UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended August 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number: 000-53166
Tone in Twenty
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(Exact name of registrant as specified in its charter)
Nevada 77-0664193
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(State of incorporation) (I.R.S. Employer ID No.)
4301 S. Valley View Ave., Suite 20, Las Vegas, NV 89103
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (702) 604-7038
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No
Indicate by checkmark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 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 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. [X]
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 [X] Smaller reporting company
(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 Exchange Act).
Yes[X] No [ ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant's most recently completed second
fiscal quarter:
The aggregate market value of the Company's common shares of voting stock held
by non-affiliates of the Company at December 8, 2008, computed by reference to
the $0.02 Registration Statement per-share price on April 8, 2008, was $8,500.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
As of December 8, 2008, the registrant's outstanding common stock consisted
of 2,625,000 shares, $0.001 Par Value. Authorized - 195,000,000 common
voting shares. 500,000 preferred issued, 5,000,000 authorized.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
INDEX
Title Page
ITEM 1. BUSINESS 5
ITEM 2. PROPERTIES 18
ITEM 3. LEGAL PROCEEDINGS 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 20
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 25
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES 25
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 28
ITEM 11. EXECUTIVE COMPENSATION 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, 33
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 35
AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 36
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 37
2
FORWARD-LOOKING STATEMENTS
This document contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact are "forward-looking statements" for purposes of
federal and state securities laws, including, but not limited to, any
projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or belief;
and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words "may," "could," "estimate,"
"intend," "continue," "believe," "expect" or "anticipate" or other similar
words. These forward-looking statements present our estimates and assumptions
only as of the date of this report. Accordingly, readers are cautioned not to
place undue reliance on forward-looking statements, which speak only as of the
dates on which they are made. We do not undertake to update forward-looking
statements to reflect the impact of circumstances or events that arise after
the dates they are made. You should, however, consult further disclosures we
make in future filings of our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
Although we believe that the expectations reflected in any of our forward-
looking statements are reasonable, actual results could differ materially from
those projected or assumed in any of our forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties. The
factors impacting these risks and uncertainties include, but are not limited
to:
o inability to raise additional financing for working capital and product
development;
o inability to develop and design new exercise programs;
o deterioration in general or regional economic, market and political
conditions;
o the fact that our accounting policies and methods are fundamental to how we
report our financial condition and results of operations, and they may
require management to make estimates about matters that are inherently
uncertain;
o adverse state or federal legislation or regulation that increases the costs
of compliance, or adverse findings by a regulator with respect to existing
operations;
o changes in U.S. GAAP or in the legal, regulatory and legislative
environments in the markets in which we operate;
3
o inability to efficiently manage our operations;
o inability to achieve future operating results;
o our ability to recruit and hire key employees;
o the inability of management to effectively implement our strategies and
business plans; and
o the other risks and uncertainties detailed in this report.
In this form 10-K references to "Tone in Twenty", "the Company", "we," "us,"
and "our" refer to Tone in Twenty
AVAILABLE INFORMATION
We file annual, quarterly and special reports and other information with the
SEC. You can read these SEC filings and reports over the Internet at the SEC's
website at www.sec.gov. You can also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 100 F
Street, NE, Washington, DC 20549 on official business days between the hours of
10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further
information on the operations of the public reference facilities. We will
provide a copy of our annual report to security holders, including audited
financial statements, at no charge upon receipt to of a written request to us
at Tone in Twenty, 4301 S. Valley View Ave., Suite 20, Las Vegas, NV 89103.
4
PART I
ITEM 1. BUSINESS
History and Organization
------------------------
Tone in Twenty ("Tone" or "the Company") was incorporated in the State of
Nevada on August 4, 2006, under the name Tone in Twenty (File Number
E0580752006-0). We are in the business of providing personal fitness
training using isometric techniques. It is management's belief that
isometric training is an intense form of training which requires less hours
of work for the same results. It is a form of exercise where muscle exertion
is used to strengthen and tone the muscle without changing the length of the
muscle fibers. Isometric training involves the exertion of muscle force that
must overcome and a counter-balancing force that increases in intensity to
the point where the muscle force can no longer hold the counter-balancing
force in place. Isometrics are done in static positions, rather than a range
of motion. The joint and muscle are either worked against an immovable force
or are held in a static position while opposed by resistance. This counter-
balancing force comes from a pneumatic air pressure which is pumped into the
exercise equipment. The greater the muscle force exerted against the
isometric equipment results in greater counter-balancing force.
Activities to date have been limited primarily to organization, initial
capitalization, establishing an appropriate operating facility in Las Vegas,
Nevada, and commencing its initial operational plans. As of the date of this
annual report, the Company has developed a business plan, established
administrative offices and tested its business model.
Our Business
------------
Tone in Twenty is a development stage company. The Company is not operational.
We generated minimal revenues from an evaluation program we conducted from
January - June 2007, in Las Vegas, NV. We conducted an evaluation of our
business plan to define our physical fitness services and advertising
program. This evaluation entailed: 1) renting space, by the hour, in a
physical fitness training center; 2) hiring and training a physical fitness
trainer on using isometric techniques; 3) advertising this physical fitness
program in the newspaper; 4) scheduling clients for training sessions; and
5) providing isometric physical fitness training for clients.
5
The Company's business plan is to establish a model physical fitness facility
in order to train personal trainers on these isometric training techniques.
Once these trainers have been fully educated and demonstrate competencies in
these techniques, the Company will seek additional locations to host
isometric fitness training. The Company's goal is to open four locations
throughout the Las Vegas valley in order to have economies of scale in its
marketing. Our major obstacle in moving our business plan forward is
funding. Management believes we need to raise $100,000 in order to fund our
business. It is management's goal to obtain the necessary funding in the
next six months.
Currently, the Company is not operational, the Company did conduct an
evaluation of its personal fitness training using isometric techniques
between January-June, 2007, in Las Vegas, NV. Management identified a
physical fitness center that permitted the use of its facilities to conduct
this evaluation. The Company spent $1,624 to advertise its fitness training
program in the local newspapers and subsequently generated $7,979 in
business. This evaluation model helped management define the Company's
services and advertising program.
Based on this evaluation, management believes it can duplicate this model.
Management is preparing this Registration Statement with the plan to raise
$100,000 in funding, provided the Company is listed on the Over the Counter
Bulletin Board. Management believes that if the Company is listed on the
Over the Counter Bulletin Board, it might be easier to fund the Company, as
it gives potential investors an exit strategy. However, there are no
assurance even if the Company is listed on the OTC-Bulletin Board that it
will be able to fund its future operations.
These funds will be used to establish four (4) separate isometric fitness
training centers in Las Vegas, NV. With four fitness centers, the Company
can use economy of scale to advertise its centers in the local newspapers and
on the local television cable. This will minimize advertising costs, per
customer, and provide a location convenient for future customers. Management
anticipates that the four planned isometric training centers can be in place
within approximately six months of obtaining funding it requires.
Our Strategy
------------
Our marketing success will be determined by our ability to create brand
awareness for our personal fitness service, acquire customers and provide our
services at a competitive price. The Company has developed a few strategies
to accomplish this goal. This includes waiving any start-up fee. Many of
the larger companies charge a start-up fee to begin membership.
6
Management plans to target our services primarily towards individuals with
limited time to spend on personal fitness training, such as business
professionals and owners. The difference between isometric physical training
and traditional physical training is the time involved. Because of the
intensity of isometric training, a training session will not last more than
20-minutes per session, as compared traditional physical training programs
that can last one-two hours. Management anticipates to charge $40.00 for a
twenty (20) minute training session.
Therefore, management plans to market its services, through newspaper ads,
and its local television cable market, to individuals who do not have a great
deal of time to devote to physical training, but can afford to spend a 20-
minutes a week in an isometric physical fitness training program.
The Industry
------------
It is management's belief that the industry is well established with a number
well-financed competitors who have an established client base. There are
many large gym facilities in Las Vegas, where the Company is based, such as
Gold's Gym, Las Vegas Athletic Club and 24-Hour Fitness. Management believes
the American society has increased knowledge and awareness of personal health
and fitness over the past decade through various media outlets, such as
television, magazines and the Internet. This has prompted the rapid building
of gyms and other personal fitness locations. Tone in Twenty plans to focus
on a particular segment of the fitness industry, by specializing in providing
personal isometric training at competitive prices for the market it serves.
Competition
-----------
The personal fitness industry is highly competitive. Competition is generally
based upon brand name recognition, price, service, reach and target
marketing. There are many larger companies who provide similar services as
Tone in Twenty. The competition includes larger companies, such as, Gold's
Gym, 24-Hour Fitness, Las Vegas Athletic Clubs and Bally's Gyms. We are an
insignificant player as compared to these larger fitness centers. These
companies are better funded and more established than Tone in Twenty. The
competition has built brand loyalty and has the resources to build its
customer bases through promotional advertising. We do not have the
advertising dollars available to compete against our competitors and we might
not be able to compete successfully with these competitors in the future.
7
All of our competitors have significantly greater financial, marketing, other
resources, and larger customer bases than we have and are less financially
leveraged than we are. As a result, these competitors may be able to adapt
changes in customer requirements more quickly; introduce new and more
innovative products more quickly; better adapt to downturns in the economy or
other decreases in sales; better withstand pressure for cancelled services,
take advantage of acquisition and other opportunities more readily; devote
greater resources to the marketing and sale of their products; and adapt more
aggressive pricing policies.
Tone in Twenty's Funding Requirements
-------------------------------------
Tone in Twenty does not have the required capital or funding to open its
planned fitness centers. Management anticipates Tone in Twenty will require at
least $100,000 to complete to train personnel, and open these fitness centers.
The Company has started seeking funding from a number of sources, but has not
secured any funding at this time. Management will continues to seek different
funding sources in order to initiate its business plan.
Future funding could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, results of
operations and financial condition. Any future acquisitions of other
businesses, technologies, services or product(s) might require the Company to
obtain additional equity or debt financing, which might not be available on
terms favorable to the Company, or at all, and such financing, if available,
might be dilutive.
Patent, Trademark, License and Franchise Restrictions and Contractual
Obligations and Concessions
Many of the isometric health fitness training processes depend upon the
training techniques, protocols, knowledge, and experience of Mr. Harper, our
sole officer, who is responsible for purchasing this isometric training
equipment from a third party for the benefit of the Company. Specifically,
our training equipment utilizes a method, whereby the force applied to this
equipment increases with the amount of pressure applied to the equipment.
For example, when a customer uses our equipment, they begin by holding a
movable bar with no pressure. They are required to hold the bar level, while
the machine slowly exerts pressure against the bar. As the bar pressure
increases, the customer needs to increase their force against this movable
bar, until they can no longer hold the bar level. Different equipment will
be used to apply pressure against different parts of the body.
8
To help protect its rights, the Company will require future employees,
collaborators, and significant consultants and advisors with access to
confidential information on how our equipment works, to enter into
confidentiality agreements with the Company. There can be no assurance,
however, that these agreements will provide adequate protection for the
Company's trade secrets, know-how or proprietary information in the event of
any unauthorized use or disclosure. The Company's success and ability to
compete is dependent in part upon its proprietary technology. There can be
no assurance that the steps taken by the Company in this regard will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technologies.
The Company regards substantial elements of its underlying infrastructure and
health fitness training techniques and equipment as proprietary information
and will attempt to protect them by relying on trademark, service mark,
copyright and trade secret laws and restrictions on disclosure and
transferring title and other methods. The Company plans to enter into
confidentiality agreements with its future employees, future suppliers and
future consultants and in connection with its license agreements with third
parties and generally seeks to control access to and distribution of its
technology, documentation and other proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's proprietary information without authorization or to
develop similar technology independently.
There can be no assurance that the steps taken by the Company will prevent
misappropriation or infringement of its proprietary information, which could
have a material adverse effect on the Company's business, results of
operations and financial condition. Litigation may be necessary in the
future to enforce the Company's intellectual property rights, to protect the
Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation might result in substantial
costs and diversion of resources and management attention. Moreover, from
time to time, the Company may be subject to claims of alleged infringement by
the Company or service marks and other intellectual property rights of third
parties. Such claims and any resultant litigation, should it occur, might
subject the Company to significant liability for damages, might result in
invalidation of the Company's proprietary rights and, even if not
meritorious, could result in substantial costs and diversion of resources and
management attention and could have a material adverse effect on the
Company's business, results of operations and financial condition.
Research and Development Activities and Costs
Tone in Twenty did not incur any research and development costs for the years
ended August 31, 2008 and 2007, and has no plans to undertake any research
and development activities during the next year of operations.
9
Compliance With Environmental Laws
We are not aware of any environmental laws that have been enacted, nor are we
aware of any such laws being contemplated for the future, that impact issues
specific to our business. In our industry, environmental laws are anticipated
to apply directly to the owners and operators of companies. They do not apply
to companies or individuals providing consulting services, unless they have
been engaged to consult on environmental matters. We are not planning to
provide environmental consulting services.
Employees
---------
We have no full time employees at this time. All functions including
development, strategy, negotiations and clerical work is being provided by our
officer/director on a voluntary basis, without compensation. We have no
intention of hiring employees until the business has been successfully launched
and we have sufficient, reliable revenue from our operations.
10
Item 1A. Risk Factors.
Risk Factors Relating to Our Financial Condition
1. We may not be able to raise sufficient capital or generate adequate
revenue to meet our obligations and fund our operating expenses.
As of December 8, 2008, the Company had $5,419 in working cash and
equivalents. The Company business plan is to provide personal fitness
training using isometric techniques. These plans will require additional
capital. The Company needs to raise at least one hundred thousand dollars
($100,000) in order to implement its business plan. The Company currently
does not have enough funds to fully implement its business plan. Failure to
raise adequate capital and generate adequate sales revenues to meet our
obligations and develop and sustain our operations could result in reducing
or ceasing our operations.
Additionally, even if we do raise sufficient capital and generate revenues to
support our operating expenses, there can be no assurances that the revenue
will be sufficient to enable us to develop business to a level where it will
generate profits and cash flows from operations. These matters raise
substantial doubt about our ability to continue as a going concern. Our
independent auditors currently included an explanatory paragraph in their
report on our financial statements regarding concerns about our ability to
continue as a going concern.
2. We have yet to attain profitable operations and because we will need
additional financing to fund our activities, our accountants believe there is
substantial doubt about the company's ability to continue as a going concern.
The Company has prepared financial statements as of year-end August 31, 2008
reporting that the Company is in its developmental stages. Its ability to
continue to operate as a going concern is fully dependent upon the Company
obtaining sufficient financing to continue its development and operational
activities. The ability to achieve profitable operations is in direct
correlation to the Company's ability to raise sufficient financing.
Accordingly, management believes the Company's continued existence, future
expansion, and ultimate profitability is fully dependent upon raising
sufficient proceeds from this offering. It is important to note that even if
the appropriate financing is received, there is no guarantee that the Company
will ever be able to operate profitably or derive any significant revenues from
its operation. The Company could be required to raise additional financing to
fully implement its entire business plan.
It is also important to note that the Company anticipates that it will incur
losses and negative cash flow over the next six (6) to twelve (12) months.
There is no guarantee that the Company will ever operate profitably or even
receive positive cash flows from full operations.
11
Risk Factors Relating to Our Company
------------------------------------
3. We may not be able to compete with other fitness providers, almost all of
whom have greater resources and experience than we do.
The fitness industry is dominated by large, well-financed firms. We do not
have the resources to compete with larger providers of this service. With
the minimal resources we have available, we may experience great difficulties
in building a customer base. Competition by existing and future competitors
could result in our inability to secure any new customers. This competition
from other entities with greater resources and reputations may result in our
failure to maintain or expand our business as we may never be able to
successfully execute our business plan. Further, Tone in Twenty cannot be
assured that it will be able to compete successfully against present or
future competitors or that the competitive pressure it may face will not
force it to cease operations.
4. Because we are a development stage company, we have only generated $7,979
in revenues since our inception on August 4, 2006 and lack an operating
history, an investment in the shares offered herein is highly risky and could
result in a complete loss of your investment if we are unsuccessful in our
business plan.
Our company was incorporated on August 4, 2006; we have realized $7,979 in
revenues since our inception. We have no operating history upon which an
evaluation of our future prospects can be made. Based upon current plans, we
expect to incur operating losses in future periods as we incur significant
expenses associated with the initial startup of our business. Further, there
are no assurances that we will be successful in realizing sufficient revenues
or in achieving or sustaining positive cash flow at any time in the future.
Any such failure could result in the possible closure of our business or
force us to seek additional capital through loans or additional sales of our
equity securities to continue business operations, which would dilute the
value of any shares you purchase in this offering.
5. The success of our business depends on the viability and acceptance of
isometric training techniques.
The existence and growth of our service depends on the continued acceptance
of isometric fitness training in the marketplace. The fitness industry is
flooded with many fad ideas and schemes for diet and weight loss that produce
either inconsistent or ineffective results. Isometric training has been
recognized for the past 30 years and has been accepted universally as a form
of fitness training. The difference between isometric physical training
versus traditional physical training is that isometric training is an intense
form of training which requires less hours of work for the same results. It
pushes the muscles to their limits within a short period of time. For
example, "push ups" are a form of isometric training as compared to riding a
bicycle, where you pedal then rest as the bicycle coasts. Isometric training
could possibly lose its viability as fitness choice as a result of new
scientific research or increased competition with newer techniques. If for
some reason isometric training techniques are not accepted in the
marketplace, the demand for our services would be significantly reduced,
which would harm or cause our business to fail.
12
6. Evolving regulation of the fitness industry may adversely affect us.
As the fitness industry continues to evolve there may be increased regulation
by federal, state and/or foreign agencies. Any new regulations which
restrict our business could harm or cause our business to fail.
7. If our business plan is not successful, we may not be able to continue
operations as a going concern and our stockholders may lose their entire
investment in us.
As discussed in the Footnote 4 to Financial Statements included in this
registration statement, our auditors have given us a Going Concern comment.
This raises substantial doubt that we will be able to continue operations as
a going concern, and our independent auditors included an explanatory
paragraph regarding this uncertainty in their report on our financial
statements for the period August 6, 2006 (inception) to August 31, 2008.
Our ability to continue as a going concern is dependent upon our generating
cash flow sufficient to fund operations and reducing operating expenses. Our
business plans may not be successful in addressing these issues. If we cannot
continue as a going concern, our stockholders may lose their entire investment
in us.
8. We face strong and varied competition.
In the Las Vegas area, there are many larger companies who provide similar
services which Tone in Twenty plans to provide. The competition includes
larger companies, such as Las Vegas Athletic Clubs, 24 Hour Fitness, Bally's
Fitness, Gold's Gym, and other providers. These companies are better funded
and more established than Tone in Twenty.
9. We may not be able to find suitable employees.
The Company currently relies heavily upon the services and expertise of our
sole officer and director. In order to implement the aggressive business
plan of the Company, management recognizes that additional clerical staff
will be required. Our sole officer is the only employed personnel at the
outset of operations. Our sole officer can manage the office functions and
bookkeeping services until the Company can generate enough revenues to hire
additional staff.
No assurances can be given that the Company will be able to find suitable
employees that can support the above needs of the Company or that these
employees can be hired on terms favorable to the Company.
13
10. We may not ever pay cash dividends.
The Company has not paid any cash dividends on the Common Shares to date, and
there can be no guarantee that the Company will be able to pay cash dividends
on the Common Shares in the foreseeable future. Initial earnings that the
Company may realize, if any, will be retained to finance the growth of the
Company. Any future dividends, of which there can be no guarantee, will be
directly dependent upon earnings of the Company, its financial requirements
and other factors that are not determined. We intend to retain any future
earnings to finance the development and expansion of our business. We do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. Unless we pay dividends, our stockholders will not be able to receive
a return on their shares unless they sell them. There is no assurance that
stockholders will be able to sell shares when desired.
11. We are subject to government regulation.
The Company is subject to federal, state and local laws and regulations
affecting its business. Although the Company plans on obtaining all required
federal and state permits, licenses, and bonds to operate its facilities,
there can be no assurance that the Company's operation and profitability will
not be subject to more restrictive regulation or increased taxation by
federal, state, or local agencies.
12. We may be liable for the products and services we provide.
There is no guarantee that the level of insurance coverage secured by the
Company will be adequate to protect the Company from risks associated with
claims that exceed the level of coverage maintained. As a result of the
Company's limited operations to date, no threatened or actual liability
claims have been made upon the Company.
13. Because our sole officer works or consults for other companies, his other
activities could slow down our operations.
John Dean Harper, our sole director/officer, does not work for us exclusively
and he does not devote all of his time to our operations. Therefore, it is
possible that a conflict of interest with regard to his time may arise based
on his employment in other activities. His other activities will prevent him
from devoting full-time to our operations which could slow our operations and
may reduce our financial results because of the slow down in operations.
John Dean Harper, the President and Director of the company, currently devotes
approximately 5-10 hours per week to company matters. The responsibility of
developing the company's business, and fulfilling the reporting requirements
of a public company all fall upon Mr. Harper. We have not formulated a plan
to resolve any possible conflict of interest with his other business
activities. In the event he is unable to fulfill any aspect of his duties to
the company we may experience a shortfall or complete lack of sales resulting
in little or no profits and eventual closure of the business.
14
14. Our principal stockholders, and sole officer and director own a
controlling interest in our voting stock and investors will not have any
voice in our management, which could result in decisions adverse to our
general shareholders.
Our sole officer and principal stockholder beneficially owns approximately,
or has the right to vote approximately 84% of our outstanding common stock.
If our Preferred shares are converted to common shares, then our largest
shareholder will vote 97% of our outstanding common stock. As a result, this
stockholder, acting alone, will have the ability to control substantially all
matters submitted to our stockholders for approval including:
a) election of our board of directors;
b) removal of any of our directors;
c) amendment of our Articles of Incorporation or bylaws; and
d) adoption of measures that could delay or prevent a change in control or
impede a merger, takeover or other business combination involving us.
15. Increases in the base cost of our services could materially increase our
costs and decrease our profitability.
The fitness industry is characterized by significant facility costs and
investment in the expertise of licensed and trained personnel. These costs
can be influenced by seasonal fluctuations. Significant increases in these
costs could decrease our profitability.
16. The fitness industry is influenced by general economic conditions.
The fitness industry is highly competitive and reactive to the overall level
of consumer spending. Consumer spending is dependent on a number of factors,
including actual and perceived economic conditions affecting disposable
consumer income (such as unemployment, wages and salaries), business
conditions, interest rates, availability of credit and tax rates in the
general economy and in the international, regional and local markets where
our products are sold. As a result, any deterioration in general economic
conditions, reductions in the level of consumer spending or increases in
interest rates could adversely affect the future sales of our products and
services.
A return to recessionary or inflationary conditions, whether in the United
States or globally, additional terrorist attacks or similar events could have
further adverse effects on consumer confidence and spending and, as a result,
could have a material adverse effect on our financial condition and results
of operations.
15
Other Risks Factors
17. We may, in the future, issue additional common shares, which would reduce
investors' percent of ownership and may dilute our share value.
Our Articles of Incorporation authorize the issuance of 195,000,000 shares of
common stock and 5,000,000 preferred shares. The future issuance of common
stock may result in substantial dilution in the percentage of our common
stock held by our then existing shareholders. We may value any common stock
issued in the future on an arbitrary basis. The issuance of common stock for
future services or acquisitions or other corporate actions may have the
effect of diluting the value of the shares held by our investors, and might
have an adverse effect on any trading market for our common stock.
18. Our common shares are subject to the "Penny Stock" Rules of the SEC and
the trading market in our securities is limited, which makes transactions in
our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to
us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to
certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules
require:
(a) that a broker or dealer approve a person's account for transactions
in penny stocks; and
(b) the broker or dealer receive from the investor a written agreement
to the transaction, setting forth the identity and quantity of the
penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must: (a) obtain financial information and investment
experience objectives of the person; and (b) make a reasonable determination
that the transactions in penny stocks are suitable for that person and the
person has sufficient knowledge and experience in financial matters to be
capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the
penny stock market, which, in highlight form: (a) sets forth the basis on
which the broker or dealer made the suitability determination; and (b) that
the broker or dealer received a signed, written agreement from the investor
prior to the transaction. Generally, brokers may be less willing to execute
transactions in securities subject to the "penny stock" rules. This may make
it more difficult for investors to dispose of our Common shares and cause a
decline in the market value of our stock.
16
Disclosure also has to be made about the risks of investing in penny stocks
in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny
stocks.
19. Liability of directors for breach of duty of care is limited.
According to Nevada law [NRS 78.138(7)], all Nevada corporations limit the
liability of directors and officers, including acts not in good faith. Our
stockholders' ability to recover damages for fiduciary breaches may be
reduced by this statute. In addition, we are obligated to indemnify our
directors and officers regarding stockholder suits which they successfully
defend (NRS 78.7502).
20. We will incur ongoing costs and expenses for SEC reporting and
compliance, without revenue we may not be able to remain in compliance with
the SEC, making it difficult for investors to sell their shares, if at all.
Our stock has been cleared for trading on the OTC-Bulletin Board. To be
eligible for quotation on the OTCBB, we must remain current in their filings
with the SEC. In order for us to remain in compliance we will require future
revenues or future funding to cover the cost of these filings, which could
comprise a substantial portion of our available cash resources.
21. We may issue additional shares of preferred stock in the future that may
adversely impact your rights as holders of our common stock.
Our articles of incorporation authorize us to issue up to 5,000,000 shares of
"blank check" preferred stock. To date, the Company has issued 500,000
shares of preferred stock. Our board of directors will have the authority to
fix and determine the relative rights and preferences of preferred shares, as
well as the authority to issue additional shares, without further stockholder
approval. As a result, our board of directors could authorize the issuance
of a series of preferred stock that would grant to holders preferred rights
to our assets upon liquidation, the right to receive dividends before
dividends are declared to holders of our common stock, and the right to the
redemption of such preferred shares, together with a premium, prior to the
redemption of the common stock. To the extent that we do issue such
additional shares of preferred stock, your rights as holders of common stock
could be impaired thereby, including, without limitation, dilution of your
ownership interests in us. In addition, shares of preferred stock could be
issued with terms calculated to delay or prevent a change in control or make
removal of management more difficult, which may not be in your interest as
holders of common stock.
17
22. Although our stock is listed on the OTC-BB, a trading market has not
developed, purchasers of our securities may have difficulty selling their
shares.
There is currently no active trading market in our securities and there are no
assurances that a market may develop or, if developed, may not be sustained.
If no market is ever developed for our common stock, it will be difficult for
you to sell any shares in our Company. In such a case, you may find that you
are unable to achieve any benefit from your investment or liquidate your shares
without considerable delay, if at all.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our corporate headquarters are located at 4301 S. Valley View Blvd., Suite 20,
Las Vegas, Nevada 89103. There is no charge to us for the space. Our officer
will not seek reimbursement for past office expenses. We believe our current
office space is adequate for our immediate needs; however, as our operations
expand, we may need to locate and secure additional office space.
Item 3. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business.
A complaint has been filed with the Office of the Labor Commissioner,
Department of Business and Industry, State of Nevada, against the Company by a
former officer. The claim alleges unpaid wages and commissions owed to the
former officer in the amount of $7,357, which were allegedly earned during the
period from April 1, 2007 to July 30, 2007. The complaint was filed on
September 11, 2008, and there has been no further progress in the matter to
date. Management intends to contest the case vigorously, and expects a
favorable outcome. The range of potential loss in the event of an unfavorable
outcome would be approximately $7,357, which is the amount claimed.
Item 4. Submission of Matters to a Vote of Security Holders.
We did not submit any matters to a vote of our security holders during the
past fiscal year.
18
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
(a) Market Information
Tone in Twenty Common Stock, $0.001 par value, is traded on the OTC-Bulletin
Board under the symbol: TTWY. The stock was cleared for trading on
the OTC-Bulletin Board on November 24, 2008.
Since the Company has been cleared for trading, through December 8, 2008,
there have been no trades of the Company's stock. There are no assurances that
a market will ever develop for the Company's stock.
(b) Holders of Common Stock
As of December 8, 2008, there were approximately thirty-two (32) holders of
record of our Common Stock and 2,625,000 shares issued and outstanding.
(c) Dividends
In the future we intend to follow a policy of retaining earnings, if any, to
finance the growth of the business and do not anticipate paying any cash
dividends in the foreseeable future. The declaration and payment of future
dividends on the Common Stock will be the sole discretion of board of directors
and will depend on our profitability and financial condition, capital
requirements, statutory and contractual restrictions, future prospects and
other factors deemed relevant.
(d) Securities Authorized for Issuance under Equity Compensation Plans
There are no outstanding grants or rights or any equity compensation plan
in place.
Recent Sales of Unregistered Securities
On August 4, 2006 (inception), we issued 2,200,000 par value $0.001 common
shares of stock to the Company's founder for $2,200 cash.
In February, 2007, we issued 500,000 shares of our $0.001 par value non-
voting Callable and Convertible Preferred stock for $10,000 cash paid for by
one entity. All securities were issued in reliance upon an exemption from
registration under Section 4(2) of the Securities Act as a transaction not
involving a public offering. The Preferred Stock converts to two hundred
shares of common stock for each share of Preferred Stock.
19
In March, 2007, we conducted a private placement without any general
solicitation or advertisement. The Company issued 425,000 shares of its
$0.001 par value common stock to non-affiliated investors for cash of $4,250
pursuant to a Regulation D, Rule 505 of the Securities Exchange Act of 1934
offering to thirty shareholders. All securities were issued in reliance upon
an exemption from registration under Section 4(2) of the Securities Act as a
transaction not involving a public offering.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the years ended
August 31, 2008 or 2007.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview of Current Operations
------------------------------
Tone in Twenty is a Nevada Corporation with a principal business strategy to
provide personal fitness training using isometric techniques. The Company is
not operational.
The Company's business plan is to establish a model facility in order to
train personal trainers on personal fitness training using isometric
techniques. Once these trainers have been fully educated and demonstrate
competencies in these techniques, the Company will seek additional locations to
host isometric fitness training. The Company's goal is to open four locations
throughout the Las Vegas valley in order to have economies of scale in its
marketing.
Results of Operations for the year ended August 31, 2008
--------------------------------------------------------
Since our inception on August 4, 2006 through August 31, 2008, we generated
$7,979 in revenues derived from an evaluation program. We generated no
revenues for the fiscal year ending August 31, 2008. We do not anticipate
earning any significant revenues until such time as we can establish fitness
centers.
20
For the fiscal year ending August 31, 2008, we experienced a net loss of
$(24,427) as compared to a net loss of $(995,890) for the same period last
year. The net loss for the year ending August 31, 2008 was contributed to
general and administrative expense of $20,261 and advertising expenses of
$4,166. The net loss for the year ending August 31, 2007 of $(995,890) was
based on the accounting of the beneficial conversion feature of our preferred
stock to common stock. Most of the actual general and administrative expenses,
since our inception, represented legal and audit fees. Our cash at hand as of
August 31, 2008 was $5,419. In our August 31, 2008 year-end financials, our
auditor issued an opinion that our financial condition raises substantial doubt
about the Company's ability to continue as a going concern.
Revenues
--------
Since our inception on August 4, 2006 through August 31, 2008, we generated
$7,979 in revenues derived from an evaluation program. We generated no
revenues for the fiscal year ending August 31, 2008. We do not anticipate
earning any significant revenues until such time as we can establish fitness
centers. We are presently in the development stage of our business and we can
provide no assurance that we will be successful in opening any fitness centers.
Going Concern
-------------
The financial conditions evidenced by the accompanying financial statements
raise substantial doubt as to our ability to continue as a going concern. Our
plans include obtaining additional capital through debt or equity financing.
The financial statements do not include any adjustments that might be necessary
if we are unable to continue as a going concern.
Summary of any product research and development that we will perform for the
term of our plan of operation.
----------------------------------------------------------------------------
We do not anticipate performing any product research and development under our
current plan of operation.
21
Expected purchase or sale of plant and significant equipment
------------------------------------------------------------
We do not anticipate the purchase or sale of any plant or significant
equipment; as such items are not required by us at this time.
Significant changes in the number of employees
----------------------------------------------
As of August 31, 2008, we did not have any employees. We are dependent upon
our sole officer and a director for our future business development. As our
operations expand we anticipate the need to hire additional employees,
consultants and professionals; however, the exact number is not quantifiable at
this time.
Liquidity and Capital Resources
-------------------------------
Our balance sheet as of August 31, 2008 reflects assets of $5,419 and $4,000 in
current liabilities. Cash and cash equivalents from inception to date have
been sufficient to provide the operating capital necessary to operate to date.
Notwithstanding, we anticipate generating losses and therefore we may be unable
to continue operations in the future. We anticipate we will require additional
capital up to approximately $100,000 and we would have to issue debt or equity
or enter into a strategic arrangement with a third party. We intend to try and
raise capital through a private offering after this registration statement is
declared effective and our shares are quoted on the Over the Counter Bulletin
Board. There can be no assurance that additional capital will be available to
us and there can be no assurance that our shares will be quoted on the Over the
Counter Bulletin Board. We currently have no agreements, arrangements or
understandings with any person to obtain funds through bank loans, lines of
credit or any other sources.
Future Financings
-----------------
We anticipate the sale of our common shares in order to continue to fund our
business operations. Issuances of additional shares will result in dilution to
our existing shareholders. There is no assurance that we will achieve any of
additional sales of our equity securities or arrange for debt or other
financing to fund our exploration and development activities.
Our sole officer/director has agreed to donate funds to the operations of the
Company, in order to keep it fully reporting for the next twelve (12) months,
without seeking reimbursement for funds donated.
22
As a result of the Company's current limited available cash, no officer or
director received cash compensation during the year ended August 31, 2008. The
Company has no employment agreements in place with its officers.
Off-Balance Sheet Arrangements
------------------------------
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results or operations, liquidity,
capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
------------------------------------------
Revenue Recognition: The Company recognizes revenue on an accrual basis as it
invoices for services. Revenue is generally realized or realizable and earned
when all of the following criteria are met: 1) persuasive evidence of an
arrangement exists between the Company and our customer(s); 2) services have
been rendered; 3) our price to our customer is fixed or determinable; and 4)
collectibility is reasonably assured.
New Accounting Standards
------------------------
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair Value Measurements, ("SFAS 157"). SFAS 157 provides a framework
for measuring fair value when such measurements are used for accounting
purposes. The framework focuses on an exit price in the principal (or,
alternatively, the most advantageous) market accessible in an orderly
transaction between willing market participants. SFAS 157 establishes a three-
tiered fair value hierarchy with Level 1 representing quoted prices for
identical assets or liabilities in an active market and Level 3 representing
estimated values based on unobservable inputs. Under SFAS 157, related
disclosures are segregated for assets and liabilities measured at fair value
based on the level used within the hierarchy to determine their fair values. We
anticipate adopting SFAS 157 on its effective date of January 1, 2008 and the
financial impact, if any, upon adoption has not yet been determined.
In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159, The Fair Value Option for Financial Assets and Financial Liabilities,
including an amendment of FASB Statement No. 115, ("SFAS 159"). SFAS 159
permits fair value accounting to be irrevocably elected for certain financial
assets and liabilities on an individual contract basis at the time of
acquisition or at a remeasurement event date. Upon adoption of SFAS 159, fair
value accounting may also be elected for existing financial assets and
liabilities. For those instruments for which fair value accounting is elected,
changes in fair value will be recognized in earnings and fees and costs
associated with origination or acquisition will be recognized as incurred
rather than deferred. SFAS 159 is effective January 1, 2008, with early
adoption permitted as of January 1, 2007. We anticipate adopting SFAS 159
concurrent with the adoption of SFAS 157 on January 1, 2008, but have not yet
determined the financial impact, if any, upon adoption.
23
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Financial Statement
-------------------
PAGE
----
Independent Auditors' Report F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financials F-6
24
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
------------------------
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Board of Directors
Tone in Twenty
(A Development Stage Company)
We have audited the accompanying balance sheets of Tone in Twenty (A
Development Stage Company) as of August 31, 2008 and August 31, 2007 (re-
stated), and the related statements of operations, stockholders' equity and
cash flows for the years then ended and for the period from inception on June
12, 2006 to August 31, 2008. 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 audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. 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 Tone in Twenty (A Development
Stage Company) as of August 31, 2008 and August 31, 2007 (re-stated), and the
related statements of operations, stockholders' equity and cash flows for the
years then ended and for the period from inception on June 12, 2006 to August
31, 2008, 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 7 to the
financial statements, the Company has sustained losses in all previous
reporting periods with an inception to date loss of $59,152, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 7. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Moore & Associates, Chartered
---------------------------------
Moore & Associates Chartered
Las Vegas, Nevada
December 9, 2008
6490 West Desert Inn Rd, Las Vegas, NV 89146
(702) 253-7499 Fax (702) 253-7501
F-1
Tone in Twenty
(a development stage company)
Balance Sheets
Restated
August 31, August 31,
2008 2007
---------- ----------
Assets
Current Assets:
Cash $ 2,860 $ 9,239
Funds held in escrow 2,559 4,250
--------- --------
Total Current Assets 5,419 13,489
Fixed Assets 0 5,000
--------- --------
TOTAL ASSETS $ 5,419 $18,489
========= ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 4,000 $ -
Accrued liability 2,357 -
--------- --------
Total liabilities 6,357 -
--------- --------
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000
shares authorized, 500,000 shares
issued and outstanding as of 8/31/08 and
8/31/07, respectively 500 500
Common stock, $0.001 par value, 195,000,000
shares authorized, 2,625,000 shares
issued and outstanding as of 8/31/08 and
8/31/07, respectively 2,625 2,625
Additional Paid-in Capital 1,018,254 1,018,254
(Deficit) accumulated during
development stage (1,022,317) (1,002,890)
----------- ---------
Total stockholders' equity (938) 18,489
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,419 $ 18,489
========= =========
The accompanying notes are an integral part of these statements.
F-2
Tone in Twenty
Statements of Operations
(a development stage company)
For the period
For the year from
For the year ending August 4, 2006
ending August 31, (Inception) to
August 31, 2007 August 31,
2008 (Restated) 2008
------------ ------------ --------------
Revenue $ - $ 7,979 $ 7,979
------------ ------------ --------------
Operating Expenses:
General and administrative
expenses 20,261 1,002,245 1,023,506
Incorporating Fees - - 1,000
Advertising 4,166 1,624 5,790
------------ ------------ --------------
Total operating expenses 24,427 1,003,869 1,030,296
------------ ------------ --------------
Net (loss) from operations $ (24,427) $ (995,890) $ (1,022,317)
------------ ------------ --------------
Provision for income taxes - - -
------------ ------------ --------------
Net (loss) $ (24,427) $ (995,890) $ (1,022,317)
============ ============ ==============
Basic Weighted Average
Number of Common Shares
Outstanding 2,625,000 2,625,000
============== ============
Net (loss) per share - basic and
fully diluted $ (0.00) $ (0.38)
============ ============
The accompanying notes are an integral part of these statements
F-3
Tone in Twenty
Statements of Stockholders' Equity
(a development stage company)
Restated
(Deficit)
Preferred Restated Accumulated Restated
Common Stock Stock Additional During Total
------------------ ----------------- Paid-in Development Stockholders
Shares Amount Shares Amount Capital Stage Equity
---------- ------- --------- ------- --------- ------------ ------------
August
2006,
Founders
initial
investment,
for
cash at
$0.001
per
share 2,200,000 $ 2,200 $ - $ - $ - $ 2,200
Net (loss)
year ended
8/31/06 (2,000) (2,000)
---------- ------- --------- ------- --------- ------------ ------------
Balance,
8/31/06 2,200,000 $ 2,200 - $ - $ - $ (2,000) $ 200
February
2007,
Preferred
shares
issued for
cash at
$0.02 per
share 500,000 500 9,500 10,000
Beneficial conversion
feature on preferred
stock 994,929 994,929
March
2007,
Shares
issued
pursuant
to 505
offering
at $0.01
per
share 425,000 425 3,825 4,250
Adjustment
for fixed
asset 5,000 5,000
Net (loss)
year
ended
8/31/07 (995,890) (995,890)
---------- ------- --------- ------- --------- ------------ ------------
Balance,
8/31/07 2,625,000 2,625 500,000 500 1,018,254 (997,890) 23,489
Net (loss)
year
ended
8/31/08 (24,427) (24,427)
---------- ------- --------- ------- --------- ------------ ------------
Balance,
8/31/08 2,625,000 2,625 500,000 500 1,018,254 (1,022,317) (938)
========== ======= ========= ======= ========= ============ ============
The accompanying notes are an integral part of these statements
F-4
Tone in Twenty
Statements of Cash Flows
(a development stage company)
For the period
For the year from
For the year ending August 4, 2006
ending August 31, (Inception) to
August 31, 2007 August 31,
2008 (Restated) 2008
------------ ------------ --------------
Operating activities:
Net (loss) $ (24,427) $ (995,890) $ (1,022,317)
Adjustments to reconcile net
loss to net cash provided
(used) by operating activities:
Changes in operating assets
and liabilities 9,000 - 9,000
Increase in accrued liability 2,357 - 2,357
Beneficial Conversion of
preferred stock - 994,929 994,929
------------ ------------ --------------
Net cash used in
operating activities (13,070) (961) (16,031)
------------ ------------ --------------
Investing activities:
Disposition of fixed assets 5,000 - 5,000
------------ ------------ --------------
Net cash provided by
investing activities 5,000 - 5,000
------------ ------------ --------------
Financing activities:
Issuances of common stock - 4,250 6,450
Issuances of preferred stock - 10,000 10,000
------------ ------------ --------------
Net cash provided by financing
activities - 14,250 16,450
------------ ------------ --------------
Net increase (decrease) in cash (8,070) 13,289 5,419
Cash and equivalents - beginning 13,489 200 -
------------ ------------ --------------
Cash and equivalents - ending $ 5,419 $ 13,489 5,419
============ ============ ==============
Supplemental disclosures:
Interest paid $ - $ - $ -
============ ============ ==============
Income taxes paid $ - $ - $ -
============ ============ ==============
Non-cash transactions $ - $ - $ -
============ ============ ==============
The accompanying notes are an integral part of these statements
F-5
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Tone in Twenty (the Company) was incorporated under the laws of the state of
Nevada on August 4, 2006. The Company was organized to conduct any lawful
business. The Company plans to offer personalized physical fitness training
through its iso-toning program.
The Company has been in the development stage since inception and has had
limited operations to date.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The Company has $5,419 in cash assets and liabilities of $11,357 as of
August 31, 2008. The relevant accounting policies are listed below.
Basis of Accounting
-------------------
The basis is United States generally accepted accounting principles.
Earnings per Share
------------------
The basic earnings (loss) per share is calculated by dividing the Company's
net income (loss) available to common shareholders by the weighted average
number of common shares during the year. The diluted earnings (loss) per share
is calculated by dividing the Company's net income (loss) available to common
shareholders by the diluted weighted average number of shares outstanding
during the year. The diluted weighted average number of shares outstanding is
the basic weighted number of shares adjusted as of the first of the year for
any potentially dilutive debt or equity.
The Company has not issued any options or warrants or similar securities since
inception.
Dividends
---------
The Company has not yet adopted any policy regarding payment of dividends. No
Dividends have been paid during the period shown.
Income Taxes
------------
The provision for income taxes is the total of the current taxes payable and
the net of the change in the deferred income taxes. Provision is made for the
deferred income taxes where differences exist between the period in which
transactions affect current taxable income and the period in which they enter
into the determination of net income in the financial statements.
F-6
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES-CONTINUED
Year end
--------
The Company's year-end is August 31.
Advertising
-----------
Advertising is expensed when incurred. During the fiscal year ended
August 31, 2008, the company incurred advertising costs of $4,166, as
compared to advertising costs of $1,624 during the fiscal year ended
August 31, 2007.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 3 - FIXED ASSETS
The Company restated the financials to report fixed assets representing $5,000
in isometric exercise equipment purchased in February, 2007. The fixed assets
as of August 31, 2008 were adjusted to recognize a contingent liability due to
pending litigation with a former officer. As of August 31, 2008, the isometric
exercise equipment, or fixed assets, were not in the Company's possession, they
are in possession of the same former officer and there is a strong possibility
that title of the equipment will be transferred to the former officer at cost
to settle the dispute. (See Footnote 13 entitled "Legal Proceedings.")
F-7
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 4. GOING CONCERN
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. As at August 31, 2008, the
Company has recognized revenues of $7,979 to date and has accumulated
operating losses of approximately $(1,022,317) since inception. The Company's
ability to continue as a going concern is contingent upon the successful
completion of additional financing arrangements and its ability to achieve
and maintain profitable operations. Management plans to raise equity capital
to finance the operating and capital requirements of the Company. Amounts
raised will be used to further development of the Company's products, to
provide financing for marketing and promotion, to secure additional property
and equipment, and for other working capital purposes. While the Company is
expending its best efforts to achieve the above plans, there is no assurance
that any such activity will generate funds that will be available for
operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
NOTE 5. STOCKHOLDERS'EQUITY
The Company is authorized to issue 195,000,000 shares of its $0.001 par value
common stock and 5,000,000 shares of its $0.001 par value preferred stock.
Common Stock
------------
On August 4, 2006 (inception), the Company issued 2,200,000 shares of its
$0.001 par value common stock to its founder for $2,200.
On March 31, 2007 the Company issued 425,000 shares of its $0.001 par value
common stock to approximately 30 shareholders for $4,250 pursuant to a
Regulation 505 offering.
F-8
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
Preferred Stock
---------------
In February, 2007, the Company issued 500,000 shares of its $0.001 par value
preferred stock to one non-affiliated shareholder for $10,000.
On June 1, 2007, the Company filed a Series A Designation with the
Nevada Secretary of State that states: "Series A Preferred shares shall
be designated as "Callable and Convertible Preferred Stock". The corporation
has the right to call for and purchase these shares at any time, within
twelve months of issue, either at par value or at a slight premium above par
value, or if corporation should designate that these shares are deemed not
callable, the holders of these non-voting Series A Preferred Shares shall
have the right to cause the corporation to redeem shares for Common Stock
at any time. Each holder of the non-voting Series A Callable and
Convertible Preferred Stock shall have the right to convert all or any
portion of such shares as such holder desires to convert, into shares of
the Common Stock of the corporation, as follows: each share of Series A
Convertible Preferred Stock can be exchanged for two hundred (200) shares
of Common Stock of the corporation." The convertible feature of the
preferred stock was calculated on the difference between the original
offering price $0.02 per share in the Company's Registration Statement, and
price in which the preferred stock was purchased, $0.001. Such feature is
normally characterized as a "Beneficial Conversion Feature" ("BCF"). Pursuant
to EITF Issue No. 98-5,"Accounting for Convertible Securities With Beneficial
Conversion Features or Contingently Adjustable Conversion Ratio" and EITF No.
00-27, "Application of EITF Issue No. 98-5 to Certain Convertible
Instruments," the estimated fair value of the BCF is recorded in the
consolidated financial statements.
There were no other issuances of common or preferred stock or equivalents
since August 4, 2006 (inception) through August 31, 2008. The Company has
not issued any options or warrants or similar securities since inception.
NOTE 6. RELATED PARTY TRANSACTIONS
The officer and director of the Company is involved in other business
activities. This person may face a conflict in selecting between the Company
and their other business interests. The Company has not formulated a policy
for the resolution of such conflicts.
F-9
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 7. REVENUE AND EXPENSES
Revenue recognition
-------------------
The Company recognizes revenue on an accrual basis as it invoices for
services." Revenue is generally realized or realizable and earned when all
of the following criteria are met: 1) persuasive evidence of an arrangement
exists between the Company and our customer(s); 2) services have been
rendered; 3) our price to our customer is fixed or determinable; and 4)
collectibility is reasonably assured. For the period from August 4, 2006
(inception) to August 31, 2008, the Company has recognized revenues of
$7,979.
NOTE 8. ACCRUED LIABILITY
The Company expects to be engaged in a legal proceeding in the near future.
In the event a settlement is not reached, the Company may be liable for $7,357.
The Company estimated and accrued liability of $2,357 and adjusted its fixed
assets by $5,000, since the fixed assets are in the possession of a former
officer and there is a strong possibility that title to this equipment will be
transferred to the former officer at cost to settle this dispute. It is often
not possible to estimate a potential liability under these circumstances
because of the conditional nature of the obligations and the unique facts and
circumstances involved. If economic conditions, or other facts and
circumstances were to change, this could cause an increase or decrease in the
Company's potential liability. (See Footnote 13 entitled "Legal Proceedings.")
NOTE 9. PROVISION FOR INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which
requires use of the liability method. SFAS No. 109 provides that deferred
tax assets and liabilities are recorded based on the differences between the
tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences. Deferred tax assets
and liabilities at the end of each period are determined using the currently
enacted tax rates applied to taxable income in the periods in which the
deferred tax assets and liabilities are expected to be settled or realized.
F-10
Note 9 - PROVISION FOR INCOME TAXES - CONTINUED
Due to the Company's net loss, there was no provision for income taxes.
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes. The sources and tax effects of the differences are as follows:
U.S federal statutory rate (34.0%)
Valuation reserve 34.0%
-------
Total -%
As of August 31, 2008, the Company has a net operating loss carryforward of
approximately $1,022,317 for tax purposes, which will be available to offset
future taxable income. If not used, this carryforward will expire in 2026.
The deferred tax asset relating to the operating loss carryforward has been
fully reserved. The Company's utilization of this carry forward against
future taxable income may become subject to an annual limitation due to a
cumulative change in ownership of the Company of more than 50 percent.
The components of the Company's Tax provision were as follows:
August 31, August 31,
2008 2007
------------ -------------
Current income tax (benefit) expense $(1,022,317) $ (1,002,890)
Deferred income tax expense (benefit) 1,022,317 1,002,890
------------ -------------
$ - $ -
=========== =============
The Company recognized no income tax benefit for the loss generated for the
periods through August 31, 2008.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize the benefit of its deferred tax
asset will depend on the generation of future taxable income. Because the
Company has yet to recognize significant revenue from the sale of its products,
it believes that the full valuation allowance should be provided.
NOTE 10. OPERATING LEASES AND OTHER COMMITMENTS:
The Company also has no lease obligations or employment agreements.
F-11
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 11. EARNINGS PER SHARE
Historical net (loss) per common share is computed using the weighted average
number of common shares outstanding. Diluted earnings per share include
additional dilution from common stock equivalents, such as stock issuable
pursuant to the exercise of securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that shared in the earnings of the entity, but these
potential common stock equivalents (100,000,000 common shares) were
determined to be antidilutive.
Calculation of net income(loss) per share is as follows:
August 31, 2008 August 31, 2007
--------------- ---------------
Net loss (numerator) $ (24,427) $ (995,890)
=============== ===============
Weighted Average Common Shares Outstanding 2,625,000 2,625,000
=============== ===============
Basic Loss per Share $ (0.00) $ (0.38)
=============== ===============
F-12
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 12. RECENTLY ACCOUNTING PRONOUNCEMENTS
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 163, "Accounting for Financial Guarantee Insurance Contracts-and
interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how
Statement 60 applies to financial guarantee insurance contracts, including
the recognition and measurement of premium revenue and claims liabilities.
This statement also requires expanded disclosures about financial guarantee
insurance contracts. SFAS No. 163 is effective for fiscal years beginning on
or after December 15, 2008, and interim periods within those years. SFAS No.
163 has no effect on the Company's financial position, statements of
operations, or cash flows at this time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS
No. 162 sets forth the level of authority to a given accounting pronouncement
or document by category. Where there might be conflicting guidance between
two categories, the more authoritative category will prevail. SFAS No. 162
will become effective 60 days after the SEC approves the PCAOB's amendments
to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no
effect on the Company's financial position, statements of operations, or cash
flows at this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities-an
amendment of FASB Statement No. 133. This standard requires companies to
provide enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. This Statement is
effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application encouraged.
The Company has not yet adopted the provisions of SFAS No. 161, but does not
expect it to have a material impact on its consolidated financial position,
results of operations or cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In
particular, the staff indicated in SAB 107 that it will accept a company's
F-13
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED
election to use the simplified method, regardless of whether the company has
sufficient information to make more refined estimates of expected term. At
the time SAB 107 was issued, the staff believed that more detailed external
information about employee exercise behavior (e.g., employee exercise
patterns by industry and/or other categories of companies) would, over time,
become readily available to companies. Therefore, the staff stated in SAB 107
that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such
detailed information about employee exercise behavior may not be widely
available by December 31, 2007. Accordingly, the staff will continue to
accept, under certain circumstances, the use of the simplified method beyond
December 31, 2007. The Company currently uses the simplified method for
"plain vanilla" share options and warrants, and will assess the impact of SAB
110 for fiscal year 2009. It is not believed that this will have an impact on
the Company's consolidated financial position, results of operations or cash
flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. Before this statement was
issued, limited guidance existed for reporting noncontrolling interests. As a
result, considerable diversity in practice existed. So-called minority
interests were reported in the consolidated statement of financial position
as liabilities or in the mezzanine section between liabilities and equity.
This statement improves comparability by eliminating that diversity. This
statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1,
2009, for entities with calendar year-ends). Earlier adoption is prohibited.
The effective date of this statement is the same as that of the related
Statement 141 (revised 2007). The Company will adopt this Statement beginning
March 1, 2009. It is not believed that this will have an impact on the
Company's consolidated financial position, results of operations or cash
flows.
F-14
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations.'This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141.
This Statement establishes principles and requirements for how the acquirer:
(a) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in
the acquiree; (b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and (c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. This
statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The effective date of this statement is the same as that of
the related FASB Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements. The Company will adopt this statement beginning March
1, 2009. It is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities-Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial
instruments and certain other items at fair value. This option is available
to all entities. Most of the provisions in FAS 159 are elective; however, an
amendment to FAS 115 Accounting for Certain Investments in Debt and Equity
Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not
report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of the previous fiscal year
provided that the entity makes that choice in the first 120 days of that
fiscal year and also elects to apply the provisions of SFAS No. 157 Fair
Value Measurements. The Company will adopt SFAS No. 159 beginning March 1,
2008 and is currently evaluating the potential impact the adoption of this
pronouncement will have on its consolidated financial statements.
F-15
Tone in Twenty
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2008
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
This statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that
fair value is the relevant measurement attribute. Accordingly, this statement
does not require any new fair value measurements. However, for some entities,
the application of this statement will change current practice. This
statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. Earlier application is encouraged, provided that the reporting entity
has not yet issued financial statements for that fiscal year, including
financial statements for an interim period within that fiscal year. The
Company will adopt this statement March 1, 2008, and it is not believed that
this will have an impact on the Company's consolidated financial position,
results of operations or cash flows.
NOTE 13. LEGAL PROCEEDINGS
A complaint has been filed with the Office of the Labor Commissioner,
Department of Business and Industry, State of Nevada, against the Company by a
former officer. The claim alleges unpaid wages and commissions owed to the
former officer in the amount of $7,357, which were allegedly earned during the
period from April 1, 2007 to July 30, 2007. The complaint was filed on
September 11, 2008, and there has been no further progress in the matter to
date. Management intends to contest the case vigorously, and expects a
favorable outcome. The range of potential loss in the event of an unfavorable
outcome would be approximately $7,357, which is the amount claimed.
NOTE 14. RESTATEMENT
We concluded that we should restate our audited financial statements for the
year ended August 31, 2007 to correct errors in our Balance Sheet, Statement
of Operations, Statement of Stockholders' Equity and Cash Flow Statements to
accurately reflect our $5,000 fixed asset which was purchased during the
fiscal year August 31, 2007. These corrections are now reflected in our
restated financial statements. (See Financial Footnote 3.)
F-16
Item 9. Changes in and Disagreements With Accountants On Accounting and
Financial Disclosure.
None.
Item 9A(T). Controls and Procedures.
Evaluation of disclosure controls and procedures
------------------------------------------------
Management is responsible for establishing and maintaining adequate internal
control over financial reporting and for the assessment of the effectiveness of
those internal controls. As defined by the SEC, internal control over
financial reporting is a process designed by our principal executive
officer/principal financial officer, who is also the sole member of our Board
of Directors, to provide reasonable assurance regarding the reliability of
financial reporting and the reparation of the financial statements in
accordance with U. S. generally accepted accounting principles.
As of the end of the period covered by this report, we initially carried out
an evaluation, under the supervision and with the participation of our
President (who is also our principal financial and accounting officer), of
the effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our President and chief financial
officer initially concluded that our disclosure controls and procedures were
not effective.
Management's Report On Internal Control Over Financial Reporting
----------------------------------------------------------------
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the
Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the company's principal executive and principal financial
officers and effected by the company's board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
company;
25
- Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America and that
receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. 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. All internal
control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation. Because of the inherent limitations of internal control, there
is a risk that material misstatements may not be prevented or detected on a
timely basis by internal control over financial reporting. However, these
inherent limitations are known features of the financial reporting process.
Therefore, it is possible to design into the process safeguards to reduce,
though not eliminate, this risk.
As of August 31, 2008 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and SEC guidance on conducting such assessments. Based on
that evaluation, they concluded that, during the period covered by this
report, such internal controls and procedures were not effective to detect the
inappropriate application of US GAAP rules as more fully described below.
This was due to deficiencies that existed in the design or operation of our
internal controls over financial reporting that adversely affected our internal
controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were: (1) lack of a functioning audit committee due
to a lack of a majority of independent members and a lack of a majority of
outside directors on our board of directors, resulting in ineffective
oversight in the establishment and monitoring of required internal controls
and procedures; (2) inadequate segregation of duties consistent with control
objectives; and (3) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were
identified by our President in connection with the review of our financial
statements as of August 31, 2008.
26
Management believes that the material weaknesses set forth in items (2) and
(3) above did not have an effect on our financial results. However,
management believes that the lack of a functioning audit committee and the
lack of a majority of outside directors on our board of directors results in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures, which could result in a material misstatement in our
financial statements in future periods.
This annual report does not include an attestation report of the Corporation's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
Corporation's registered public accounting firm pursuant to temporary rules of
the SEC that permit the Corporation to provide only the management's report in
this annual report.
Management's Remediation Initiatives
------------------------------------
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to us. And,
we plan to appoint one or more outside directors to our board of directors who
shall be appointed to an audit committee resulting in a fully functioning
audit committee who will undertake the oversight in the establishment and
monitoring of required internal controls and procedures such as reviewing and
approving estimates and assumptions made by management when funds are
available to us.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by August 31, 2009. Additionally, we plan to test our updated
controls and remediate our deficiencies by August 31, 2009.
Changes in internal controls over financial reporting
-----------------------------------------------------
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
Item 9B. Other Information.
None.
27
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth certain information regarding our current
directors and executive officers. Our executive officers serve one-year terms.
Name Age Positions and Offices Held
------------------ --- --------------------------
John Dean Harper 46 President and Director
The business address for our officers/directors is: c/o Tone in Twenty,
4301 S. Valley View Ave., Suite 20, Las Vegas, NV 89103, and our telephone
number at this address is (702) 604-7038.
Set forth below is a brief description of the background and business
experience of our sole officer and director.
John Dean Harper, Director, President and Secretary
---------------------------------------------------
Mr. Harper is a graduate of Ohio University in Athens, Ohio with Bachelors of
Business Administration degree and a double major in Business Pre-Law and
General Business. He is also a graduate of the University of Cincinnati,
College of Law with a Juris Doctor. Mr. Harper has a private law practice
focusing primarily on corporate law, labor/employment and litigation. Mr.
Harper serves as counsel for the Las Vegas Police Protective Association,
General Counsel, 1998-Present.
28
Work Experience:
----------------
Dates Name of Company Job Title
----- -------------- ---------
1986-1989 Univ. of Cincinnati, College of Law Law Student
1989-1991 Schottenstein, Zox and Dunn Assoc. Atty.
1991-1995 Redmon & Harper Partner
1996-1998 Gugino & Schwartz Assoc. Atty.
1999-2002 Starbase-1 Coffee Co. Ltd. President
2000-2002 Lock-Gun.com President
1998-Present Injured Police Officers Fund General Counsel
2001-2005 Absolute Glass Protection, Inc. Pres., Treasurer,
Director
1996-Present John Dean Harper, Attorney at Law
1998-Present Las Vegas Police Protective Assoc. General Counsel
1998-Present Nevada Conf. of Police and Sheriffs General Counsel
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors, and persons
who beneficially own more than ten percent of our common stock, to file
initial reports of ownership and reports of changes in ownership with the
SEC. Executive officers, directors and greater than ten percent beneficial
owners are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Based upon a review of the copies of such
forms furnished to us and written representations from our executive officers
and directors, we believe that as of the date of this report they were not
current in his 16(a) reports.
29
Board of Directors
Our board of directors currently consists of one member, Mr. John Dean Harper.
Our directors serve one-year terms.
Audit Committee
---------------
The company does not presently have an Audit Committee. The sole member of the
Board sits as the Audit Committee. No qualified financial expert has been
hired because the company is too small to afford such expense.
Committees and Procedures
-------------------------
(1) The registrant has no standing audit, nominating and compensation
committees of the Board of Directors, or committees performing
similar functions. The Board acts itself in lieu of committees due
to its small size.
(2) The view of the board of directors is that it is appropriate for the
registrant not to have such a committee because its directors
participate in the consideration of director nominees and the
board and the company are so small.
(3) The members of the Board who acts as nominating committee is
not independent, pursuant to the definition of independence of a
national securities exchange registered pursuant to section 6(a)
of the Act (15 U.S.C. 78f(a).
(4) The nominating committee has no policy with regard to the
consideration of any director candidates recommended by security
holders, but the committee will consider director candidates
recommended by security holders.
(5) The basis for the view of the board of directors that it is
appropriate for the registrant not to have such a policy is that
there is no need to adopt a policy for a small company.
(6) The nominating committee will consider candidates recommended by
security holders, and by security holders in submitting such
recommendations.
(7) There are no specific, minimum qualifications that the nominating
committee believes must be met by a nominee recommended by security
holders except to find anyone willing to serve with a clean
background.
30
(8) The nominating committee's process for identifying and evaluation
of nominees for director, including nominees recommended by security
holders, is to find qualified persons willing to serve with a clean
backgrounds. There are no differences in the manner in which the
nominating committee evaluates nominees for director based on
whether the nominee is recommended by a security holder, or found
by the board.
Code of Ethics
We have not adopted a Code of Ethics for the Board and any salaried employees.
Limitation of Liability of Directors
------------------------------------
Pursuant to the Nevada General Corporation Law, our Articles of Incorporation
exclude personal liability for our Directors for monetary damages based upon
any violation of their fiduciary duties as Directors, except as to liability
for any breach of the duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, or any
transaction from which a Director receives an improper personal benefit. This
exclusion of liability does not limit any right which a Director may have to
be indemnified and does not affect any Director's liability under federal or
applicable state securities laws. We have agreed to indemnify our directors
against expenses, judgments, and amounts paid in settlement in connection with
any claim against a Director if he acted in good faith and in a manner he
believed to be in our best interests.
Nevada Anti-Takeover Law and Charter and By-law Provisions
----------------------------------------------------------
The anti-takeover provisions of Sections 78.411 through 78.445 of the Nevada
Corporation Law apply to Tone in Twenty. Section 78.438 of the Nevada law
prohibits the Company from merging with or selling more than 5% of our assets
or stock to any shareholder who owns or owned more than 10% of any stock or any
entity related to a 10% shareholder for three years after the date on which the
shareholder acquired the Tone in Twenty shares, unless the transaction is
approved by Tone in Twenty's Board of Directors. The provisions also prohibit
the Company from completing any of the transactions described in the preceding
sentence with a 10% shareholder who has held the shares more than three years
and its related entities unless the transaction is approved by our Board of
Directors or a majority of our shares, other than shares owned by that 10%
shareholder or any related entity. These provisions could delay, defer or
prevent a change in control of Tone in Twenty
31
Item 11. Executive Compensation
The following table sets forth summary compensation information for the
fiscal year ended August 31, 2008 for our President and sole director.
We did not have any executive officer as of the fiscal year end of August 31,
2008 receive any compensation.
Compensation
------------
As a result of our the Company's current limited available cash, no officer or
director received compensation since August 4, 2006 (inception) of the company
through August 31, 2008. Tone in Twenty has no intention of paying any
salaries at this time. We intend to pay salaries when cash flow permits.
Summary Compensation Table
--------------------------
All
Fiscal Other
Year Compen-
ending Salary Bonus Awards sation Total
Name and Principal Position Aug. 31 ($) ($) ($) ($) ($)
----------------------------------------------------------------------------
John Dean Harper CEO/Dir. 2008 -0- -0- -0- -0- -0-
2007 -0- -0- -0- -0- -0-
We do not maintain key-man life insurance for any our executive officers/
directors. We do not have any long-term compensation plans or stock option
plans.
Stock Option Grants
-------------------
We did not grant any stock options to the executive officers or directors from
inception through fiscal year end August 31, 2008.
Outstanding Equity Awards at 2008 Fiscal Year-End
-------------------------------------------------
We did not have any outstanding equity awards as of August 31, 2008.
32
Option Exercises for Fiscal 2008
--------------------------------
There were no options exercised by our named executive officer in fiscal 2008.
Potential Payments Upon Termination or Change in Control
--------------------------------------------------------
We have not entered into any compensatory plans or arrangements with respect
to our named executive officer, which would in any way result in payments to
such officer because of his resignation, retirement, or other termination of
employment with us or our subsidiaries, or any change in control of, or a
change in his responsibilities following a change in control.
Director Compensation
---------------------
We did not pay our directors any compensation during fiscal years ending
August 31, 2008 or August 31, 2007.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following table presents information, to the best of our knowledge, about
the ownership of our common stock on December 8, 2008 relating to those persons
known to beneficially own more than 5% of our capital stock and by our named
executive officer and sole director.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and does not necessarily indicate
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes those shares of common stock over which the stockholder has
sole or shared voting or investment power. It also includes shares of common
stock that the stockholder has a right to acquire within 60 days after December
8, 2008 pursuant to options, warrants, conversion privileges or other right.
The percentage ownership of the outstanding common stock, however, is based on
the assumption, expressly required by the rules of the Securities and Exchange
Commission, that only the person or entity whose ownership is being reported
has converted options or warrants into shares of Tone in Twenty's common stock.
33
We do not have any outstanding options, warrants or other securities
exercisable for or convertible into shares of our common stock.
AMOUNT AND PERCENT OF PERCENT OF
NATURE OF CLASS CLASS
TITLE OF NAME OF BENEFICIAL BENEFICIAL BEFORE AFTER
CLASS OWNER AND POSITION OWNERSHIP CONVERSION(1) CONVERSION(2)
Common John Dean Harper, 2,200,000 84.0% 2.1%
Stock 4301 S. Valley View Ave.
Suite 20
Las Vegas, NV 89103
----------------------------------------------------------------------------
Ownership upon conversion of
shareholders' preferred stock:
Common San Nicholas, Inc. 100,000,000 0.0% 97.0%
Stock
----------------------------------------------------------------------------
Common All Executive Officers
Stock and Directors as a
Group (1 person) 2,200,000 84.0% 2.1%
(1) Percent of Class based on 2,625,000 shares before conversion of Series
A Callable and Convertible Preferred shares.
(2) Percent of Class based on 102,625,000 after conversion of the 500,000
Series A Callable and Convertible Preferred shares.
(3) San Nicholas, Inc. a Nevada Corporation, beneficially owned and
Controlled by Mrs. Eva Esparza, Escobedo 435 Ote., Torreon,
Coah, Mexico. Note: The Company entered into a lock-up with San
Nicholas, Inc. on November 10, 2008 (see Exhibit 10.1).
We are not aware of any arrangements that may result in "changes in control" as
that term is defined by the provisions of Item 403(c) of Regulation S-B.
We believe that all persons named have full voting and investment power with
respect to the shares indicated, unless otherwise noted in the table. Under the
rules of the Securities and Exchange Commission, a person (or group of persons)
is deemed to be a "beneficial owner" of a security if he or she, directly or
indirectly, has or shares the power to vote or to direct the voting of such
security, or the power to dispose of or to direct the disposition of such
security. Accordingly, more than one person may be deemed to be a beneficial
owner of the same security. A person is also deemed to be a beneficial owner of
any security, which that person has the right to acquire within 60 days, such
as options or warrants to purchase our common stock.
34
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
The company's sole officer/director has contributed office space for our use.
There is no charge to us for the space. Our officer will not seek
reimbursement for past office expenses.
Through a Board Resolution, the Company hired the professional services of
Moore & Associates, Chartered, Certified Public Accountants, to perform
audited financials for the Company. Moore & Associates, Chartered own no
stock in the Company. The company has no formal contracts with its
accountants, they are paid on a fee for service basis.
Other than as set forth above, there are no transactions since our inception,
or proposed transactions, to which we were or are to be a party, in which any
of the following persons had or is to have a direct or indirect material
interest:
a) Any director or executive officer of the small business issuer;
b) Any majority security holder; and
c) Any member of the immediate family (including spouse, parents, children,
siblings, and in-laws) of any of the persons in the above.
35
Item 14. Principal Accountant Fees and Services.
Moore & Associates, Chartered served as our principal independent public
accountants for fiscal years ending August 31, 2008 and August 31, 2007.
Aggregate fees billed to us for the years ended August 31, 2008 and 2008 by
Moore & Associates were as follows:
For the Years Ended
August 31,
-------------------
2008 2007
-------------------
(1) Audit Fees(1) $5,500 $1,000
(2) Audit-Related Fees -0- -0-
(3) Tax Fees -0- -0-
(4) All Other Fees -0- -0-
Total fees paid or accrued to our principal accountant
(1) Audit Fees include fees billed and expected to be billed for services
performed to comply with Generally Accepted Auditing Standards (GAAS),
including the recurring audit of the Company's financial statements for such
period included in this Annual Report on Form 10-K and for the reviews of the
quarterly financial statements included in the Quarterly Reports on Form
10-QSB filed with the Securities and Exchange Commission.
Audit Committee Policies and Procedures
---------------------------------------
We do not have an audit committee; therefore our sole director pre-approves
all services to be provided to us by our independent auditor. This process
involves obtaining (i) a written description of the proposed services, (ii)
the confirmation of our Principal Accounting Officer that the services are
compatible with maintaining specific principles relating to independence, and
(iii) confirmation from our securities counsel that the services are not among
those that our independent auditors have been prohibited from performing under
SEC rules. Our sole director then makes a determination to approve or
disapprove the engagement of Moore & Associates for the proposed services. In
the fiscal year ending August 31, 2008, all fees paid to Moore & Associates
were unanimously pre-approved in accordance with this policy.
Less than 50 percent of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees.
36
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following information required under this item is filed as part of this
report:
(a) 1. Financial Statements
Page
----
Management's Report on Internal Control Over Financial Reporting 25
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-5
(b) 2. Financial Statement Schedules
None.
37
(c) 3. Exhibit Index
Incorporated by reference
-------------------------
Filed Period Filing
Exhibit Exhibit Description herewith Form ending Exhibit date
------------------------------------------------------------------------------
3.1 Tone in Twenty Articles SB-2 3.1 11-02-07
of Incorporation
------------------------------------------------------------------------------
3.2 Bylaws as currently SB-2 3.2 11-02-07
in effect
------------------------------------------------------------------------------
3.2 Amended Articles of SB-2 3.2 11-02-07
incorporation in effect
------------------------------------------------------------------------------
10.1 Preferred share lock-up
agreement dated Nov. 10, 2008 X
------------------------------------------------------------------------------
23.1 Consent Letter from Moore X
and Associates Chartered
------------------------------------------------------------------------------
31.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
302 of the Sarbanes-Oxley
Act
------------------------------------------------------------------------------
31.2 Certification of President X
and Principal Financial
Officer, pursuant to Section
906 of the Sarbanes-Oxley
Act
------------------------------------------------------------------------------
38
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Tone in Twenty
By: /s/ John Dean Harper
--------------------------
John Dean Harper
President and Director
Date: December 8, 2008
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated have signed this report below.
Name
By: /s/ John Dean Harper
-----------------------
John Dean Harper
President, Secretary,
Treasurer and Director
(Principal Executive,
Principal Financial and
Principal Accounting Officer)
Date: December 8, 2008
----------------
39