UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 31, 2012
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ______________
Commission file number 333-159607
ONLINE TELE-SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
Nevada 98-0583175
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Block 225, 02-213, Tampines St. 23, Singapore 521225
(Address of principal executive offices) (Zip Code)
(702) 553-3026
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None N/A
Securities registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by checkmark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by checkmark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by checkmark whether the registrant has (1) filed all reports required
to be filed 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant'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 checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of voting and non-voting common equity held by
non-affiliates as of July 31, 2011 was approximately $35,000 based upon 700,000
shares held by non-affiliates and a closing market price of $0.05 per share on
the last day of the registrant's most recently completed second fiscal quarter.
As of May 15, 2012, there were 66,000,000 shares of common stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits incorporated by reference are referred to in Part IV.
AVAILABLE INFORMATION
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and all amendments to those reports that we file with the Securities
and Exchange Commission, or SEC, are available at the SEC's public reference
room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains
reports, proxy and information statements and other information regarding
reporting companies.
TABLE OF CONTENTS
Page
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PART I
ITEM 1. Business 4
ITEM 1A. Risk Factors 11
ITEM 2. Properties 17
ITEM 3. Legal Proceedings 17
ITEM 4. Mine safety Disclosures 17
PART II
ITEM 5. Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 17
ITEM 6. Selected Financial Data 18
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 18
ITEM 8. Financial Statements and Supplementary Data 26
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 40
ITEM 9A. Controls and Procedures 40
ITEM 9B. Other Information 41
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance 41
ITEM 11. Executive Compensation 42
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 43
ITEM 13. Certain Relationships and Related Transactions, and Director
Independence 45
ITEM 14. Principal Accountant Fees and Services 45
PART IV
ITEM 15. Exhibits Financial Statement Schedules 45
Signatures 46
2
PART I
FORWARD LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors" and the risks set out below, any of which may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks include, by way of example and not in
limitation:
* the uncertainty that we will not be able to successfully identify and
evaluate a suitable business opportunity;
* risks related to the large number of established and well-financed
entities that are actively seeking suitable business opportunities;
* risks related to the failure to successfully manage or achieve growth
of a new business opportunity; and
* other risks and uncertainties related to our business strategy.
This list is not an exhaustive list of the factors that may affect any of our
forward-looking statements. These and other factors should be considered
carefully and readers should not place undue reliance on our forward-looking
statements.
Forward looking statements are made based on management's beliefs, estimates and
opinions on the date the statements are made and we undertake no obligation to
update forward-looking statements if these beliefs, estimates and opinions or
other circumstances should change. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Except as
required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward-looking statements to conform
these statements to actual results.
The safe harbors of forward-looking statements provided by Section 21E of the
Exchange Act are unavailable to issuers of penny stock. As we issued securities
at a price below $5.00 per share, our shares are considered penny stock and such
safe harbors set forth under the Private Securities Litigation Reform Act of
1995 are unavailable to us.
Our financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common stock" refer to
the common shares in our capital stock.
As used in this annual report, the terms "we," "us," "our" and "Online Tele"
mean Online Tele-Solutions Inc., unless otherwise indicated.
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ITEM 1. BUSINESS
GENERAL
We were incorporated in the state of Nevada on June 5, 2008. Our offices are
currently located at Block 225, 02-213, Tampines St 23, Singapore 521225. Our
U.S.-based telephone number is (702) 553-3026. Our website, which is currently
being developed, is www.online-tele-solutions.com.
We intend to develop and offer Internet-based hosted call center services for
small to medium sized companies, or companies with between 10 - 500 employees,
that are seeking to establish their own internal support and telemarketing
divisions. We intend to provide call-center software to our customers which will
enable them to handle outbound calls, inbound calls and a combination of both
from their own locations. We will host their customer calling data on our
servers, and our customers will be able to access the functionality of our
software via a web browser such as Internet Explorer. Our product will blend
together features of Voice over Internet Protocol ("VoIP") technology and
customer relationship management ("CRM") software. To date, we have secured
office space, taken steps to retain a transfer agent, and have been in contact
with professional advisors regarding legal compliance, accounting disclosure
statements and financial reporting. We have also begun developing a website and
have engaged a contractor to develop our software. We intend to launch our
"information only" web site during the third quarter of the fiscal year ended
January 31, 2012.
MARKET OPPORTUNITY
Many businesses are using international call centers to gain visibility in the
marketplace, some for direct sales and marketing, while others use call centers
to resolve customer product and service inquiries. Businesses of all sizes use
call centers, including Fortune 500 companies with multi-national operations,
and small businesses, such as local banks, insurance companies and hospitals,
use call centers for a variety of customer service, marketing and sales
programs.
Most call centers have used Customer Relationship Management ("CRM") software
programs like ACT! by Sage Software, one of the leading selling contact and
customer management software programs, to track and record sequential contacts
and discussions with customers. Initially, CRM software programs were loaded
onto a personal computer as a stand-alone application. As such, a company using
CRM would be required to purchase one copy for every personal computer that
served as a workstation for its staff. Today, with the use of local area
networks, CRM software has been adapted for simultaneous multi-users.
We believe that the Internet has become a universal delivery platform. Through
the Internet existing vendors are able to refine the CRM software into an
Internet-delivered service and are able to enhance that product offering by
hosting it on a company's server(s) and delivering it to individual customers
via the Internet. We intend to capitalize on this particular delivery method by
offering a hosted call center service that borrows the style of methodology
being offered by existing vendors and packaging it for the small business
sector. Based on our initial research, we believe we can deliver a hosted call
center solution that will be affordable in cost and equal to, and in some cases
surpass, those call center solutions that are currently available in the market.
A hosted call center is a call center without in-house distribution equipment.
The PBX, automated call distributor ("ACD") and related equipment are hosted by
a third party. Virtual call centers, also called "hosted call centers," enable
agents to work in remote locations. Calls may come in and out via regular
telephone lines or voice over IP (VoIP).
We provide a hosted environment that will allow our customer to have their own
call center without investing in an in-house solution. We intend to provide
call-center software to our customers which will enable them to handle outbound
calls, inbound calls and a combination of both from their own locations. We will
host their customer calling data on our servers, and our customers will be able
to access the functionality of our software via a web browser such as Internet
Explorer. We refer to this in this prospectus our "hosted call center" or
"hosted software" solution, services or product.
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We believe that many companies require a robust yet inexpensive integrated call
center solution that combines best practices of CRM with VoIP in order to
maintain contact with their existing customers and establish contact with
prospective customers. Through our online hosted call center services, we intend
to address such needs by providing a software solution for small call centers
with advanced functionality that is typically available only in high-end
solutions, such as CRM, VoIP and telephony-CRM integration.
Our intended customers are small call centers and businesses seeking to set-up
their own call centers. Our intended customers are businesses with between 10
and 500 employees, particularly the lower and middle range of this market, or
companies with fewer than 200 employees. By subscribing to our service, these
businesses will use our hosted call center solution rather than deploy their
own, which, we believe, in turn, will provide them with substantial economic
savings as well as the opportunity to focus on their core competency. Moreover,
our product/service will eliminate the need for companies seeking to establish a
call center to retain the personnel to maintain their operations.
OUR PRODUCTS AND SERVICES
Our research has helped us better to understand the call center products
currently available in the market, as well as how we can develop a product to
fill the gap in the marketplace. We believe that existing online call center
products appear to restrict or limit the number of advanced functions available
to subscribers, choosing instead to attract subscribers with low prices rather
than the quality of the product or the functions made available to each
customer. Additionally, upon subscription, most existing companies that provide
hosted call center services require their customers to pay additional fees for
separately priced modules or functions.
As described above, we intend to provide call-center software to our customers
which will enable them to handle outbound calls, inbound calls and a combination
of both from their own locations. We will host their customer calling data on
our servers, and our customers will be able to access the functionality of our
software via a web browser such as Internet Explorer. Our online hosted call
center services will include the best practices of CRM, web technologies and
VoIP. Our hosted call center product offering will target the needs of the small
and medium sized call center operators, companies seeking to deploy their own
internal call center, or individual customers. By subscribing to our service and
through the use of our product, our customers will have the ability to handle
outbound calls, inbound calls and a combination of both.
We can offer no assurance that we will be successful in developing and offering
our products and services. Any number of factors may impact our ability to
develop our products and services, including our ability to obtain financing if
and when necessary; the availability of skilled personnel; market acceptance of
our products, if they are developed; and our ability to gain market share. Our
business will fail if we cannot successfully implement our business plan or if
we cannot develop or successfully market our products and services.
REGISTRATION PROCESS
Upon visiting our web site, customers will find general information about our
Company and about the products and services we provide. Interested parties will
be able to register with us at no cost and upon registration, each subscriber
will receive email updates, a quarterly newsletter which we plan to produce once
our business is operational and other pertinent announcements that may be
disseminated to customers and potential customers.
We intend for the online registration process to collect contact information
about the subscriber. We anticipate that this data will be converted to form
part of the subscriber's private section on our web site. A survey will also be
conducted wherein each subscriber will be requested to share his, her or its
objectives or reasons for interest in our product. Collecting and reviewing this
type of information will assist our staff in future discussions with the
subscriber and will further assist us in our product development.
5
SUBSCRIBER PORTAL
Our plans anticipate that once the registration process is complete, each
subscriber will be directed to the "Subscriber Portal." The Subscriber Portal
will be a dedicated web page created for each subscriber that registers with us.
Each subscriber that chooses to register for our services will be able to access
our product and service immediately upon payment through the Subscriber Portal.
The Subscriber Portal will be developed around a CRM platform that provides each
customer with an easy-to-use web interface. Information about the qualitative
and quantitative nature of customer contacts will be managed from a single
user's interface.
Our product will be developed in modular fashion, which means it will be
developed as separate functional modules rather than one program, and then
linked together so as to offer an integrated solution for our customers. We
believe that developing our software this way will provide greater flexibility
for future development and customization of the software. It will also enable us
to provide the users of the software with the ability to add and drop functions,
and customize the software for their use.
Each customer will also be given the ability to customize the feel and look of
the Subscriber Portal. In addition, each customer will be able to add and delete
functions from his, her or its Subscriber Portal. This function is intended to
simplify the interface for those customers who do not need the full
functionality of our product.
ACCESS LEVELS
Customers will have multiple access levels to the Subscriber Portal, one for the
subscribing company's general use (the Company Access), one for the company's
managers and one for each user at the Company.
COMPANY ACCESS - We will provide a subscribing company with general access which
will permit the subscribing company to manage, add, edit and
suspend Manager and User Accesses.
MANAGER ACCESS - Those with Manager Access will be able to add, edit and suspend
the access of particular Users assigned to such Manager.
Managers are also able to access active conversation between
users and are given the ability to join active conversations
between users, as well as give instruction to support staff.
Moreover, Managers are able to record calls, whether randomly
or all calls for specific operators as well as review the calls
and the records of certain operators.
USERS ACCESS - This is the interface that each user will use to access
customer records needed to support a customer or a process.
ADMINISTRATIVE PORTAL
The Administrative Portal section of the web site is for our Company's use
through which we will be able to handle the back office functions of working
with our customers. The Administrative Portal will be password protected and
will feature high level encryption in order to prevent unauthorized access. Our
officer and employees will be able to monitor web site activity, activate and
revoke password access as deemed necessary and produce monthly, quarterly and
annual reports as needed through the Administrative Portal.
PRODUCT DEVELOPMENT
EARLY STAGE DEVELOPMENT - We are currently building our website and to date have
completed approximately 90% of its development. We plan to launch an
"INFORMATION ONLY" web site during the third quarter of the fiscal year ended
January 31, 2013. By doing so our plan is to be able to begin building interest
in our Company during the development phase, and that this will encourage web
site visitors to return at a later date.
HIRING OF CONTRACTOR FOR SOFTWARE DEVELOPMENT - We have hired an outside
contractor for software development, which will entail integrating an open
source telephony software program with an open source CRM program. We expect the
initial work, which includes completion of our "information only" website and
initial database design, will be completed within approximately during the third
quarter of our fiscal year ended January 31, 2013. We expect the balance of the
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project, which includes the continued development of our software, will be
completed during the first quarter of our fiscal year ended January 31, 2013. We
will require additional funding in order to complete plans beyond our initial
budget for developmental expenses.
DATA CENTER SELECTION - The selection of a data center which leases and
collocate servers, where we will host our servers, is essential to our success.
Service quality and reliability are critical to our selection process. We intend
to commence these leases immediately after the software development phase is
complete. We plan to commence leases for two development servers during the
fourth quarter of fiscal 2012 or the first quarter of fiscal 2013, and lease two
production servers during the second or third quarters of fiscal 2013.
EVALUATION - We intend to invest in two computers to be used as development
servers. One will be used for the telephony software and the other one for the
CRM software.
We will evaluate several telephony and CRM software and determine which solution
best serves our needs. We will develop a requirement list that will assist us in
the selection of software. The selection will be based on:
* Availability of needed functionality in the software;
* The ability to customize and add functionality to software; and
* The ability to integrate the telephony software to the CRM software
We anticipate that the process of evaluating telephony and CRM software will
take approximately two months.
SPECIFICATIONS AND HIGH-LEVEL DESIGN - - We intend to develop, with the
assistance of our contractor, the detailed specifications for the product. This
includes:
* The way the telephony and CRM software interact with each other;
* Adapting the CRM and VoIP softwares to work in a hosted environment;
and
* Developing the graphical interfaces for the user as well as the back
office administrative area
It is anticipated that this process will take approximately one and a half
months.
INSTALLATION AND INTEGRATION - During this phase, our contractor will install
the telephony and CRM software and commence the integration of the two in order
to determine whether each component works seamlessly with the other. It is
during this phase that it is determined whether our telephony system will
accurately be able to detect the phone number of a customer service
representative upon receipt of a call and whether such information is accurate
and effectively passed into the CRM software. Upon receipt by the CRM software
of the required information, our system will cross reference it with the
database and load the customer's information to the customer service
representative computer.
It is anticipated that the Installation and Integration phase will take
approximately two months.
CUSTOMIZATION OF CUSTOMER INTERFACE(S) - During this phase, we will modify each
interface to include telephony specific functions such as answering a call,
making a call, recording a call, measuring the length of the call and the like,
as required by each customer. We expect this phase to take approximately three
months of development.
DEVELOPMENT OF RESELLER INTERFACE - - We will develop a Reseller Interface which
will enable each reseller to review the number of sales made, the commission
earned by each reseller, commission paid to each reseller and the commission he
is owed by our Company. We expect that we will spend three weeks on the
development of the reseller interface.
INTEGRATION OF THE SOLUTION TO OUR WEB SITE - Our outside contractor will be
responsible for the integration of the product into our web site. The
integration process is intended to enable our customers to register for service
from our web site and further permit agents to login to their accounts from our
site. Our site will also include a free demonstration which potential customers
can subscribe to. We expect that this process will take approximately one month.
7
DEVELOPMENT OF TRAINING MATERIAL - Our officer, with the assistance of our
contractor, will be responsible for the development of the necessary training
materials and Frequently Asked Questions for future customers' use. The training
material will be available on our web site.
BETA TRIAL - We intend to conduct a Beta trial with a select group of resellers
and customers prior to the formal launch of our product. The feedback of the
trial will be used to affect future modifications and enhancement to our initial
system. We expect that the Beta test period will last approximately three weeks
and any necessary corrections or improvements to our system based on the Beta
trial will take another three weeks. Non-critical feedback will be incorporated
into the development schedule for our second year of operations.
We plan to use industry-standard, 128-bit encryption for all web pages delivered
to our customers, and to encrypt our customers' data on our system in order to
secure their information.
FEES AND PAYMENT METHOD
For our product and services, we intend to charge a $1,000 one-time set-up fee
per customer. We will then charge a flat fee of $100 per user at the company,
per month. We plan to generate additional revenue from providing services for
inbound and outbound calls. We will charge $0.02 for outgoing minutes and $0.016
for incoming minutes.
We will initially block outgoing calls to regions outside of Canada and United
States. Calls coming in from regions other than the United States and Canada
will not be similarly restricted. We intend to unblock outgoing international
calls upon developing a pre-paid solution through which our customers will be
able to make international calls as long as they have a positive balance in
their account with us; and implementing processes to minimize the impact of
fraudulent calls. Since call centers primarily serve a regional or national
service area, we do not believe that blocking calls to regions outside the
United States and Canada will impact the success or our business or our ability
to gain customers and create revenues.
Variable telephony charges will depend on the number of minutes used.
We plan to use the internationally recognized PayPal.com system
(http://www.paypal.com/) for all financial transactions. PayPal is a credit card
merchant and a financial services company that accepts and clears all customer
credit card payments on behalf of participating merchants, such as our company.
We intend to use PayPal because it does not require a long-term commitment.
MARKETING & SALES STRATEGY
Our marketing strategy will be focused on developing a network of resellers and
building our brand name. We plan to use a number of marketing tactics to develop
brand name.
Our directors have used and will continue to use their own network of personal
contacts in the small and medium business sector in order to generate business
for us. This included direct telephone contact, email correspondence and email
newsletters. To date, our initial contacts have generated limited interest in
our Company, but no sales have developed as a result of their initial marketing
efforts. Additionally, we intend to use online demonstrations as a marketing
tool once we have arranged sufficient contacts in the judgment of our officers
and directors.
As part of our growth strategy, we plan to identify, recruit and develop a
network of resellers that are already working with small business owners. At
that same time, we intend to sell directly to end users through our web site.
Our goal is to shift the sales and marketing operations to our reseller
community over a period of several years. To date, we have not yet identified
any resellers. We intend to begin developing our network of resellers when we
complete our beta website.
Our research has led us to conclude that an effective component of a marketing
strategy to identify business owners is through their professional advisors. We
plan to promote our products and services to information technology services
firms with online email campaigns, testimonials in online advertising pieces and
articles submitted to national and regional chapters about trends in small and
medium size businesses. We intend to begin examining other marketing and
promotional activities such as attending business trade shows to gain brand name
exposure and attract more customers after we have established and implemented
our initial marketing strategy and have had an opportunity to evaluate their
success.
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We also expect to attract customers through our web site. Once a potential
reseller has subscribed with us, we intend to initiate contact with the reseller
through one-on-one and group telephone discussions. During that time we will
have an opportunity to learn more about the reseller's business and how he, she
or it engages small and medium business owners, the type of services he, she or
it offers and how our product offering fits into what the reseller does. We also
intend to conduct online training and orientation sessions.
We also intend to use our "information only" web site as an online marketing
tool. Our directors will use email to send out general information to potential
subscribers and resellers and direct them to our web site for more details and
to view the online demonstration.
ONLINE ADVERTISING
We intend to undertake an online advertising campaign using Google Adwords as a
component of our marketing strategy. We have selected Google because of its
status as one of the leading online search engines. The Google Adwords program
will allow us the flexibility to customize the advertising campaign around our
choice of keywords, length of time and frequency of insertions and the option to
start and stop at times that are convenient to our schedule. We believe that
using the Google Adwords will give us the maximum amount of online coverage at
an affordable price and the flexibility to closely monitor the costs of the
campaign. We plan to use keywords that an online web visitor may use when
looking for information about hosted call centers.
We may also in the future consider publishing quarterly newsletters as an
additional marketing tool. If we undertake to use this marketing device, we
would distribute these newsletters to potential customers identified through
uses of bulk mailing lists which we would purchase.
INDUSTRY TRADE SHOWS
Our directors will be attending industry trade shows and offering to appear as
guest speakers in order to boost our brand and our offerings in the marketplace.
This is an important opportunity to meet face-to-face with potential subscribers
and resellers.
SEARCH ENGINE OPTIMIZATION
Another facet of our marketing plan is to work on search engine optimization.
Search engines are designed to search out keywords as online users look for the
information they want. Meta-tags act as keywords that reside in the hidden
infrastructure of a web page and help to highlight a web page when someone is
using a search engine to find information. Relevant content is also essential to
obtain higher ranking. For example, by including keywords such as "CALL CENTER"
on our web page, the search engines will identify our web pages as a match for
the search request. The effect of this marketing tactic is to have our web page
appear higher on the list of results for the online user looking for information
about a call center. Our research shows that the majority of online visitors
typically look at the search results in descending order. The higher up the list
a search result appears, the higher the probability that the online user will
click through to the web site.
SALES REVENUE
We anticipate that our revenue will come from two primary sources: first, from
direct sales to small and medium business owners that subscribe to our online
call center services and second, from our network of resellers. We anticipate
that our operations will begin to generate revenue approximately 18 to 24 months
following the date of this prospectus.
One of our long-term goals is to educate and develop our network of resellers to
be able to handle sales inquiries. In order to achieve this, we intend to
actively solicit resellers during the 18 months following the date of this
prospectus. We plan to have our reseller network attend routine and periodic
training throughout their tenure to assure their competitiveness. To date we
have not identified any resellers, although we intend to continue this approach.
Our research suggests that resellers will come from a number of business
categories. We anticipate working with resellers that include information
technology companies, computer system integrators, management consultants,
9
telephone interconnect companies and others companies that are involved in
selling to small and medium businesses. A large part of our sales process will
be devoted to online training of resellers and helping them to market our
product to end users.
Our directors have already identified a number of prospective resellers through
extensive internet research for information technology ("IT") professional
services companies, and plan to approach them during the product development
period. We intend to target businesses through their IT providers, and
accordingly intend to focus on resellers that have national and regional reach.
We also plan to invite a small group to participate as Beta-test sites during
the development process. We anticipate that the Beta-test sites will lead to the
development of the initial members of our reseller community.
We will compensate our resellers on a commission basis, based on an agreed-upon
percentage of the recurring monthly fee we will charge to our customers.
To date, we have focused on product development and executing the initial stage
of the marketing effort. We have not earned any sales revenue during this time.
ACTIVITIES TO DATE
We have begun the development of our non-functional information-only website and
have commenced development of our software. We have also identified a developer
and management is working with them to design our database. We expect to have
our non-functional information-only website operational by the end of October
2012. We have begun the full development of our software. We will commence our
marketing efforts upon the development of our downloadable client software.
Further, we have researched the market for computer servers and a web hosting
service, and we have identified office space that we deem adequate, although no
formal written agreements have been entered into.
We can offer no assurance that we will be successful in developing the hosted
service, client software, or the enterprise messaging product, or that these
products will be marketable if developed. Any number of factors may impact our
ability to develop our products, including our ability to obtain financing if
and when necessary; the availability of skilled personnel; market acceptance of
our products, if they are developed; and our ability to gain market share. Our
business will fail if we cannot successfully implement our business plan,
develop our products or successfully market our products and capabilities.
SOURCES AND AVAILABILITY OF PRODUCTS AND SUPPLIES
We believe there are no constraints on the sources or availability of products
and supplies related to our development of our website and Internet-based
business.
PATENTS, TRADEMARKS, LICENSES, FRANCHISE RESTRICTIONS AND CONTRACTUAL
OBLIGATIONS & CONCESSIONS
We intend to protect our website with copyright laws. Beyond our trade name, we
do not hold any other intellectual property.
EFFECT OF EXISTING OR PROBABLE GOVERNMENT REGULATION
We do not believe that government regulation will have a material impact on the
way we conduct our business, however, any government regulation imposing greater
fees for Internet use or restricting information exchange over the Internet
could result in a decline in the use of the Internet and the viability of
Internet-based services, which could harm our business and operating results.
10
RESEARCH AND DEVELOPMENT ACTIVITIES AND COSTS
We have not incurred any research and development costs to date. We have plans
to undertake certain research and development activities during the first 12
months following the date of this prospectus related to the development of our
website.
EMPLOYEES
We have commenced only limited operations, and therefore currently have no
employees other than our sole officer, who spends approximately 10 hours a week
on our business. Within the next twelve months, we intend to hire a full-time
employee who will act as an executive sales person and first level support. His
or her responsibility will include contacting potential resellers, responding to
inquiries and training new resellers and subscribers.
As our business and operations increase, we will hire full time management and
administrative support personnel.
ITEM 1A. RISK FACTORS
Much of the information included in this annual report includes or is based upon
estimates, projections or other "forward looking statements". Such "forward
looking statements" involve various risks and uncertainties as outlined below.
We caution the reader that important factors in some cases have affected, and in
the future could materially affect, actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other "forward looking statements".
The securities offered hereby involve a substantial risk of loss. Prospective
investors should carefully consider the risks and uncertainties described below
before making an investment in our securities. The risks and uncertainties
described below are those which management currently believes may significantly
affect us.
RISKS RELATING TO OUR BUSINESS
WE ARE UNCERTAIN OF OUR ABILITY TO FUNCTION AS A GOING CONCERN, INDICATING THE
POSSIBILITY THAT WE MAY NOT BE ABLE TO OPERATE IN THE FUTURE.
To date, we have completed only the initial stages of our business plan and we
can provide no assurance that we will be able to generate a sufficient amount of
revenue, if any, from our business in order to achieve profitability. It is not
possible at this time for us to predict with assurance the potential success of
our business. The revenue and income potential of our proposed business and
operations are unknown. If we cannot continue as a viable entity, you may lose
some or all of your investment in our common stock.
AS A COMPANY IN THE EARLY STAGE OF DEVELOPMENT WITH AN UNPROVEN BUSINESS
STRATEGY, OUR LIMITED HISTORY OF OPERATIONS MAKES EVALUATION OF OUR BUSINESS AND
PROSPECTS DIFFICULT.
We were incorporated on June 5, 2008 and our business is in the development
stage. To date, we have not earned any revenues. Our business prospects are
difficult to predict because of our limited operating history, early stage of
development and unproven business strategy. Our business activities during the
12 to 18 months following the date of this prospectus will be focused on the
development of our website, the development of a network of resellers and the
establishment of our brand name. We may not attain profitable operations and our
management may not succeed in realizing our business objectives.
OUR BUSINESS WILL FAIL IF WE ARE UNABLE TO DEVELOP AND IMPLEMENT OUR CALL CENTER
SOLUTION SUCCESSFULLY.
The success of our business plan is significantly dependent on the successful
development of our call center solution. However, no assurance can be given that
we will be able to develop a call center solution in a timely manner or at all.
Our business will fail if we can not successfully implement our business plan or
successfully market our call center product, services and capabilities.
11
WE MAY NOT BE ABLE TO EXECUTE OUR BUSINESS PLAN OR STAY IN BUSINESS WITHOUT
ADDITIONAL FUNDING.
Our ability successfully to develop our hosted call center product, to provide
our services, and eventually our ability to generate operating revenues will
depend on our ability to obtain the necessary financing to implement our
business plan. We have raised a total of $50,000 to date through the sale of
shares of our common stock. As of January 31, 2011, we had cash of approximately
$126 remaining from such financing. We will require additional financing through
issuance of debt and/or equity in order to expand our operations or business
plan beyond that time, and such financing, if required, may not be forthcoming.
As has been widely reported, global and domestic financial markets and economic
conditions have been, and continue to be, disrupted and volatile due to a
variety of factors, including the current weak economic conditions. As a result,
the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished
significantly, even more so for smaller companies like ours. If such conditions
and constraints continue, we may not be able to acquire additional funds either
through credit markets or through equity markets and, even if additional
financing is available, it may not be available on terms we find favorable. At
this time, there are no anticipated sources of additional funding in place.
Failure to secured additional funding when needed will have an adverse effect on
our ability to meet our obligations and remain in business.
WE EXPECT TO SUFFER LOSSES IN THE IMMEDIATE FUTURE.
Since our inception on June 5, 2008, we have incurred accumulated net losses of
$52,906 and we expect to continue to incur operating losses in the immediate
future. These losses will occur because we do not yet have any revenues to
offset the expenses associated with the implementation of our business plan, the
development of a network of resellers and the development of our website. We
cannot guarantee that we will ever become successful in generating revenues in
the future. We recognize that if we are unable to generate revenues, we will not
be able to earn profits or continue operations. If we are unsuccessful in
addressing these risks, our business will most likely fail.
OUR CUSTOMERS ARE SMALL AND MEDIUM-SIZED BUSINESSES, WHICH CAN BE CHALLENGING TO
COST-EFFECTIVELY REACH, ACQUIRE AND RETAIN. We plan to market and sell our
application suite to small- and medium-sized businesses ("SMBs"), or companies
with 10 to 500 employees. To grow our revenue, we must add new customers, sell
additional services to existing customers and encourage existing customers to
maintain our services. However, selling to and retaining SMBs can be more
difficult than selling to and retaining large enterprises because SMB customers:
* are more price sensitive;
* are more difficult to reach with traditional marketing campaigns;
* often have a higher turnover rate or attrition rate with respect to
their customer base than larger enterprises, which can affect their
ability to steadily support their business and remain in business;
* often require higher sales, marketing and support expenditures by
vendors that sell to them per revenue dollar; and
* are more vulnerable to negative changes in the general economic
environment that may disrupt continued business operations.
If we are unable to cost-effectively market and sell our service to our target
customers, our ability to grow our revenue quickly and become profitable will be
harmed.
IF OUR SECURITY MEASURES ARE BREACHED AND UNAUTHORIZED ACCESS IS OBTAINED TO OUR
CUSTOMERS' DATA, WE MAY INCUR SIGNIFICANT LIABILITIES, OUR SERVICE MAY BE
PERCEIVED AS NOT BEING SECURE AND CUSTOMERS MAY CURTAIL OR STOP USING OUR
SERVICES.
The product and services we plan to offer will involve the storage of our
customers' sensitive information. If our security measures are breached as a
result of third-party action, employee error, malfeasance or otherwise, and
someone obtains unauthorized access to our customers' data, we could incur
significant liability to our customers and to individuals or businesses whose
information was being stored by our customers. If this happens, our business may
12
suffer and our reputation will be damaged. Because techniques used to obtain
unauthorized access to or to sabotage systems change frequently and generally
are not recognized until launched against a target, we may be unable to
anticipate these techniques or to implement adequate preventive measures. If an
actual or perceived breach of our security occurs, the market perception of the
effectiveness of our security measures could be harmed and we could lose sales
and customers. We do not have, and are likely not to have for the foreseeable
future, insurance that will adequately cover any liability to a customer under
these circumstances.
WE RELY HEAVILY ON VOIP AND ANY INTERRUPTION IN SERVICE COULD AFFECT OUR ABILITY
TO PROVIDE OUR SERVICE EFFECTIVELY AND EFFICIENTLY.
Our product and services will leverage on VoIP technology combined with CRM
software. Any interruption or difficulties that may be experienced in our VoIP
service will greatly affect our ability to effectively and efficiently provide
our product and services to our customers and will directly affect our
customers. In turn, our sales will suffer and our revenues will decline.
IF WE ARE UNABLE TO SELL OUR PRODUCT AND SERVICE INTO NEW MARKETS, OUR REVENUE
WILL NOT GROW AS EXPECTED.
Our ability to attract new customers and increase revenue from existing
customers will depend in large part on our ability to introduce and sell our
product and service into new markets. These new markets into which we attempt to
sell our product and our service, whether new vertical markets and/or new
countries or regions, may not be receptive to our offering. If we are unable to
successfully sell our products and/or services into new markets, our revenue
will not grow as expected.
ASSERTIONS BY A THIRD PARTY THAT WE INFRINGE ITS INTELLECTUAL PROPERTY, WHETHER
SUCCESSFUL OR NOT, COULD SUBJECT US TO COSTLY AND TIME-CONSUMING LITIGATION OR
EXPENSIVE LICENSES.
The software and technology industries are characterized by the existence of a
large number of patents, copyrights, trademarks and trade secrets and by
frequent litigation based on allegations of infringement or other violations of
intellectual property rights. As we face increasing competition, the possibility
of intellectual property rights claims against us may grow. Our technologies may
not be able to withstand any third-party claims or rights against their use. Any
claim alleging infringement of patents, copyrights, trademarks or trade secrets
could harm our relationships with our customers, may deter future customers from
purchasing our product or service, or could expose us to litigation for these
claims.
We may have to pay damages or stop using technology found to be in violation of
a third party's rights if a successful intellectual property claim is brought
against us or a customer. We may have to seek a license for the technology we
use, which may not be available on reasonable terms, if at all. If we are able
to enter into such a license agreement, it may be on terms that will
significantly increase our operating expenses or may require us to restrict our
business activities in one or more respects. As a result, we may also be
required to develop alternative non-infringing technology, which could require
significant effort and expense and may not be accepted by our customers and
prospects.
MATERIAL DEFECTS OR ERRORS IN THE SOFTWARE WE DEVELOP COULD HARM OUR REPUTATION,
MAY CAUSE US TO BECOME LIABLE TO OUR CUSTOMERS, MAY RESULT IN THE LOSS OF
EXISTING CUSTOMERS, OR MAY RESULT IN A SIGNIFICANT COSTS TO US AND IMPAIR OUR
ABILITY TO SELL OUR PRODUCT AND PROVIDE OUR SERVICE.
The software applications underlying our services are inherently complex and may
contain material defects or errors, particularly when first introduced or when
new versions or enhancements are released. Any defects that cause interruptions
to the availability of our services could result in:
* a reduction in sales or delay in market acceptance of our services;
* sales credits or refunds to our customers;
* loss of existing customers and difficulty in attracting new customers;
* diversion of development resources;
13
* harm to our reputation; and
* increased warranty and insurance costs.
Any errors, defects or other performance-related issues regarding the software
used for our product and service may result in customers electing to terminate
the purchase of our product and/or our service, or delay or withhold payment to
us which may result in a significant loss for the Company. Customers may also
make warranty claims against us, which could result in an increase in our
provision for doubtful accounts, an increase in collection cycles for accounts
receivable or costly litigation. We do not maintain and do not expect to
maintain in the foreseeable future, insurance adequately to cover these risks.
IF OUR ESTIMATES RELATED TO EXPENDITURES ARE ERRONEOUS OR INACCURATE, OUR
BUSINESS WILL FAIL AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
Our success is dependent in part upon the accuracy of our management's estimates
of expenditures for legal and accounting services, including those we expect to
incur as a publicly reporting company, website development, and administrative
expenses, which management estimated to aggregate approximately $50,000 over the
first 12 months of our development phase. If such estimates are erroneous or
inaccurate, or if we encounter unforeseen costs, we may not be able
satisfactorily to execute our business plan, which could result in the failure
of our business and you could lose your entire investment.
WE ARE IN A COMPETITIVE MARKET WHICH COULD IMPACT OUR ABILITY TO GAIN MARKET
SHARE WHICH COULD HARM OUR FINANCIAL PERFORMANCE.
The business of providing hosted call center solutions is competitive. The
barriers to entry on the Internet are relatively low, and we will likely face
competitive pressures from companies that have been established for a period
longer than we have and those that have greater financial resources. If we
cannot gain enough market share, our business and financial performance will be
adversely affected.
WE NEED TO RETAIN KEY PERSONNEL TO SUPPORT OUR PRODUCT, SERVICE AND ONGOING
OPERATIONS.
The development and the marketing of our product and service will continue to
place a significant strain on our limited personnel, management, and other
resources. Our future success depends upon the continued service of Mario Jakiri
Tolentino, our President, Treasurer and Director, who is developing the
relationships on which we will rely to implement our business plan. The loss of
Mr. Tolentino's services could negatively impact our ability to develop sell our
product, which could adversely affect our financial results and impair our
operations.
RISKS RELATING TO OUR COMMON STOCK
THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR SECURITIES, AND THERE CAN BE NO
ASSURANCE THAT ANY PUBLIC MARKET WILL DEVELOP OR THAT OUR COMMON STOCK WILL BE
QUOTED FOR TRADING.
There is no public market for our securities and there can be no assurance that
an active trading market for the securities offered herein will develop after
this offering by the selling stockholders, or, if developed, be sustained. After
the effective date of the registration statement of which this prospectus is a
part, we intend to try to identify a market maker to file an application with
the Financial Industry Regulatory Authority ("FINRA") to have our common stock
quoted on the Over-the-Counter Bulletin Board. We will have to satisfy certain
criteria in order for our application to be accepted. We do not currently have a
market maker that is willing to participate in this application process, and
even if we identify a market maker, there can be no assurance as to whether we
will meet the requisite criteria or that our market maker's application will be
accepted. Our common stock may never be quoted on the Over-the-Counter Bulletin
Board, or, even if quoted, a public market may not materialize or even if a
public market-materializes will be sustained.
If our securities are not eligible for initial quotation, or if quoted, are not
eligible for continued quotation on the Over-the-Counter Bulletin Board or a
public trading market does not develop, purchasers of the shares of common stock
14
may have difficulty selling or be unable to sell their securities should they
desire to do so, rendering their shares effectively worthless and resulting in a
complete loss of their investment.
BECAUSE WE WILL BE SUBJECT TO "PENNY STOCK" RULES IF OUR SHARES ARE QUOTED ON
THE OVER-THE-COUNTER BULLETIN BOARD, THE LEVEL OF TRADING ACTIVITY IN OUR STOCK
MAY BE REDUCED.
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by penny stock rules adopted by the Securities and Exchange Commission
(the "SEC"). Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on some national securities
exchanges). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
broker-dealers who sell these securities to persons other than established
customers and "accredited investors" must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. Consequently, these
requirements may have the effect of reducing the level of trading activity, if
any, in the secondary market for a security subject to the penny stock rules. If
a trading market does develop for our common stock, these regulations will
likely be applicable, and investors in our common stock may find it difficult to
sell their shares.
FINRA SALES PRACTICE REQUIREMENTS MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND
SELL OUR STOCK.
FINRA rules require that, a stockbroker, in recommending an investment to a
customer, have reasonable grounds for believing that the investment is suitable
for that customer. Prior to recommending speculative, low-priced securities to
their non-institutional customers, stockbrokers must make reasonable efforts to
obtain information about the customer's financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative, low-priced
securities will not be suitable for certain customers. FINRA requirements will
likely make it more difficult for brokers to recommend that their customers buy
our common stock, which may have the effect of reducing the level of trading
activity in our common stock. As a result, fewer brokers may be willing to make
a market in our common stock, reducing a stockholder's ability to resell shares
of our common stock.
STATE SECURITIES LAWS MAY LIMIT SECONDARY TRADING, WHICH MAY RESTRICT THE STATES
IN WHICH YOU CAN SELL THE SHARES OFFERED BY THIS PROSPECTUS.
If you purchase shares of our common stock sold pursuant to this offering, you
may not be able to resell the shares in a certain state unless and until the
shares of our common stock are qualified for secondary trading under the
applicable securities laws of such state or there is confirmation that an
exemption, such as listing in certain recognized securities manuals, is
available for secondary trading in such state. There can be no assurance that we
will be successful in registering or qualifying our common stock for secondary
trading, or identifying an available exemption for secondary trading in our
common stock in every state. If we fail to register or qualify, or to obtain or
verify an exemption for the secondary trading of our common stock in any
particular state, the shares of common stock could not be offered or sold to, or
purchased by, a resident of that state. In the event that a significant number
of states refuse to permit secondary trading in our common stock, the market for
the common stock will be limited which could drive down the market price of our
common stock and reduce the liquidity of the shares of our common stock and a
stockholder's ability to resell shares of our common stock at all or at current
market prices, which could increase a stockholder's risk of losing some or all
of his investment.
IF QUOTED, THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE, WHICH MAY
SUBSTANTIALLY INCREASE THE RISK THAT YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT
OR ABOVE THE PRICE THAT YOU MAY PAY FOR THE SHARES.
Even if our shares are quoted for trading on the Over-the-Counter Bulletin Board
following this offering and a public market develops for our common stock, the
market price of our common stock may be volatile. It may fluctuate significantly
in response to the following factors:
* variations in quarterly operating results;
15
* our announcements of significant commissions and achievement of
milestones;
* our relationships with other companies or capital commitments;
* additions or departures of key personnel;
* sales of common stock or termination of stock transfer restrictions;
* changes in financial estimates by securities analysts, if any; and
* fluctuations in stock market price and volume.
Your inability to sell your shares during a decline in the price of our stock
may increase losses that you may suffer as a result of your investment.
OUR INSIDERS BENEFICIALLY OWN A SIGNIFICANT PORTION OF OUR STOCK, AND
ACCORDINGLY, MAY HAVE CONTROL OVER STOCKHOLDER MATTERS, OUR BUSINESS AND
MANAGEMENT.
As of May 15, 2012, our officer and directors beneficially owned 45,600,000
shares of our common stock in the aggregate, or approximately 69.09% of our
issued and outstanding common stock. As a result, our officer and directors will
have significant influence to:
* ELECT OR DEFEAT THE ELECTION OF OUR DIRECTORS;
* amend or prevent amendment of our articles of incorporation or bylaws;
* effect or prevent a merger, sale of assets or other corporate
transaction; and
* affect the outcome of any other matter submitted to the stockholders
for vote. Moreover, because of the significant ownership position held
by our insiders, new investors may not be able to effect a change in
our business or management, and therefore, shareholders would have no
recourse as a result of decisions made by management.
In addition, sales of significant amounts of shares held by our officer and
directors, or the prospect of these sales, could adversely affect the market
price of our common stock. Management's stock ownership may discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of us, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.
BECAUSE WE DO NOT INTEND TO PAY ANY DIVIDENDS ON OUR COMMON STOCK, HOLDERS OF
OUR COMMON STOCK MUST RELY ON STOCK APPRECIATION FOR ANY RETURN ON THEIR
INVESTMENT.
We have not declared or paid any dividends on our common stock since our
inception, and we do not anticipate paying any such dividends for the
foreseeable future. Accordingly, holders of our common stock will have to rely
on stock appreciation, if any, to earn a return on their investment in our
common stock.
ADDITIONAL ISSUANCES OF OUR SECURITIES MAY RESULT IN IMMEDIATE DILUTION TO
EXISTING SHAREHOLDERS.
We are authorized to issue up to 300,000,000 shares of common stock, $0.0001 par
value per share, of which 66,000,000 shares of common stock are currently issued
and outstanding. Our Board of Directors has the authority to cause us to issue
additional shares of common, and to determine the rights, preferences and
privilege of such shares, without consent of any of our stockholders. We may
issue shares in connection with financing arrangements or otherwise. Any such
issuances will result in immediate dilution to our existing shareholders'
interests, which will negatively affect the value of your shares.
16
ITEM 2. PROPERTIES
EXECUTIVE OFFICES
We do not own any real property. Our sole officer provides us with space located
at Block 225, 02-213, Tampines St 23, Singapore, free of charge for at least the
next 12 months. This location serves as our primary office for planning and
implementing our business plan. We believe this space is sufficient for our
current purposes and will be sufficient for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
There are no pending, nor to our knowledge threatened, legal proceedings against
us.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR SECURITIES
Our Common Stock is traded on the over-the-counter market and quoted on the
OTCBB under the symbol "ONTS" On January 31, 2012, the closing price for our
Common Stock as reported on the OTCBB was unavailable as our Common Stock has
not traded.
The high and the low bid prices for our Common Stock is based on inter-dealer
prices, without retail mark-up, markdown or commission, and may not represent
actual transactions.
The table below sets forth the range of high and low bid information for our
Common Shares as quoted on the OTCBB for each of the quarters during the fiscal
year ended January 31, 2012 (no quotes are available for the previous fiscal
year as our stock has not traded ):
For the Fiscal Year Ended January 31, 2012
For the Quarter ended High Low
--------------------- ---- ---
January 31 N/A N/A
October 31 N/A N/A
July 31 N/A N/A
April 30 N/A N/A
HOLDERS OF OUR COMMON STOCK
On May 16, 2012, the shareholders' list of our common stock showed 37 registered
shareholder and 66,000,000 shares outstanding.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock and have no present
intention of paying any dividends on the shares of our common stock. Our future
dividend policy will be determined from time to time by our board of directors.
17
Securities Authorized for Issuance under Equity Compensation Plans
As of January 31, 2012, we had not adopted an equity compensation plan and had
not granted any stock options.
Recent Sales of Unregistered Securities
During the fiscal year ended January 31, 2012 we have not sold any equity
securities not registered under the Securities Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchases
During each month within the fourth quarter of the fiscal year ended January 31,
2011, neither we nor any "affiliated purchaser," as that term is defined in Rule
10b-18(a)(3) under the Exchange Act, repurchased any of our Common Stock or
other securities.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion should be read in conjunction with our audited
financial statements and the related notes that appear elsewhere in this annual
report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include those discussed below and
elsewhere in this annual report.
Our financial statements are stated in United States dollars and are prepared in
accordance with United States generally accepted accounting principles.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with United States
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 year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
BASIS OF PRESENTATION
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 915-10-20 of
the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification. Although the Company has recognized some nominal amount of
revenues since inception, the Company is still devoting substantially all of its
efforts on establishing the business and, therefore, still qualifies as a
development stage company. All losses accumulated since inception have been
considered as part of the Company's development stage activities.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
18
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.
The Company's significant estimates and assumptions include the fair value of
financial instruments; income tax rate, income tax provision, deferred tax
assets and the valuation allowance of deferred tax assets, and the assumption
that the Company will continue as a going concern. Those significant accounting
estimates or assumptions bear the risk of change due to the fact that there are
uncertainties attached to those estimates or assumptions, and certain estimates
or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop
the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such
evaluations, and if deemed appropriate, those estimates are adjusted
accordingly. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards
Codification ("Paragraph 820-10-35-37") to measure the fair value of its
financial instruments and paragraph 825-10-50-10 of the FASB Accounting
Standards Codification for disclosures about fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair
value in accounting principles generally accepted in the United States of
America (U.S. GAAP), and expands disclosures about fair value measurements. To
increase consistency and comparability in fair value measurements and related
disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The three (3) levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities, such as
accrued expenses approximate their fair values because of the short maturity of
these instruments.
Transactions involving related parties cannot be presumed to be carried out on
an arm's-length basis, as the requisite conditions of competitive, free-market
dealings may not exist. Representations about transactions with related parties,
if made, shall not imply that the related party transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
It is not, however, practical to determine the fair value of advances from
stockholders due to their related party nature.
19
IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards
Codification for its long-lived assets. The Company's long-lived asset, which
includes deposit on software, is reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing
the projected undiscounted net cash flows associated with the related long-lived
asset or group of long-lived assets over their remaining estimated useful lives
against their respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets. Fair value is
generally determined using the asset's expected future discounted cash flows or
market value, if readily determinable. If long-lived assets are determined to be
recoverable, but the newly determined remaining estimated useful lives are
shorter than originally estimated, the net book values of the long-lived assets
are depreciated over the newly determined remaining estimated useful lives. The
Company determined that there was an impairment of its long-lived asset as of
January 31, 2011 and wrote off the $15,000 deposit to general and administrative
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
RELATED PARTIES
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions.
Pursuant to Section 850-10-20 the Related parties include a. affiliates of the
Company; b. Entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; c. trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d. principal owners of the Company; e. management of the Company; f.
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. Other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
The financial statements shall include disclosures of material related party
transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of
transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall
include: a. the nature of the relationship(s) involvedb. description of the
transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which income statements are presented, and
such other information deemed necessary to an understanding of the effects of
the transactions on the financial statements; c. the dollar amounts of
transactions for each of the periods for which income statements are presented
and the effects of any change in the method of establishing the terms from that
used in the preceding period; and d. amounts due from or to related parties as
of the date of each balance sheet presented and, if not otherwise apparent, the
terms and manner of settlement.
COMMITMENT AND CONTINGENCIES
The Company follows subtopic 450-20 of the FASB Accounting Standards
Codification to report accounting for contingencies. Certain conditions may
exist as of the date the consolidated financial statements are issued, which may
result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are pending
against the Company or unasserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought therein.
20
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company's consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and material, would be
disclosed.
Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the guarantees would be disclosed. Management
does not believe, based upon information available at this time, that these
matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows. However, there is no
assurance that such matters will not materially and adversely affect the
Company's business, financial position, and results of operations or cash flows.
REVENUE RECOGNITION
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company will recognize revenue when it
is realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
INCOME TAX PROVISION
The Company accounts for income taxes under Section 740-10-30 of the FASB
Accounting Standards Codification, which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the fiscal year in which the differences are expected to
reverse. Deferred tax assets are reduced by a valuation allowance to the extent
management concludes it is more likely than not that the assets will not be
realized. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the fiscal years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the Statements of Income and Comprehensive Income in the period that includes
the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards
Codification ("Section 740-10-25") with regards to uncertainty income taxes.
Section 740-10-25 addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under Section 740-10-25, the Company may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent (50%) likelihood of being
realized upon ultimate settlement. Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures.
21
The estimated future tax effects of temporary differences between the tax basis
of assets and liabilities are reported in the accompanying consolidated balance
sheets, as well as tax credit carry-backs and carry-forwards. The Company
periodically reviews the recoverability of deferred tax assets recorded on its
consolidated balance sheets and provides valuation allowances as management
deems necessary.
Management makes judgments as to the interpretation of the tax laws that might
be challenged upon an audit and cause changes to previous estimates of tax
liability. In addition, the Company operates within multiple taxing
jurisdictions and is subject to audit in these jurisdictions. In management's
opinion, adequate provisions for income taxes have been made for all years. If
actual taxable income by tax jurisdiction varies from estimates, additional
allowances or reversals of reserves may be necessary.
UNCERTAIN TAX POSITIONS
The Company did not take any uncertain tax positions and had no adjustments to
unrecognized income tax liabilities or benefits pursuant to the provisions of
Section 740-10-25 for the fiscal year ended January 31, 2012 or 2011.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed pursuant to section 260-10-45 of
the FASB Accounting Standards Codification. Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period to reflect the potential dilution that
could occur from common shares issuable through stock options and warrants.
There were no potentially outstanding dilutive common shares for the fiscal year
ended January 31, 2012 or 2011.
CASH FLOWS REPORTING
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards
Codification for cash flows reporting, classifies cash receipts and payments
according to whether they stem from operating, investing, or financing
activities and provides definitions of each category, and uses the indirect or
reconciliation method ("Indirect method") as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from
operating activities by adjusting net income to reconcile it to net cash flow
from operating activities by removing the effects of (a) all deferrals of past
operating cash receipts and payments and all accruals of expected future
operating cash receipts and payments and (b) all items that are included in net
income that do not affect operating cash receipts and payments. The Company
reports the reporting currency equivalent of foreign currency cash flows, using
the current exchange rate at the time of the cash flows and the effect of
exchange rate changes on cash held in foreign currencies is reported as a
separate item in the reconciliation of beginning and ending balances of cash and
cash equivalents and separately provides information about investing and
financing activities not resulting in cash receipts or payments in the period
pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards
Codification.
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB Accounting
Standards Codification for the disclosure of subsequent events. The Company will
evaluate subsequent events through the date when the financial statements were
issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification,
the Company as an SEC filer considers its financial statements issued when they
are widely distributed to users, such as through filing them on EDGAR.
22
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05
"COMPREHENSIVE INCOME" ("ASU 2011-05"), which was the result of a joint project
with the IASB and amends the guidance in ASC 220, COMPREHENSIVE INCOME, by
eliminating the option to present components of other comprehensive income (OCI)
in the statement of stockholders' equity. Instead, the new guidance now gives
entities the option to present all non-owner changes in stockholders' equity
either as a single continuous statement of comprehensive income or as two
separate but consecutive statements. Regardless of whether an entity chooses to
present comprehensive income in a single continuous statement or in two separate
but consecutive statements, the amendments require entities to present all
reclassification adjustments from OCI to net income on the face of the statement
of comprehensive income.
The amendments in this Update should be applied retrospectively and are
effective for public entity for fiscal years, and interim periods within those
years, beginning after December 15, 2011.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No.
2011-08 "INTANGIBLES--GOODWILL AND OTHER: TESTING GOODWILL FOR IMPAIRMENT" ("ASU
2011-08"). This Update is to simplify how public and nonpublic entities test
goodwill for impairment. The amendments permit an entity to first assess
qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. Under the amendments in this Update, an entity is
not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its
carrying amount.
The guidance is effective for interim and annual periods beginning on or after
December 15, 2011. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-10 "PROPERTY, PLANT AND EQUIPMENT: DERECOGNITION OF IN SUBSTANCE REAL
ESTATE-A SCOPE CLARIFICATION" ("ASU 2011-09"). This Update is to resolve the
diversity in practice as to how financial statements have been reflecting
circumstances when parent company reporting entities cease to have controlling
financial interests in subsidiaries that are in substance real estate, where the
situation arises as a result of default on nonrecourse debt of the subsidiaries.
The amended guidance is effective for annual reporting periods ending after June
15, 2012 for public entities. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-11 "BALANCE SHEET: DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES"
("ASU 2011-11"). This Update requires an entity to disclose information about
offsetting and related arrangements to enable users of its financial statements
to understand the effect of those arrangements on its financial position. The
objective of this disclosure is to facilitate comparison between those entities
that prepare their financial statements on the basis of U.S. GAAP and those
entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on or
after January 1, 2013, and interim periods within those annual periods.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-12 "COMPREHENSIVE INCOME: DEFERRAL OF THE EFFECTIVE DATE FOR AMENDMENTS TO
THE PRESENTATION OF RECLASSIFICATIONS OF ITEMS OUT OF ACCUMULATED OTHER
COMPREHENSIVE INCOME IN ACCOUNTING STANDARDS UPDATE NO. 2011-05" ("ASU
2011-12"). This Update is a deferral of the effective date pertaining to
23
reclassification adjustments out of accumulated other comprehensive income in
ASU 2011-05. FASB is to going to reassess the costs and benefits of those
provisions in ASU 2011-05 related to reclassifications out of accumulated other
comprehensive income. Due to the time required to properly make such a
reassessment and to evaluate alternative presentation formats, the FASB decided
that it is necessary to reinstate the requirements for the presentation of
reclassifications out of accumulated other comprehensive income that were in
place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update,
including the requirement to report comprehensive income either in a single
continuous financial statement or in two separate but consecutive financial
statements. Public entities should apply these requirements for fiscal years,
and interim periods within those years, beginning after December 15, 2011.
OTHER RECENTLY ISSUED, BUT NOT YET EFFECTIVE ACCOUNTING PRONOUNCEMENTS
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying financial statements.
OFF BALANCE SHEET TRANSACTIONS
We have had no off balance sheet transactions.
SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment for the next twelve
months.
RESULTS OF OPERATIONS
REVENUES
We had no revenues for the period from June 5, 2008 (date of inception) through
January 31, 2011.
EXPENSES
Our expenses for the twelve month periods ended January 31, 2012 and 2011, were
$21,711 and $30,996, respectively. During the period from June 5, 2008 (date of
inception) through January 31, 2012, we incurred expenses of $74,617. These
expenses were comprised primarily of professional fees and general and
administrative expenses.
NET INCOME (LOSS)
Our net loss for the twelve-month periods ended January 31, 2012 and 2011, were
$21,711 and $30,966, respectively. During the period from June 5, 2008 (date of
inception), through January 31, 2012, we incurred a net loss of $74,617. This
loss consisted of professional fees and general and administrative expenses.
Since inception, we have sold 66,000,000 shares of common stock.
PURCHASE OR SALE OF EQUIPMENT
We do not expect to purchase or sell any plant or significant equipment.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of January 31, 2012, reflects assets of $15,384 in the form
of cash. Since inception, we have sold 66,000,000 shares of common stock with
gross proceeds of $50,000. Cash resources provided from our capital formation
activities have, from inception, been sufficient to provide the working capital
necessary to operate our Company.
24
We anticipate generating losses in the near term, and therefore, may be unable
to continue operations in the future. We require additional capital, and we may
have to issue debt or equity or enter into a strategic arrangement with a third
party to obtain such capital. There can be no assurance that additional capital
will be available to us. We currently have no agreements, arrangements, or
understandings with any person to obtain funds through bank loans, lines of
credit, or any other sources.
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on the accompanying financial statements regarding concerns about our
ability to continue as a going concern. Our financial statements contain
additional note disclosures describing the circumstances that lead to this
disclosure by our registered independent auditors.
Due to this doubt about our ability to continue as a going concern, management
is open to new business opportunities which may prove more profitable to the
shareholders of Online Tele-Solutions inc. In the past, we have been able to
raise a limited amount of capital through private placements of our equity
stock, but we are uncertain about our continued ability to raise funds
privately. Further, we believe that our company may have difficulties raising
capital unless we locate a prospective new business opportunity through which we
can pursue a new plan of operation. If we are unable to secure adequate capital
to implement our current business plan or to continue our acquisition efforts of
a new business opportunity, our business may fail and our stockholders may lose
some or all of their investment.
Should our original business plan fail, we anticipate that the selection of a
business opportunity in which to participate will be complex and without
certainty of success. Management believes that there are numerous firms in
various industries seeking the perceived benefits of being a publicly registered
corporation. Business opportunities may be available in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We can provide no assurance that we will be
able to locate compatible business opportunities.
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Online Tele-Solutions, Inc.
(A Development Stage Company)
January 31, 2012 and 2011
Index to the Financial Statements
Contents Page(s)
-------- -------
Report of Independent Registered Public Accounting Firm.......................27
Balance Sheets at January 31, 2012 and 2011...................................28
Statements of Operations for the Fiscal Year Ended January 31, 2012 and
2011 and for the Period from June 5, 2008 (inception) through
January 31, 2012 .............................................................29
Statement of Stockholders' Equity (Deficit) for the Period from
June 5, 2008 (inception) through January 31, 2012 ............................30
Statements of Cash Flows for the Fiscal Year Ended January 31, 2012
and 2011 and for the Period from June 5, 2008 (inception) through
January 31, 2012 .............................................................31
Notes to the Financial Statements.............................................32
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Online Tele-Solutions, Inc.
(A development stage company)
Singapore
We have audited the accompanying balance sheets of Online Tele-Solutions, Inc.,
a development stage company, (the "Company") as of January 31, 2012 and 2011 and
the related statements of operations, stockholders' equity (deficit) and cash
flows for the fiscal years then ended and for the period from June 5, 2008
(inception) through January 31, 2012. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of January 31,
2012 and 2011 and the results of its operations and its cash flows for the
fiscal years then ended and for the period from June 5, 2008 (inception) through
January 31, 2012 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company had a deficit accumulated during the
development stage at January 31, 2012, and had a net loss and net cash used in
operating activities for the fiscal year then ended. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Li & Company, PC
-------------------------------------
Li & Company, PC
Skillman, New Jersey
May 15, 2012
27
Online Tele-Solutions, Inc.
(A Development Stage Company)
Balance Sheets
January 31, January 31,
2012 2011
-------- --------
ASSETS
CURRENT ASSETS:
Cash $ 15,384 $ 126
Prepaid expenses -- 2,400
-------- --------
TOTAL CURRENT ASSETS 15,384 2,526
-------- --------
TOTAL ASSETS $ 15,384 $ 2,526
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 9,301 $ 4,932
Advances from stockholders 30,700 500
-------- --------
TOTAL CURRENT LIABILITIES 40,001 5,432
-------- --------
STOCKHOLDERS' DEFICIT:
Common stock at $0.0001 par value: 300,000,000 shares
authorized, 66,000,000 shares issued and outstanding 6,600 6,600
Additional paid-in capital 43,400 43,400
Accumulated deficit (74,617) (52,906)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT (24,617) (2,906)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 15,384 $ 2,526
======== ========
See accompanying notes to the financial statements.
28
Online Tele-Solutions, Inc.
(A Development Stage Company)
Statements of Operations
For the
Period from
For the For the June 5, 2008
Fiscal Year Fiscal Year (inception)
Ended Ended through
January 31, January 31, January 31,
2012 2011 2012
------------ ------------ ------------
NET REVENUES $ -- $ -- $ --
OPERATING EXPENSES:
Professional fees 16,317 11,073 45,371
General and administrative expenses 5,394 19,923 29,246
------------ ------------ ------------
TOTAL OPERATING EXPENSES 21,711 30,996 74,617
------------ ------------ ------------
LOSS BEFORE INCOME TAX PROVISION (21,711) (30,996) (74,617)
INCOME TAX PROVISION -- -- --
------------ ------------ ------------
NET LOSS $ (21,711) $ (30,996) $ (74,617)
============ ============ ============
NET LOSS PER COMMON SHARE
-BASIC AND DILUTED $ (0.00) $ (0.00)
============ ============
WEIGHTED COMMON SHARES OUTSTANDING
-BASIC AND DILUTED 66,000,000 66,000,000
============ ============
See accompanying notes to the financial statements
29
Online Tele-Solutions, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
For the Period from June 5, 2008 (Inception) Through January 31, 2012
Common Stock, Deficit
$0.0001 Par Value Accumulated Total
------------------------ Additional during the Stockholders'
Number of paid-in Development Equity
Shares Amount Capital Stage (Deficit)
------ ------ ------- ----- ---------
Balance, June 5, 2008 (inception) -- $ -- $ -- $ -- $ --
Shares issued for cash at
$0.0003 per share on August 1, 2008 45,000,000 4,500 10,500 -- 15,000
Shares issued for cash at $0.0017
per share from August 1, 2008
through October 27, 2008 21,000,000 2,100 32,900 -- 35,000
Net loss (4,500) (4,500)
----------- ----------- ----------- ----------- -----------
Balance, January 31, 2009 66,000,000 6,600 43,400 (4,500) 45,500
Net loss (17,410) (17,410)
----------- ----------- ----------- ----------- -----------
Balance, January 31, 2010 66,000,000 6,600 43,400 (21,910) 28,090
Net loss (30,996) (30,996)
----------- ----------- ----------- ----------- -----------
Balance, January 31, 2011 66,000,000 6,600 43,400 (52,906) (2,906)
Net loss (21,711) (21,711)
----------- ----------- ----------- ----------- -----------
Balance, January 31, 2012 66,000,000 $ 6,600 $ 43,400 $ (74,617) $ (24,617)
=========== =========== =========== =========== ===========
See accompanying notes to the financial statements.
30
Online Tele-Solutions, Inc.
(A Development Stage Company)
Statements of Cash Flows
For the
Period from
For the For the June 5, 2008
Fiscal Year Fiscal Year (inception)
Ended Ended through
January 31, January 31, January 31,
2012 2011 2012
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(21,711) $(30,996) $(74,617)
Adjustments to reconcile net loss to net cash
used in operating activities
Write off of deposit on software -- 15,000 15,000
Changes in operating assets and liabilities:
Prepaid expenses 2,400 (2,400) --
Accrued expenses 4,369 (2,068) 9,301
-------- -------- --------
NET CASH USED IN OPERATING ACTIVITIES (14,942) (20,464) (50,316)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on software purchase -- -- (15,000)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES -- -- (15,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Amounts received from (paid to) stockholders 30,200 -- 30,700
Proceeds from sale of common stock -- -- 50,000
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 30,200 -- 80,700
-------- -------- --------
NET CHANGE IN CASH 15,258 (20,464) 15,384
Cash at beginning of period 126 20,590 --
-------- -------- --------
CASH AT END OF PERIOD $ 15,384 $ 126 $ 15,384
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid $ -- $ -- $ --
======== ======== ========
Income tax paid $ -- $ -- $ --
======== ======== ========
See accompanying notes to the financial statements.
31
Online Tele-Solutions, Inc.
(A Development Stage Company)
January 31, 2012 and 2011
Notes to the Financial Statements
NOTE 1 - ORGANIZATION AND OPERATIONS
ONLINE TELE-SOLUTIONS, INC.
Online Tele-Solutions, Inc. (a development stage company) ("Online
Tele-Solutions" or the "Company") was incorporated under the laws of the State
of Nevada on June 5, 2008. Initial operations have included organization and
incorporation, target market identification, marketing plans, and capital
formation. A substantial portion of the Company's activities has involved
developing a business plan and establishing contacts and visibility in the
marketplace. The Company has generated no revenues since inception.
AMENDMENT TO THE ARTICLES OF INCORPORATION
On March 9, 2012 the Board of Directors and the consenting stockholders
adopted and approved a resolution to (i) amend to its Articles of Incorporation
to (a) increase the number of shares of authorized common stock from 50,000,000
to 300,000,000; and (b) change the par value of each such common stock from
$0.001 per share to $0.0001 per share; and (ii) effectuate a forward split of
all issued and outstanding shares of common stock, at a ratio of thirty-for-one
(30:1) (the "Stock Split").
All shares and per share amounts in the financial statements have been
adjusted to give retroactive effect to the Stock Split.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 915-10-20
of the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification. Although the Company has recognized some nominal amount of
revenues since inception, the Company is still devoting substantially all of its
efforts on establishing the business and, therefore, still qualifies as a
development stage company. All losses accumulated since inception have been
considered as part of the Company's development stage activities.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with 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.
The Company's significant estimates and assumptions include the fair value
of financial instruments; income tax rate, income tax provision, deferred tax
assets and the valuation allowance of deferred tax assets, and the assumption
that the Company will continue as a going concern. Those significant accounting
estimates or assumptions bear the risk of change due to the fact that there are
uncertainties attached to those estimates or assumptions, and certain estimates
or assumptions are difficult to measure or value.
32
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to
develop the estimates utilizing currently available information, changes in
facts and circumstances, historical experience and reasonable assumptions. After
such evaluations, and if deemed appropriate, those estimates are adjusted
accordingly. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards
Codification ("Paragraph 820-10-35-37") to measure the fair value of its
financial instruments and paragraph 825-10-50-10 of the FASB Accounting
Standards Codification for disclosures about fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair
value in accounting principles generally accepted in the United States of
America (U.S. GAAP), and expands disclosures about fair value measurements. To
increase consistency and comparability in fair value measurements and related
disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The three (3) levels of fair value hierarchy defined by
Paragraph 820-10-35-37 are described below:
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are
determined using pricing models, discounted cash flow methodologies or similar
techniques and at least one significant model assumption or input is
unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities,
such as accrued expenses approximate their fair values because of the short
maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out
on an arm's-length basis, as the requisite conditions of competitive,
free-market dealings may not exist. Representations about transactions with
related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm's-length
transactions unless such representations can be substantiated.
It is not, however, practical to determine the fair value of advances from
stockholders due to their related party nature.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting
Standards Codification for its long-lived assets. The Company's long-lived
asset, which includes deposit on software, is reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by
comparing the projected undiscounted net cash flows associated with the related
long-lived asset or group of long-lived assets over their remaining estimated
useful lives against their respective carrying amounts. Impairment, if any, is
based on the excess of the carrying amount over the fair value of those assets.
Fair value is generally determined using the asset's expected future discounted
33
cash flows or market value, if readily determinable. If long-lived assets are
determined to be recoverable, but the newly determined remaining estimated
useful lives are shorter than originally estimated, the net book values of the
long-lived assets are depreciated over the newly determined remaining estimated
useful lives. The Company determined that there was an impairment of its
long-lived asset as of January 31, 2011 and wrote off the $15,000 deposit to
general and administrative
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
RELATED PARTIES
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions.
Pursuant to Section 850-10-20 the Related parties include a. affiliates of
the Company; b. Entities for which investments in their equity securities would
be required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; c. trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d. principal owners of the Company; e. management of the Company; f.
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. Other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
The financial statements shall include disclosures of material related
party transactions, other than compensation arrangements, expense allowances,
and other similar items in the ordinary course of business. However, disclosure
of transactions that are eliminated in the preparation of consolidated or
combined financial statements is not required in those statements. The
disclosures shall include: a. the nature of the relationship(s) involvedb.
description of the transactions, including transactions to which no amounts or
nominal amounts were ascribed, for each of the periods for which income
statements are presented, and such other information deemed necessary to an
understanding of the effects of the transactions on the financial statements; c.
the dollar amounts of transactions for each of the periods for which income
statements are presented and the effects of any change in the method of
establishing the terms from that used in the preceding period; and d. amounts
due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
COMMITMENT AND CONTINGENCIES
The Company follows subtopic 450-20 of the FASB Accounting Standards
Codification to report accounting for contingencies. Certain conditions may
exist as of the date the consolidated financial statements are issued, which may
result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are pending
against the Company or unasserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the Company's
consolidated financial statements. If the assessment indicates that a
potentially material loss contingency is not probable but is reasonably
possible, or is probable but cannot be estimated, then the nature of the
contingent liability, and an estimate of the range of possible losses, if
determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless
they involve guarantees, in which case the guarantees would be disclosed.
Management does not believe, based upon information available at this time, that
34
these matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows. However, there is no
assurance that such matters will not materially and adversely affect the
Company's business, financial position, and results of operations or cash flows.
REVENUE RECOGNITION
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company will recognize revenue when it
is realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
INCOME TAX PROVISION
The Company accounts for income taxes under Section 740-10-30 of the FASB
Accounting Standards Codification, which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the fiscal year in which the differences are expected to
reverse. Deferred tax assets are reduced by a valuation allowance to the extent
management concludes it is more likely than not that the assets will not be
realized. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the fiscal years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the Statements of Income and Comprehensive Income in the period that includes
the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards
Codification ("Section 740-10-25") with regards to uncertainty income taxes.
Section 740-10-25 addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under Section 740-10-25, the Company may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent (50%) likelihood of being
realized upon ultimate settlement. Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures.
The estimated future tax effects of temporary differences between the tax
basis of assets and liabilities are reported in the accompanying consolidated
balance sheets, as well as tax credit carry-backs and carry-forwards. The
Company periodically reviews the recoverability of deferred tax assets recorded
on its consolidated balance sheets and provides valuation allowances as
management deems necessary.
Management makes judgments as to the interpretation of the tax laws that
might be challenged upon an audit and cause changes to previous estimates of tax
liability. In addition, the Company operates within multiple taxing
jurisdictions and is subject to audit in these jurisdictions. In management's
opinion, adequate provisions for income taxes have been made for all years. If
actual taxable income by tax jurisdiction varies from estimates, additional
allowances or reversals of reserves may be necessary.
UNCERTAIN TAX POSITIONS
The Company did not take any uncertain tax positions and had no adjustments
to unrecognized income tax liabilities or benefits pursuant to the provisions of
Section 740-10-25 for the fiscal year ended January 31, 2012 or 2011.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed pursuant to section
260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss)
per common share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the period. Diluted
net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock and potentially
35
outstanding shares of common stock during the period to reflect the potential
dilution that could occur from common shares issuable through stock options and
warrants.
There were no potentially outstanding dilutive common shares for the fiscal
year ended January 31, 2012 or 2011.
CASH FLOWS REPORTING
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards
Codification for cash flows reporting, classifies cash receipts and payments
according to whether they stem from operating, investing, or financing
activities and provides definitions of each category, and uses the indirect or
reconciliation method ("Indirect method") as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from
operating activities by adjusting net income to reconcile it to net cash flow
from operating activities by removing the effects of (a) all deferrals of past
operating cash receipts and payments and all accruals of expected future
operating cash receipts and payments and (b) all items that are included in net
income that do not affect operating cash receipts and payments. The Company
reports the reporting currency equivalent of foreign currency cash flows, using
the current exchange rate at the time of the cash flows and the effect of
exchange rate changes on cash held in foreign currencies is reported as a
separate item in the reconciliation of beginning and ending balances of cash and
cash equivalents and separately provides information about investing and
financing activities not resulting in cash receipts or payments in the period
pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards
Codification.
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB
Accounting Standards Codification for the disclosure of subsequent events. The
Company will evaluate subsequent events through the date when the financial
statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards
Codification, the Company as an SEC filer considers its financial statements
issued when they are widely distributed to users, such as through filing them on
EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-05
In June 2011, the FASB issued the FASB Accounting Standards Update No.
2011-05 "COMPREHENSIVE INCOME" ("ASU 2011-05"), which was the result of a joint
project with the IASB and amends the guidance in ASC 220, COMPREHENSIVE INCOME,
by eliminating the option to present components of other comprehensive income
(OCI) in the statement of stockholders' equity. Instead, the new guidance now
gives entities the option to present all non-owner changes in stockholders'
equity either as a single continuous statement of comprehensive income or as two
separate but consecutive statements. Regardless of whether an entity chooses to
present comprehensive income in a single continuous statement or in two separate
but consecutive statements, the amendments require entities to present all
reclassification adjustments from OCI to net income on the face of the statement
of comprehensive income.
The amendments in this Update should be applied retrospectively and are
effective for public entity for fiscal years, and interim periods within those
years, beginning after December 15, 2011.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No.
2011-08 "INTANGIBLES--GOODWILL AND OTHER: TESTING GOODWILL FOR IMPAIRMENT" ("ASU
2011-08"). This Update is to simplify how public and nonpublic entities test
goodwill for impairment. The amendments permit an entity to first assess
qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. Under the amendments in this Update, an entity is
not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its
carrying amount.
The guidance is effective for interim and annual periods beginning on or
after December 15, 2011. Early adoption is permitted.
36
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-10
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-10 "PROPERTY, PLANT AND EQUIPMENT: DERECOGNITION OF IN SUBSTANCE REAL
ESTATE-A SCOPE CLARIFICATION" ("ASU 2011-09"). This Update is to resolve the
diversity in practice as to how financial statements have been reflecting
circumstances when parent company reporting entities cease to have controlling
financial interests in subsidiaries that are in substance real estate, where the
situation arises as a result of default on nonrecourse debt of the subsidiaries.
The amended guidance is effective for annual reporting periods ending after
June 15, 2012 for public entities. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-11 "BALANCE SHEET: DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES"
("ASU 2011-11"). This Update requires an entity to disclose information about
offsetting and related arrangements to enable users of its financial statements
to understand the effect of those arrangements on its financial position. The
objective of this disclosure is to facilitate comparison between those entities
that prepare their financial statements on the basis of U.S. GAAP and those
entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on
or after January 1, 2013, and interim periods within those annual periods.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-12
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-12 "COMPREHENSIVE INCOME: DEFERRAL OF THE EFFECTIVE DATE FOR AMENDMENTS TO
THE PRESENTATION OF RECLASSIFICATIONS OF ITEMS OUT OF ACCUMULATED OTHER
COMPREHENSIVE INCOME IN ACCOUNTING STANDARDS UPDATE NO. 2011-05" ("ASU
2011-12"). This Update is a deferral of the effective date pertaining to
reclassification adjustments out of accumulated other comprehensive income in
ASU 2011-05. FASB is to going to reassess the costs and benefits of those
provisions in ASU 2011-05 related to reclassifications out of accumulated other
comprehensive income. Due to the time required to properly make such a
reassessment and to evaluate alternative presentation formats, the FASB decided
that it is necessary to reinstate the requirements for the presentation of
reclassifications out of accumulated other comprehensive income that were in
place before the issuance of Update 2011-05.
All other requirements in Update 2011-05 are not affected by this Update,
including the requirement to report comprehensive income either in a single
continuous financial statement or in two separate but consecutive financial
statements. Public entities should apply these requirements for fiscal years,
and interim periods within those years, beginning after December 15, 2011.
OTHER RECENTLY ISSUED, BUT NOT YET EFFECTIVE ACCOUNTING PRONOUNCEMENTS
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying financial statements.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates continuity of
operations, realization of assets, and liquidation of liabilities in the normal
course of business
As reflected in the accompanying financial statements, the Company had a
deficit accumulated during the development stage at January 31, 2012, a net loss
and net cash used in operating activities for the fiscal year then ended,
respectively, with no revenues earned since inception. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
37
While the Company is attempting to commence operations and generate
revenues, the Company's cash position may not be sufficient enough to support
the Company's daily operations. Management intends to raise additional funds by
way of a public or private offering. Management believes that the actions
presently being taken to further implement its business plan and generate
revenues provide the opportunity for the Company to continue as a going concern.
While the Company believes in the viability of its strategy to commence
operations and generate revenues and in its ability to raise additional funds,
there can be no assurances to that effect. The ability of the Company to
continue as a going concern is dependent upon the Company's ability to further
implement its business plan and generate revenues.
The financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 4 - DEPOSIT
The Company follows section 350-50-25 of the FASB Accounting Standards
Codification, WEBSITE DEVELOPMENT COSTS, which specifies the appropriate
accounting for costs incurred in connection with the development and maintenance
of websites. Under 350-50-25, costs related to certain website development
activities are expensed as incurred (such as planning and operating stage
activities). Costs relating to certain website application and infrastructure
development are generally capitalized, and are amortized over its estimated
useful life of two (2) years. The Company made a deposit of $15,000 for initial
stage software development and wrote off the $15,000 deposit to general and
administrative expenses in the fiscal year ended January 31, 2011 due to the
Company having insufficient funding to continue software and website
development.
NOTE 5 - RELATED PARTY TRANSACTIONS
FREE OFFICE SPACE
The Company has been provided office space by its Chief Executive Officer
at no cost. The management determined that such cost is nominal and did not
recognize the rent expense in its financial statements.
ADVANCES FROM STOCKHOLDER
From time to time, stockholders of the Company advance funds to the Company
for working capital purpose. Those advances are unsecured, non-interest bearing
and due on demand.
NOTE 6 - STOCKHOLDERS' EQUITY (DEFICIT)
SHARES AUTHORIZED
Upon formation the total number of shares of common stock which the Company
is authorized to issue is Fifty Million (50,000,000) shares, par value $0.001
per share.
On March 9, 2012 the Board of Directors and the consenting stockholders
adopted and approved a resolution to effect an amendment to our Articles of
Incorporation to increase the number of shares of authorized common stock from
50,000,000 to 300,000,000. The par value of each such common stock shall be
decreased from $0.001 per share to $0.0001 per share.
COMMON STOCK
On August 1, 2008, the Company issued 45,000,000 shares of common stock at
$0.0003 per share to the company's president for total cash proceeds of $15,000.
For the period from August 1, 2008 through October 27, 2008, the Company
issued 21,000,000 shares of common stock at $0.0017 per share for total cash
proceeds of $35,000.
38
NOTE 7 - INCOME TAX PROVISION
DEFERRED TAX ASSETS
At January 31, 2012, the Company had net operating loss ("NOL")
carry-forwards for Federal income tax purposes of $74,617 that may be offset
against future taxable income through 2032. No tax benefit has been reported
with respect to these net operating loss carry-forwards in the accompanying
financial statements because the Company believes that the realization of the
Company's net deferred tax assets of approximately $25,370 was not considered
more likely than not and accordingly, the potential tax benefits of the net loss
carry-forwards are offset by a full valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL
carry-forwards. The Company has provided a full valuation allowance on the
deferred tax assets because of the uncertainty regarding its realizability. The
valuation allowance increased approximately $7,382 and $10,539 for the fiscal
years ended January 31, 2012 and 2011, respectively.
Components of deferred tax assets at January 31, 2012 and 2011 are as
follows:
January 31, January 31,
2012 2011
-------- --------
Net deferred tax assets - non-current:
Expected income tax benefit from NOL carry-forwards $ 25,370 $ 17,988
Less valuation allowance (25,370) (17,988)
-------- --------
Deferred tax assets, net of valuation allowance $ -- $ --
======== ========
INCOME TAX PROVISION IN THE STATEMENTS OF OPERATIONS
A reconciliation of the federal statutory income tax rate and the effective
income tax rate as a percentage of income before income taxes is as follows:
For the For the
Fiscal Year Fiscal Year
Ended Ended
January 31, January 31,
2012 2011
-------- --------
Federal statutory income tax rate 34.0% 34.0%
Change in valuation allowance on net operating
loss carry-forwards (34.0) (34.0)
-------- --------
Effective income tax rate 0.0% 0.0%
======== ========
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet
date through the date when the financial statements were issued to determine if
they must be reported. The Management of the Company determined that there were
no reportable subsequent events to be disclosed.
39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the SECURITIES
EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president (our principal executive
officer, principal financial officer and principle accounting officer) to allow
for timely decisions regarding required disclosure.
As of January 31, 2011, the end of our fiscal year covered by this report, we
carried out an evaluation, under the supervision and with the participation of
our president (our principal executive officer, principal financial officer and
principle accounting officer), of the effectiveness of the design and operation
of our disclosure controls and procedures. Based on the foregoing, our president
(our principal executive officer, principal financial officer and principle
accounting officer) concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this annual report.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
control procedures. The objectives of internal control include providing
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States. Our management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2010. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in INTERNAL CONTROL-INTEGRATED
FRAMEWORK. Our management has concluded that, as of January 31, 2011, our
internal control over financial reporting is effective. Our management reviewed
the results of their assessment with our board of directors.
This annual report does not include an attestation report of our company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit our company to provide only management's
report in this annual report.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Internal control over financial reporting has inherent limitations which include
but is not limited to the use of independent professionals for advice and
guidance, interpretation of existing and/or changing rules and principles,
segregation of management duties, scale of organization, and personnel factors.
Internal control over financial reporting is a process which involves human
diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements on a timely basis, however these inherent limitations
are known features of the financial reporting process and it is possible to
design into the process safeguards to reduce, though not eliminate, this risk.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation. 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.
40
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the year ended January 31, 2012 that have materially or are
reasonably likely to materially affect, our internal controls over financial
reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE EXECUTIVE
OFFICER AND DIRECTORS
Our officers and directors and their ages and positions are as follows:
Name Age Position
---- --- --------
Mario Jakiri Tolentino 43 President, Treasurer and Director
Owen A. Orendain 41 Director
BIOGRAPHICAL INFORMATION
Set forth below is a brief description of the background and business experience
of our executive officer and director for the past five years.
MARIO JAKIRI TOLENTINO - Mr. Tolentino has served as our Treasurer and Director
since our inception on June 5, 2008. He was appointed President on March 1, 2009
following the resignation of Mr. Geronimo Ferrer Abelanes as President,
Secretary and Director on the same date. Mr. Tolentino is an engineer who
specializes in the area of satellite communications and VoIP telephony systems.
Since 2005, he has worked as the SATCOMM Engineer for Rignet PTE Ltd. of
Singapore where he is responsible for working with customers to document
specifications, design and develop satellite based communication sub-systems.
From 1997 to 2005, Mr. Tolentino worked as a Satellite Engineer for ST Teleport
PTE Ltd., also in Singapore. In this role he was responsible for the operation
and maintenance of a satellite ground station, operation and control booth
uplink, downlink of broadcast services and customer system co-locate services of
IP over satellite VSAT network. He was also responsible for operating and
maintaining the VSAT hub, organizing resources and configuration requirements,
troubleshooting and system optimization. Mr. Tolentino graduated from the Saint
Louis University in Baguio City, Philippines with a BSC in Electronics and
Communication Engineering in 1989. He has also completed industry technical
course in Global VSAT Technology, level 1 & 2, GVF (USA Standard).
OWEN A. ORENDAIN - Mr. Orendain was appointed our Director on March 1, 2009
following the resignation of Mr. Abelanes as a director on the same date. Mr.
Orendain is an engineer who focuses on media content for Ascent Media Pte Ltd.,
a provider of creative and technical services to the media and entertainment
industries in Singapore. He has held various engineering positions with Ascent
since September 1997. From August 1995 to September 1997, Mr. Orendain was a
broadcast controller with ST Teleport Pte Ltd., a satellite and fibre
communications solutions provider also in Singapore. He has held this position
since 2004. Mr. Orendain attained a Bachelor of Science in Electronics and
Communications Engineering from the Intramuros Manila, Philippines, in March
1993.
41
COMMITTEES OF THE BOARD OF DIRECTORS
To date, our Board of Directors has not established a nominating and governance
committee, a compensation committee, nor an audit committee.
CODE OF ETHICS
We currently do not have a Code of Ethics.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers, and stockholders holding more than 10% of our
outstanding common stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in beneficial ownership of
our common stock. Executive officers, directors and greater-than-10%
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file. To our knowledge, based solely on review of the
copies of such reports furnished to us for the period ended January 31, 2011, no
Section 16(a) reports required to be filed by our executive officers, directors
and greater-than-10% stockholders were not filed on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of compensation paid to the following persons during the fiscal
period ended March 31, 2010 are set out in the summary compensation table below:
* our Chief Executive Officer (Principal Executive Officer);
* our Chief Financial Officer (Principal Financial Officer);
* each of our three most highly compensated executive officers, other
than the Principal Executive Officer and the Principal Financial
Officer, who were serving as executive officers at the end of the
fiscal year ended January 31, 2012; and
* up to two additional individuals for whom disclosure would have been
provided under the item above but for the fact that the individual was
not serving as our executive officer at the end of the fiscal year
ended January 31, 2012;
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Fiscal Incentive Deferred All
Name and Year Plan Compen- Other
Principal Ended Stock Option Compen- sation Compen-
Position July 31, Salary($) Bonus($) Awards($) Awards($) sation($) Earnings($) sation($) Totals($)
------------ -------- -------- ------- -------- -------- -------- ---------- -------- --------
Mr. Mario 2012 0 0 0 0 0 0 0 0
Jakiri 2011 0 0 0 0 0 0 0 0
Tolentino (1)
Notes:
(1) Mr. Tolentino has been our President and a Director since we were
incorporated on June 5, 2008.
42
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
Option Awards Stock Awards
----------------------------------------------------------------- ----------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options (#) Options (#) Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable Unexercisable Options (#) Price Date Vested(#) Vested Vested Vested
---- ----------- ------------- ----------- ----- ---- --------- ------ ------ ------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Mr. Mario -- -- -- -- -- -- -- -- --
Jakir
Tolentino
OPTION GRANTS AND EXERCISES
There were no option grants or exercises by any of the executive officers named
in the Summary Compensation Table above.
EMPLOYMENT AGREEMENTS
We have not entered into employment and/or consultant agreements with our
Directors and officers.
COMPENSATION OF DIRECTORS
All directors receive reimbursement for reasonable out-of-pocket expenses in
attending board of directors meetings and for promoting our business. From time
to time we may engage certain members of the board of directors to perform
services on our behalf. In such cases, we compensate the members for their
services at rates no more favorable than could be obtained from unaffiliated
parties. Our directors have not received any compensation for the fiscal year
ended January 31, 2012.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
BENEFICIAL OWNERSHIP OF HOLDINGS
The table below sets forth the number and percentage of shares of our common
stock owned as of October 26, 2009, by the following persons: (i) stockholders
known to us who own 5% or more of our outstanding shares, (ii) each of our
Directors, and (iii) our officers and Directors as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned.
43
Name and Address Amount and Nature Percentage
Title of Class of Beneficial Owner of Beneficial Ownership of Class(1)
-------------- ------------------- ----------------------- -----------
Common Stock Mr. Mario Jakiri 22,500,000 34.09%
Tolentino
Common Stock Mr. Owen A. Orendain 23,100,000(2) 35.00%
Common Stock All Officers as a Group 45,600,000 69.09%
----------
(1) Based on 66,000,000 shares of our common stock outstanding.
(2) Represents 22,500,000 shares of common stock owned directly and 600,000
shares of common stock owned by Mr. Orendain's wife. Mr. Orendain
expressely disclaims beneficial ownership with respect to the shares of
common stock owned by his wife.
CHANGES IN CONTROL
There are no existing arrangements that may result in a change in control of the
Company.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
The following table sets forth information regarding our equity compensation
plans.
Number of Securities to be Number of Securities Remaining Available for
Issued Upon Exercise of Weighted-Average Exercise Future Issuance Under
Outstanding Options, Price of Outstanding Options, Equity Compensation Plans
Plan Category Warrants and Rights Warrants and Rights (excluding securities
(a) (b) reflected in column (a))
------------- ------------------- ------------------- ------------------------
Equity Compensation Plans to -- -- --
be Approved by Security
Holders
Equity Compensation Plans Not -- -- --
Approved by Security Holders
Total -- -- --
44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Other than the transactions discussed below, we have not entered into any
transaction nor are there any proposed transactions in which any of our
Directors, executive officers, stockholders or any member of the immediate
family of any of the foregoing had or is to have a direct or indirect material
interest.
As at January 31, 2012, there is a balance owing to a stockholder of the Company
in the amount of $30,700.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
For the year ended January 31, 2012, Li & Company, PC billed us for $4,500 in
audit fees. For the year-ended January 31, 2011, Li & Company, PC billed us for
$4,500 in audit fees, including S-1 review fees.
REVIEW FEES
Li & Company, PC billed us $2,250 for reviews of our quarterly financial
statements in 2012 that are not reported under Audit Fees above.
TAX AND ALL OTHER FEES
We did not pay any fees to Li & Company, PC for tax compliance, tax advice, tax
planning or other work during our fiscal year ended January 31, 2012.
PRE-APPROVAL POLICIES AND PROCEDURES
We have implemented pre-approval policies and procedures related to the
provision of audit and non-audit services. Under these procedures, our board of
directors pre-approves all services to be provided by Li & Company, PC and the
estimated fees related to these services.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit Description
------- -----------
3.1 Articles of Incorporation of Registrant (Attached as an exhibit to our
Registration Statement on Form S-1 originally filed with the SEC on
October 14, 2009 and incorporated herein by reference.)
3.2 Bylaws. (Attached as an exhibit to our Registration Statement on Form
S-1 originally filed with the SEC on October 14, 2009 and incorporated
herein by reference.)
31.1 Certification of the Chief Executive and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 Interactive data files pursuant to Rule 405 of Regulation S-T.
45
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ONLINE TELE-SOLUTIONS INC.
By: /s/ Mario Jakiri Tolentino
--------------------------------------
Mario Jakiri Tolentino
President, Treasurer and Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
Signatures Title Date
---------- ----- ----
/s/ Mario Jakiri Tolentino President, Treasurer and Director (Principal May 15, 2012
----------------------------------- Executive Officer, Principal Financial Officer
Mario Jakiri Tolentino and Principal Accounting Officer)
/s/ Owen A. Orendain Director May 15, 2012
-----------------------------------
Owen A. Orendain
46