generic pharmaceuticals.. We expect that our level of operating expenses will continue at the current level for fiscal 2013, and may possibly increase if we are able to exploit the controlled release technology, which is being evaluated at this time by our industry consultants.

Revenue

. We had limited sales of $6,627 in the June 30, 2013 quarter (from the nutraceuticals division) and as compared $4,500 for the year ended June 30, 2012 (from resales of generic pharamaceuticals). The 2013 sales represented sales in a new division, financing the marketing of nutraceuticals, and we cannot predict whether results will continue in future quarters.

General and Administrative expenses.

General Administrative expenses were $114,001 for the year ended June 30, 2013 as compared to $60,305 for the year ended June 30, 2012. General and administrative costs were primarily composed of costs related to our status as a public company, which were legal and accounting expenses of $29,799, and press releases and transfer agent fees of $8,709; rent expense of $2,541 and telephone and other office expenses of $9,272; patent costs of $666, and travel costs of $25,069 incurred in marketing the Company's products. In addition, under the contract, Crown Nutraceuticals pays all the advertisting costs for the products (green tea extract and raspberry ketone diet products) while the other party developed the product, packaging and marketing materials, and is responsible for all the costs of inventory and fulfillment. The advertisingcosts paid by this division were $28,986 in fiscal 2013. In comparison, operating expenses in the 2012 fiscal year primarily comprised of $44,871 in filing fees on our patents, and public company-related costs of $5,127. The Company believes that the new nutraceutical enterprise will recoup all of the advertising costs by December 31, 2013. We cannot predict whether this new business segment will be profitable nor whether the controlled release technology will be successfully exploited. Should we be able to obtain additional funding to market the controlled release technology, our marketing expenses will increase substantially as well in fiscal 2014.

Liquidity

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company is still in development stage and has not yet been successful in establishing profitable operations. The Company incurred a net loss of $108,800 for the year ended June 30, 2013, and the Company's liabilities exceed its assets by $227,273 as of June 30, 2013. The Company has received limited revenues to date. These factors create substantial doubt about the Company's ability to continue as a going concern. As such, the accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company's management plans to continue as a going concern revolves around its ability to achieve, as well as raise necessary capital to pay ongoing general and administrative expenses of the Company. The ability of the Company to continue as a going concern is dependent on securing additional sources of capital and the success of the Company's plan. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations.

Our cash needs in the year ended June 30, 2013 were primarily met by extension of loans of $44,694 from a shareholder, increase in accounts payable from an office director, and the exercise of warrants. As of June 30, 2013 we had cash on hand of $19,746., During the quarter ended September 30, 2012, 24,000,000 warrants were exercised that entitled us to receive proceeds of $168,000.
During the year ended June 30, 2013 we received $804000 from the proceeds of the exercise of warrants. Subsequently we received $79,000 in July 2013 that were due us from on the warrant subscription receivable and we believe we will be able to receive, prior to December 31, 2013, the remaining due us from warrants exercised, and that this amount will cover our operating expenses through that time. After December 31, 2013, we will need approximately $750,000 for marketing and development to fully fund our marketing plans. Due to our limited operating history, we believe that we will need to sell common equity to raise the required funds. We have no arrangement or understanding pursuant to which we might obtain such funding.

Our officer/shareholder is providing all of our working capital other than those from warrant exercises and will continue to do so until at least June 30, 2014. During the year ended June 30, 2012, the Company issued an unsecured promissory note to an entity owned by a shareholder and former director of the Company for the aggregate principal sum of $9,666. The unpaid principal sum, together with all other amounts advanced to the Company by the lender from time to time, shall bear interest at 4% per annum until paid, and shall be due and payable on demand. In September 2012, the lender advanced an additional $700 to the Company under the same terms. As of June 30, 2013, notes payable to this related party had a balance of $10,366.

In September 2012, the Company issued an unsecured promissory note to an entity controlled by Mr. Learned Hand, the Company's Chief Executive and Financial Officer and director, for the principal sum of $140,000. The promissory note was issued in connection with the assignment of two patents and the related intellectual property (see Note 6). The unpaid principal sum of the promissory note bears interest at 4% per annum until paid. The unpaid principal sum and all accrued but unpaid interest thereon shall be due and payable five years from the date of the promissory note (September 2017). As of June 30, 2013, the promissory note of $140,000 remained outstanding.

In March 2013, Mr. Hand loaned the Company $25,000 to capitalize the Crown Nutraceuticals subsidiary. This loan is represented by a demand note bearing interest at a rate of 4% per annum. As of June 30, 2013, the loan of $25,000 remained outstanding.

Recent Accounting Pronouncements

There are recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants ("AICPA")and the SEC; however these pronouncements are not believed by management to have a material impact on the Company's present or future financial statements.

Forward Looking Statements

Information included in this report includes forward looking statements, which can be identified by the use of forward-looking terminology such as may, expect, anticipate, believe, estimate, or continue, or the negative thereof or other variations thereon or comparable terminology. The statements in "Risk Factors" and other statements and disclaimers in this report constitute cautionary statements identifying important factors, including risks and uncertainties, relating to the forward-looking statements that could cause actual results to differ materially from those reflected in the forward-looking statements.

Since we have generated limited revenues, we are a development stage company as that term is defined in Section 915 - Development Stage Entities, of the FASB Accounting Standards Codification. Our activities have mostly been devoted to seeking capital; seeking supply contracts and development of a business plan.
Our auditors have included an explanatory paragraph in their report on our financial statements, relating to the uncertainty of our business as a going concern, due to our lack of operating history or current revenues, its nature as a start up business, management's limited experience and limited funds. We do not believe that conventional financing, such as bank loans, is available to us due to these factors. We have no bank line of credit available to us.
Management believes that it will be able to raise the required funds for operations from one or more future offerings, in order to effect our business plan.

Our future operating results are subject to our attaining certain milestones, including:

o our success in entering into favorable arrangements with pharmaceutical licensees;

o the success of our develop and marketing efforts for our own products;

o our ability to obtain additional financing; and

o other risks which we identify in future filings with the SEC.

Any or all of our forward looking statements in this prospectus and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward looking statement can be guaranteed. In addition, we undertake no responsibility to update any forward-looking statement to reflect events or circumstances which occur after the date of this prospectus.

Contractual Obligations and Off-Balance Sheet Arrangements

We do not have any contractual obligations or off balance sheet arrangements.

Item 7A.

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