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, 2009
[ ] 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.)
3433 Losee Rd., Suite 2, North Las Vegas, NV 89030
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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 fiscal year:
The aggregate market value of the Company's common shares of voting stock
held by non-affiliates of the Company at December 9, 2009, computed by
reference to the $0.12 Registration Statement per-share price on April 8,
2008, was $51,000. This was the most recent value of common shares, as no
trades occurred during the fiscal year ended August 31, 2009.
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 9, 2009, the registrant's outstanding common stock consisted
of 437,500 shares, $0.001 Par Value. Authorized - 195,000,000 common
voting shares. 83,333 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 1A. RISK FACTORS 11
ITEM 1B. UNRESOLVED STAFF COMMENTS 18
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 6. SELECTED FINANCIAL DATA 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 20
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 30
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A(T) CONTROLS AND PROCEDURES 31
ITEM 9B OTHER INFORMATION 33
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 34
ITEM 11. EXECUTIVE COMPENSATION 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, 39
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 41
AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 42
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 43
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, 3433 Losee Rd., Suite 2, North Las Vegas,
NV 89030.
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 demonstrated 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 $5,389 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
assurances 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.
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
of 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 an 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 during this economic downturn. Management
will continue to seek different funding sources in order to initiate its
business plan, but has not been successful.
Future funding could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization of 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, 2009 and 2008, 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
---------
The Company does not have any employees. 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 August 31, 2009, the Company had $2,013 in cash and cash equivalents.
The Company's 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, 2009
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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has recognized an accumulated deficit of
approximately $1,022,693 and $1,013,817 since inception on August 4, 2006
through August 31, 2009 and 2008, respectively, which raises substantial
doubt about its ability to continue as a going concern. 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
plan 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 stock to date, and
there can be no guarantee that the Company will be able to pay cash dividends
on the stock 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 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 convertible 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.
In February, 2007, the Company issued 83,333 shares of its $0.001 par value
preferred stock at approximately $0.12 per share to one non-affiliated
shareholder for $10,000. These preferred shares can be converted to
16,666,600 common shares on the preferred shareholder's demand.
On February 23, 2007, the Company filed a Certificate of Amendment 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."
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 continue
being 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" convertible preferred stock. To date, the Company has issued
83,333 shares of convertible 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.
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."
17
22. Although our stock is listed on the OTC-BB, a trading market has not yet
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 assurance 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 3433 Losee Rd., Suite 2, North Las
Vegas, NV 89030. 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. However,
litigation is subject to inherent uncertainties, and an adverse result in
these or other matters may arise from time to time that may harm our
business.
Item 4. Submission of Matters to a Vote of Security Holders.
On June 4, 2009, the major shareholder representing approximately 84% of the
Company's outstanding and issued capital stock gave written consent to
approve a six-for-one (6:1) reverse stock split for Tone and Twenty's common
stock. The reverse stock split took effect on August 31, 2009. Upon the
reverse stock split, the stock trading symbol for Tone and Twenty on the
OTC-BB changed from TTWY to TTWZ.
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: TTWZ. 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 9, 2009,
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 9, 2009, there were approximately thirty-two (32) holders of
record of our Common Stock and 437,500 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
There we no sales of any stock during the fiscal years ending August 31, 2009
or 2008.
19
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the years ended
August 31, 2009 or 2008.
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, 2009 and 2008
-----------------------------------------------------------------
Since our inception on August 4, 2006 through August 31, 2009, we generated
$7,979 in revenues derived from an evaluation program. We generated no
revenues for the fiscal years ending August 31, 2009 and 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, 2009, we experienced a net loss of
$8,876 as compared to a net loss of $21,927 for the same period last
year. The net loss for the year ending August 31, 2009 was attributed to
general and administrative expense of $4,233 and audit fees of $7,000. Our
cash at hand as of August 31, 2009 was $2,013. In our August 31, 2009
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, 2009, we generated
$7,979 in revenues derived from an evaluation program. We generated no
revenues for the fiscal years ending August 31, 2009 and 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, 2009, 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 sheets as of August 31, 2009 and 2008 reflect current assets of
$2,013 and $2,860, and current liabilities of $336 and $2,941, respectively.
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, 2009.
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
------------------------------------------
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 the customer(s); 2) services have been
rendered; 3) the price to the customer is fixed or determinable; and 4)
collectibility is reasonably assured. For the period from August 4, 2006
(inception) to August 31, 2009, the Company has recognized revenues of
$7,979. The Company has recognized no revenues for the years ended
August 31, 2009 and 2008, respectively.
New Accounting Standards
------------------------
June 2009, the FASB issued FASB No. 166, "Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140" ("FASB 166").
The provisions of FASB 166, in part, amend the derecognition guidance
in FASB Statement No. 140, eliminate the exemption from consolidation
for qualifying special-purpose entities and require additional
disclosures. FASB 166 is effective for financial asset transfers
occurring after the beginning of an entity's first fiscal year that
begins after November 15, 2009. The Company does not expect the
provisions of FASB 166 to have a material effect on the financial
position, results of operations or cash flows of the Company.
23
In June 2009, the FASB issued FASB No. 167, "Amendments to FASB
Interpretation No. 46(R) ("FASB 167"). FASB 167 amends the
consolidation guidance applicable to variable interest entities. The
rovisions of FASB 167 significantly affect the overall consolidation
analysis under FASB Interpretation No. 46(R). FASB 167 is effective as
of the beginning of the first fiscal year that begins after November
15, 2009. FASB 167 will be effective for the Company beginning in 2010.
The Company does not expect the provisions of FASB 167 to have a
material effect on the financial position, results of operations or
cash flows of the Company.
In June 2009, the FASB issued FASB No. 168, "The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles - a replacement of FASB Statement No. 162" ("FASB
No. 168"). Under FASB No. 168 the "FASB Accounting Standards
Codification" ("Codification") will become the source of authoritative
U. S. GAAP to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission ("SEC")
under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. FASB No. 168 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. On the effective date, the Codification will
supersede all then-existing non-SEC accounting and reporting standards.
All other non-grandfathered non-SEC accounting literature not included
in the Codification will become non-authoritative. FASB No. 168 is
effective for the Company's interim quarterly period beginning July 1,
2009. The Company does not expect the adoption of FASB No. 168 to have
an impact on the financial statements.
In June 2009, the Securities and Exchange Commission's Office of the
Chief Accountant and Division of Corporation Finance announced the
release of Staff Accounting Bulletin (SAB) No. 112. This staff
accounting bulletin amends or rescinds portions of the interpretive
guidance included in the Staff Accounting Bulletin Series in order to
make the relevant interpretive guidance consistent with current
authoritative accounting and auditing guidance and Securities and
Exchange Commission rules and regulations. Specifically, the staff is
updating the Series in order to bring existing guidance into conformity
with recent pronouncements by the Financial Accounting Standards Board,
namely, Statement of Financial Accounting Standards No. 141 (revised
2007), Business Combinations, and Statement of Financial Accounting
24
Standards No. 160, Non-controlling Interests in Consolidated Financial
Statements. The statements in staff accounting bulletins are not rules
or interpretations of the Commission, nor are they published as bearing
the Commission's official approval. They represent interpretations and
practices followed by the Division of Corporation Finance and the
Office of the Chief Accountant in administering the disclosure
requirements of the Federal securities laws.
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. This FSP amends
FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments, to require disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB
Opinion No. 28, Interim Financial Reporting, to require those
disclosures in summarized financial information at interim reporting
periods. This FSP shall be effective for interim reporting periods
ending after June 15, 2009. The Company does not have any fair value of
financial instruments to disclose.
In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments. This
FSP amends the other-than-temporary impairment guidance in U.S. GAAP
for debt securities to make the guidance more operational and to
improve the presentation and disclosure of other-than-temporary
impairments on debt and equity securities in the financial statements.
The FSP does not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. The
FSP shall be effective for interim and annual reporting periods ending
after June 15, 2009. The Company currently does not have any financial
assets that are other-than-temporarily impaired.
In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That
Arise from Contingencies, to address some of the application issues
under FASB 141(R). The FSP deals with the initial recognition and
measurement of an asset acquired or a liability assumed in a business
combination that arises from a contingency provided the asset or
liability's fair value on the date of acquisition can be determined.
When the fair value can-not be determined, the FSP requires using the
guidance under FASB No. 5, Accounting for Contingencies, and FASB
25
Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a
Loss. This FSP was effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition date
is on or after January 1, 2009. The adoption of this FSP has not had a
material impact on our financial position, results of operations, or
cash flows during the fiscal years ended August 31, 2009 or 2008.
In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not
Orderly" ("FSP FAS 157-4"). FSP FAS 157-4 provides guidance on
estimating fair value when market activity has decreased and on
identifying transactions that are not orderly. Additionally, entities
are required to disclose in interim and annual periods the inputs and
valuation techniques used to measure fair value. This FSP is effective
for interim and annual periods ending after June 15, 2009. The Company
does not expect the adoption of FSP FAS 157-4 will have a material
impact on its financial condition or results of operation.
In October 2008, the FASB issued FSP No. FAS 157-3, "Determining the
Fair Value of a Financial Asset When the Market for That Asset is Not
Active," ("FSP FAS 157-3"), which clarifies application of FASB 157 in
a market that is not active. FSP FAS 157-3 was effective upon
issuance, including prior periods for which financial statements have
not been issued. The adoption of FSP FAS 157-3 had no impact on the
Company's results of operations, financial condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8,
"Disclosures by Public Entities (Enterprises) about Transfers of
Financial Assets and Interests in Variable Interest Entities." This
disclosure-only FSP improves the transparency of transfers of financial
assets and an enterprise's involvement with variable interest entities,
including qualifying special-purpose entities. This FSP is effective
for the first reporting period (interim or annual) ending after
December 15, 2008, with earlier application encouraged. The Company
adopted this FSP effective January 1, 2009. The adoption of the FSP
had no impact on the Company's results of operations, financial
condition or cash flows.
26
In December 2008, the FASB issued FSP No. FAS 132(R)-1, "Employers'
Disclosures about Postretirement Benefit Plan Assets" ("FSP FAS 132(R)-
1"). FSP FAS 132(R)-1 requires additional fair value disclosures about
employers' pension and postretirement benefit plan assets consistent
with guidance contained in FASB 157. Specifically, employers will be
required to disclose information about how investment allocation
decisions are made, the fair value of each major category of plan
assets and information about the inputs and valuation techniques used
to develop the fair value measurements of plan assets. This FSP is
effective for fiscal years ending after December 15, 2009. The Company
does not expect the adoption of FSP FAS 132(R)-1 will have a material
impact on its financial condition or results of operation.
In September 2008, the FASB issued exposure drafts that eliminate
qualifying special purpose entities from the guidance of FASB No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," and FASB Interpretation 46 (revised
December 9003), "Consolidation of Variable Interest Entities - an
interpretation of ARB No. 51," as well as other modifications. While
the proposed revised pronouncements have not been finalized and the
proposals are subject to further public comment, the Company
anticipates the changes will not have a significant impact on the
Company's financial statements. The changes would be effective
March 1, 2010, on a prospective basis.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities, ("FSP EITF 03-6-1"). FSP
EITF 03-6-1 addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting, and
therefore need to be included in the computation of earnings per share
under the two-class method as described in FASB Statement of Financial
Accounting Standards No. 128, "Earnings per Share." FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning on
or after December 15, 2008 and earlier adoption is prohibited. We are
not required to adopt FSP EITF 03-6-1; neither do we believe that FSP
EITF 03-6-1 would have material effect on our consolidated financial
position and results of operations if adopted.
27
In May 2008, the Financial Accounting Standards Board ("FASB") issued
FASB No. 163, "Accounting for Financial Guarantee Insurance Contracts-
and interpretation of FASB Statement No. 60". FASB 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. FASB No. 163 is effective for
fiscal years beginning on or after December 15, 2008, and interim
periods within those years. FASB 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
FASB No. 162, "The Hierarchy of Generally Accepted Accounting
Principles". FASB 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. FASB No. 162 will become effective 60 days after
the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA
Professional Standards. FASB 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 FASB 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 FASB No. 161, but
does not expect it to have a material impact on its consolidated
financial position, results of operations or cash flows.
28
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 Stockholders' Equity F-4-5
Statements of Cash Flows F-6
Notes to Financials F-7
29
SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
--------------------------------
www.sealebeers.com
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, 2009 and 2008 (restated), and the
related statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended August 31, 2009 and 2008 (restated), and from
inception on August 4, 2006 through August 31, 2009 (restated). 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 conduct our audits 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, 2009 and 2008 (restated), and the related
statements of operations, stockholders' equity (deficit) and cash flows for
the years then ended August 31, 2009 and 2008 (restated), and from inception
on August 4, 2006 through August 31, 2009 (restated), 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 4 to the
financial statements, the Company has recognized an accumulated deficit of
approximately $1,022,693 and $1,013,817 since inception on August 4, 2006
through August 31, 2009 and 2008, respectively, which raises substantial doubt
about its ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 4. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Seale and Beers, CPAs
-------------------------
Seale and Beers, CPAs
Las Vegas, Nevada
December 9, 2009
50 S. Jones Blvd. Suite 202 Las Vegas, NV 89107
Phone: (888)727-8251 Fax: (888)782-2351
F-1
Tone in Twenty
(A Development Stage Company)
Balance Sheets
August 31,
August 31, 2008
2009 (Restated)
---------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 2,013 $ 2,860
Funds held in escrow - -
---------- ----------
Total current assets 2,013 2,860
Other Assets
Prepaid expense 3,500 -
---------- ----------
Total other assets 3,500 -
---------- ----------
TOTAL ASSETS $ 5,513 $ 2,860
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 336 $ 2,941
Accrued liability - 2,357
---------- ----------
Total current liabilities 336 5,298
---------- ----------
Stockholders' Equity (Deficit)
Convertible Preferred stock, $0.001 par value,
5,000,000 shares authorized, 83,333 shares
issued and outstanding as of 8/31/09 and
8/31/08, respectively (1) 83 83
Common stock, $0.001 par value, 195,000,000
shares authorized, 437,500 shares
issued and outstanding as of 8/31/09 and
8/31/08, respectively 438 438
Additional Paid-in Capital 1,027,349 1,010,858
Deficit accumulated during
development stage (1,022,693) (1,013,817)
---------- ----------
Total stockholders' equity (deficit) 5,177 (2,438)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)$ 5,513 $ 2,860
========== ==========
(1) Please see Note 6 Stockholders' Equity, Preferred Stock section for
information regarding the conversion feature of the preferred stock.
The accompanying notes are an integral part of these financial statements.
F-2
Tone in Twenty
Statements of Operations
(A Development Stage Company)
For the year August 4, 2006
For the year ending (Inception) to
ending August 31, August 31,
August 31, 2008 2009
2009 (Restated) (Restated)
------------ ------------ --------------
REVENUE $ - $ - $ 7,979
EXPENSES
Advertising - 4,166 5,389
Audit fees 7,000 7,500 15,500
General & administrative 4,233 5,261 12,211
------------ ------------ --------------
Total expenses 11,233 16,927 33,100
------------ ------------ --------------
Net (loss) from operations (11,233) (16,927) (25,121)
OTHER INCOME/EXPENSES
Extraordinary gain 2,357 - 2,357
Beneficial conversion feature - - (994,929)
Disposition of fixed asset - (5,000) (5,000)
------------ ------------ --------------
Total other income/expenses 2,357 (5,000) (997,572)
Provision for income taxes - - -
------------ ------------ --------------
NET (LOSS) $ (8,876) $ (21,927) $ (1,022,693)
============ ============ ==============
(LOSS) PER SHARE - BASIC (1) $ (0.02) $ (0.05)
============ ============
(LOSS) PER SHARE - FULLY
DILUTED (1) $ (0.02) $ (0.05)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC AND FULLY DILUTED 437,500 437,500
============ ============
(1) In-the-money options or warrants are not included in the diluted EPS
computations because there is a loss from continuing operations in the
periods being reported, and to include them would be antidilutive.
The accompanying notes are an integral part of these financial statements.
F-3
Tone in Twenty
Statements of Stockholders' Equity
(A Development Stage Company)
(Restated)
Convertible Deficit
Preferred Common Accumulated
Stock Stock Additional During the Total
-------------- ------------------ Paid-In Exploration Stockholders'
Shares Amount Shares Amount Capital Stage Equity
------- ------ ---------- ------- ---------- ------------ -------------
August 2006
Founders
shares
for
cash at
$0.006
per share $ 366,667 $ 367 $ 1,833 $ - $ 2,200
Net (loss)
year ended
8/31/06 (1,000) (1,000)
------- ------ ---------- ------- ---------- ------------ -------------
Balance,
8/31/06 - - 366,667 367 1,833 (1,000) 1,200
February 2007
Preferred
shares
issued for
cash at
$0.12 per
share 83,333 83 9,917 10,000
Beneficial
conversion
feature on
preferred
stock 994,929 994,929
Deemed interest
on beneficial
conversion
feature (994,929) (994,929)
March 2007
Common shares
issued
pursuant
to 505
offering
at $0.06
per share 70,833 71 4,179 4,250
F-4
Tone in Twenty
Statements of Stockholders' Equity (Continued)
(A Development Stage Company)
(Restated)
Convertible Deficit
Preferred Common Accumulated
Stock Stock Additional During the Total
-------------- ------------------ Paid-In Exploration Stockholders'
Shares Amount Shares Amount Capital Stage Equity
------- ------ ---------- ------- ---------- ------------ -------------
Net income
year ended
8/31/07 4,039 4,039
------- ------ ---------- ------- ---------- ------------ -------------
Balance,
8/31/07 83,333 83 437,500 438 1,010,858 (991,890) 19,489
Net (loss)
year ended
8/31/08 (21,927) (21,927)
------- ------ ---------- ------- ---------- ------------ -------------
Balance,
8/31/08
(Restated)
83,333 83 437,500 438 1,010,858 (1,013,817) (2,438)
September 2008
Contributed
capital 2,559 2,559
January 2009
Contributed
capital 6,632 6,632
February 2009
Contributed
capital 6,300 6,300
July 2009
Contributed
capital 1,000 1,000
Net (loss)
year ended
8/31/09 (8,876) (8,876)
------- ------ ---------- ------- ---------- ------------ -------------
Balance,
8/31/09 83,333 $ 83 437,500 $ 438 $1,027,349 $(1,022,693) $ 5,177
======= ====== ========== ======= ========== ============ =============
The accompanying notes are an integral part of these financial statements.
F-5
Tone in Twenty
Statements of Cash Flows
(A Development Stage Company)
For the year August 4, 2006
For the year ending (Inception) to
ending August 31, August 31,
August 31, 2008 2009
2009 (Restated) (Restated)
------------ ------------ --------------
OPERATING ACTIVITIES
NET (LOSS) $ (8,876) $ (21,927) $ (1,022,693)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities:
Increase(decrease) in:
Accounts payable (2,605) 3,941 336
Accrued liability (2,357) 2,357 -
(Increase)decrease in:
Prepaid expense (3,500) - (3,500)
------------ ------------ --------------
Net cash (used in)
operating activities (17,338) (15,629) (1,025,857)
INVESTING ACTIVITIES
Purchase of fixed assets - - (5,000)
Disposition of fixed assets - 5,000 5,000
------------ ------------ --------------
Net cash provided by
investing activities - 5,000 -
FINANCING ACTIVITIES
Issuances of common stock - - 6,450
Issuances of preferred stock - - 10,000
Contributed capital 16,491 - 16,491
Beneficial Conversion of
preferred stock - - 994,929
------------ ------------ --------------
Net cash provided by financing
activities 16,491 - 1,027,870
------------ ------------ --------------
NET CHANGE IN CASH (847) (10,629) 2,013
CASH AND CASH EQUIVALENTS -
BEGINNING 2,860 13,489 -
------------ ------------ --------------
CASH AND CASH EQUIVALENTS -
ENDING $ 2,013 $ 2,860 $ 2,013
============ ============ ==============
SUPPLEMENTAL DISCLOSURES:
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
Non-cash transactions $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
F-6
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and 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 had $5,513 in assets and liabilities of $336 as of August 31,
2009, as compared to assets of $2,860 and liabilities of $5,298 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 presented.
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-7
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES-CONTINUED
Year end
--------
The Company's fiscal year-end is August 31.
Advertising
-----------
Advertising costs are expensed when incurred. For the years ended August 31,
2009 and 2008, and since inception on August 4, 2006 through the year ended
August 31, 2009, the Company has incurred advertising expenses of $0, $4,166
and $5,389, respectively.
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 - LEGAL PROCEEDINGS AND DISPOSITION OF ASSETS
On September 11, 2008, a former officer filed a complaint with the State
of Nevada Department of Business and Industry, Office of the Labor
Commissioner. The claim alleged 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. In the year ended August 31,
2008, the company recognized a disposition of equipment expense for $5,000,
as well as an accrued liability of $2,357 to fully recognize the potential
adverse effects, should the Department of Labor have decided to pursue this
matter. The Company has been informed by the Office of the Labor
Commissioner that it cannot find wrongdoing by the Company, that insufficient
evidence exists to support the complaint, and that the complaint will not be
further pursued by the Department of Business and Industry, State of Nevada,
and therefore the Company recognized an extraordinary income of $2,357 for
the year ended August 31, 2009. As of August 31, 2009, the isometric
exercise equipment, or fixed assets, were not in the Company's possession,
as they are in possession of a former officer and there is no assurance it
will be returned to the Company.
F-8
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and 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. Since inception on
August 4, 2006 through August 31, 2009 and 2008, the Company recognized an
accumulated operating deficit of approximately $1,022,693 and $1,013,817,
respectively. 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 for 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 devoting 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.
On June 4, 2009, the Company initiated a six-for-one reverse stock split
for its issued and outstanding common and preferred stock. This reverse
stock split had no effect on the authorized number of common shares or
preferred shares, and did not affect the par value of the stock. The
financial statements reflect the reverse stock split on a retroactive basis.
Common Stock
------------
On August 4, 2006 (inception), the Company issued 366,667 shares of its
common stock at approximately $0.006 per share to its founder for $2,200.
On March 31, 2007 the Company issued 70,833 shares of its $0.001 par value
common stock at approximately $0.06 per share to approximately 30
shareholders for $4,250 pursuant to a Regulation 505 offering.
F-9
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 5. STOCKHOLDERS'EQUITY (Continued)
Convertible Preferred Stock
---------------------------
In February, 2007, the Company issued 83,333 shares of its $0.001 par value
preferred stock at approximately $0.12 per share to one non-affiliated
shareholder for $10,000. These preferred shares can be converted to
16,666,600 common shares on the preferred shareholder's demand.
On February 23, 2007, the Company filed a Certificate of Amendment 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 $0.01 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-10
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and 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 the customer(s); 2) services have been
rendered; 3) the price to the customer is fixed or determinable; and 4)
collectibility is reasonably assured. For the period from August 4, 2006
(inception) to August 31, 2009, the Company has recognized revenues of
$7,979. The Company has recognized no revenues for the years ended
August 31, 2009 and 2008, respectively.
NOTE 8. PROVISION FOR INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
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.
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 -%
NOTE 9. 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, 2009 and August 31, 2008
NOTE 10. EARNINGS PER SHARE
Historical earnings 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 (16,666,600 common shares) are antidilutive
for periods in which a loss is incurred, therefore they are not included below.
Calculation of earnings(loss) per share is as follows:
August 31, 2009 August 31, 2008
--------------- ---------------
Net loss (numerator) $ (8,876) $ (21,927)
=============== ===============
Weighted Average Common Shares Outstanding 437,500 437,500
=============== ===============
Basic Loss per Share $ (0.02) $ (0.05)
=============== ===============
NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS
June 2009, the FASB issued FASB No. 166, "Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140" ("FASB 166").
The provisions of FASB 166, in part, amend the derecognition guidance
in FASB Statement No. 140, eliminate the exemption from consolidation
for qualifying special-purpose entities and require additional
disclosures. FASB 166 is effective for financial asset transfers
occurring after the beginning of an entity's first fiscal year that
begins after November 15, 2009. The Company does not expect the
provisions of FASB 166 to have a material effect on the financial
position, results of operations or cash flows of the Company.
F-12
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In June 2009, the FASB issued FASB No. 167, "Amendments to FASB
Interpretation No. 46(R) ("FASB 167"). FASB 167 amends the
consolidation guidance applicable to variable interest entities. The
rovisions of FASB 167 significantly affect the overall consolidation
analysis under FASB Interpretation No. 46(R). FASB 167 is effective as
of the beginning of the first fiscal year that begins after November
15, 2009. FASB 167 will be effective for the Company beginning in 2010.
The Company does not expect the provisions of FASB 167 to have a
material effect on the financial position, results of operations or
cash flows of the Company.
In June 2009, the FASB issued FASB No. 168, "The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles - a replacement of FASB Statement No. 162" ("FASB
No. 168"). Under FASB No. 168 the "FASB Accounting Standards
Codification" ("Codification") will become the source of authoritative
U. S. GAAP to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission ("SEC")
under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. FASB No. 168 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. On the effective date, the Codification will
supersede all then-existing non-SEC accounting and reporting standards.
All other non-grandfathered non-SEC accounting literature not included
in the Codification will become non-authoritative. FASB No. 168 is
effective for the Company's interim quarterly period beginning July 1,
2009. The Company does not expect the adoption of FASB No. 168 to have
an impact on the financial statements.
In June 2009, the Securities and Exchange Commission's Office of the
Chief Accountant and Division of Corporation Finance announced the
release of Staff Accounting Bulletin (SAB) No. 112. This staff
accounting bulletin amends or rescinds portions of the interpretive
guidance included in the Staff Accounting Bulletin Series in order to
make the relevant interpretive guidance consistent with current
authoritative accounting and auditing guidance and Securities and
Exchange Commission rules and regulations. Specifically, the staff is
updating the Series in order to bring existing guidance into conformity
with recent pronouncements by the Financial Accounting Standards Board,
namely, Statement of Financial Accounting Standards No. 141 (revised
2007), Business Combinations, and Statement of Financial Accounting
F-13
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
Standards No. 160, Non-controlling Interests in Consolidated Financial
Statements. The statements in staff accounting bulletins are not rules
or interpretations of the Commission, nor are they published as bearing
the Commission's official approval. They represent interpretations and
practices followed by the Division of Corporation Finance and the
Office of the Chief Accountant in administering the disclosure
requirements of the Federal securities laws.
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. This FSP amends
FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments, to require disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB
Opinion No. 28, Interim Financial Reporting, to require those
disclosures in summarized financial information at interim reporting
periods. This FSP shall be effective for interim reporting periods
ending after June 15, 2009. The Company does not have any fair value of
financial instruments to disclose.
In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments. This
FSP amends the other-than-temporary impairment guidance in U.S. GAAP
for debt securities to make the guidance more operational and to
improve the presentation and disclosure of other-than-temporary
impairments on debt and equity securities in the financial statements.
The FSP does not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. The
FSP shall be effective for interim and annual reporting periods ending
after June 15, 2009. The Company currently does not have any financial
assets that are other-than-temporarily impaired.
In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That
Arise from Contingencies, to address some of the application issues
under FASB 141(R). The FSP deals with the initial recognition and
measurement of an asset acquired or a liability assumed in a business
combination that arises from a contingency provided the asset or
liability's fair value on the date of acquisition can be determined.
When the fair value can-not be determined, the FSP requires using the
guidance under FASB No. 5, Accounting for Contingencies, and FASB
F-14
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a
Loss. This FSP was effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition date
is on or after January 1, 2009. The adoption of this FSP has not had a
material impact on our financial position, results of operations, or
cash flows during the years ended August 31, 2009 and 2008.
In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not
Orderly" ("FSP FAS 157-4"). FSP FAS 157-4 provides guidance on
estimating fair value when market activity has decreased and on
identifying transactions that are not orderly. Additionally, entities
are required to disclose in interim and annual periods the inputs and
valuation techniques used to measure fair value. This FSP is effective
for interim and annual periods ending after June 15, 2009. The Company
does not expect the adoption of FSP FAS 157-4 will have a material
impact on its financial condition or results of operation.
In October 2008, the FASB issued FSP No. FAS 157-3, "Determining the
Fair Value of a Financial Asset When the Market for That Asset is Not
Active," ("FSP FAS 157-3"), which clarifies application of FASB 157 in
a market that is not active. FSP FAS 157-3 was effective upon
issuance, including prior periods for which financial statements have
not been issued. The adoption of FSP FAS 157-3 had no impact on the
Company's results of operations, financial condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8,
"Disclosures by Public Entities (Enterprises) about Transfers of
Financial Assets and Interests in Variable Interest Entities." This
disclosure-only FSP improves the transparency of transfers of financial
assets and an enterprise's involvement with variable interest entities,
including qualifying special-purpose entities. This FSP is effective
for the first reporting period (interim or annual) ending after
December 15, 2008, with earlier application encouraged. The Company
adopted this FSP effective January 1, 2009. The adoption of the FSP
had no impact on the Company's results of operations, financial
condition or cash flows.
F-15
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In December 2008, the FASB issued FSP No. FAS 132(R)-1, "Employers'
Disclosures about Postretirement Benefit Plan Assets" ("FSP FAS 132(R)-
1"). FSP FAS 132(R)-1 requires additional fair value disclosures about
employers' pension and postretirement benefit plan assets consistent
with guidance contained in FASB 157. Specifically, employers will be
required to disclose information about how investment allocation
decisions are made, the fair value of each major category of plan
assets and information about the inputs and valuation techniques used
to develop the fair value measurements of plan assets. This FSP is
effective for fiscal years ending after December 15, 2009. The Company
does not expect the adoption of FSP FAS 132(R)-1 will have a material
impact on its financial condition or results of operation.
In September 2008, the FASB issued exposure drafts that eliminate
qualifying special purpose entities from the guidance of FASB No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," and FASB Interpretation 46 (revised
December 2003), "Consolidation of Variable Interest Entities - an
interpretation of ARB No. 51," as well as other modifications. While
the proposed revised pronouncements have not been finalized and the
proposals are subject to further public comment, the Company
anticipates the changes will not have a significant impact on the
Company's financial statements. The changes would be effective
March 1, 2010, on a prospective basis.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities, ("FSP EITF 03-6-1"). FSP
EITF 03-6-1 addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting, and
therefore need to be included in the computation of earnings per share
under the two-class method as described in FASB Statement of Financial
Accounting Standards No. 128, "Earnings per Share." FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning on
or after December 15, 2008 and earlier adoption is prohibited. We are
not required to adopt FSP EITF 03-6-1; neither do we believe that FSP
EITF 03-6-1 would have material effect on our consolidated financial
position and results of operations if adopted.
F-16
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In May 2008, the Financial Accounting Standards Board ("FASB") issued
FASB No. 163, "Accounting for Financial Guarantee Insurance Contracts-
and interpretation of FASB Statement No. 60". FASB 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. FASB No. 163 is effective for
fiscal years beginning on or after December 15, 2008, and interim
periods within those years. FASB 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
FASB No. 162, "The Hierarchy of Generally Accepted Accounting
Principles". FASB 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. FASB No. 162 will become effective 60 days after
the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA
Professional Standards. FASB 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 FASB 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 FASB No. 161, but
does not expect it to have a material impact on its consolidated
financial position, results of operations or cash flows.
NOTE 12 - CONCENTRATION OF CREDIT RISK
Cash Balances
The Company maintains its cash in various financial institutions in the
United States. Balances maintained are insured by the Federal Deposit
Insurance Corporation (FDIC). This government corporation insured balances
up to $100,000 through October 13, 2008. As of October 14, 2008 all
non-interest bearing transaction deposit accounts at an FDIC-insured
institution, including all business checking deposit accounts that do not
earn interest, are fully insured for the entire amount in the deposit
account. This unlimited insurance coverage is temporary and will remain in
effect for participating institutions until December 31, 2009. All other
deposit accounts at FDIC-insured institutions are insured up to at least
$250,000 per depositor until December 31, 2013.
F-17
Tone in Twenty
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 2009 and August 31, 2008
NOTE 13 - RESTATEMENT
The Company has restated its financial statements as of and for the year
ended August 31, 2008 to reflect a correction to the amount of accounts
payable. This restatement resulted in an additional expense of $1,059 being
recorded in 2008. Additionally, restatement was made to the total assets to
reflect a correction to the amount of funds held in escrow, which was $0
instead of $2,559. The Company's summarized financial statements comparing
the restated financial statements to those originally filed are as follows:
Year Ended
August 31, 2008
Original Restated Change
---------- ---------- ----------
BALANCE SHEET
Total Assets $ 5,419 $ 2,860 $ (2,559)
========== ========== ==========
Total Liabilities and Stockholders'
Equity (Deficit) $ 5,419 $ 2,860 $ (2,559)
========== ========== ==========
STATEMENT OF CASH FLOWS
Operating Activities $ (13,070) $ (15,629) $ (2,559)
Investing Activities 5,000 5,000 -
Financing Activities - - -
Comprehensive Loss (8,070) (10,629) (2,559)
Cash Ending $ 5,419 $ 2,860 $ (2,559)
========== ========== ==========
NOTE 14 - SUBSEQUENT EVENTS
None. The Company has evaluated subsequent events through December 9, 2009,
the date which the financial statements were available to be issued.
F-18
Item 9. Changes in and Disagreements With Accountants On Accounting
and Financial Disclosure.
(a) Dismissal of Moore & Associates, Chartered
On August 27, 2009, the Public Company Accounting Oversight Board
("PCAOB") revoked the registration of our former auditor Moore and
Associates, Chartered because of violations of PCAOB rules and auditing
standards in auditing the financial statements, PCAOB rules and quality
controls standards, and Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5 thereunder, and noncooperation with a Board investigation.
On August 24, 2009 the Board of Directors of Tone in Twenty dismissed
Moore & Associates, Chartered, thereby terminating its relationship as the
Registrant's independent registered public accounting firm.
The reports of Moore & Associates, Chartered on the audited financial
statements of the Registrant for the fiscal years ended August 31, 2008 and
2007 did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles, except a going concern qualification in its audit report.
During the Registrant's two most recent fiscal years, the subsequent
interim periods thereto, and through August 27, 2009, there were no
disagreements (as defined in Item 304 of Regulation S-K) with Moore &
Associates, Chartered on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Moore & Associates,
Chartered, would have caused it to make reference in connection with its
opinion to the subject matter of the disagreement. Further, during the
Registrant's two most recent fiscal years, the subsequent interim periods
thereto, and through the Dismissal Date, there were no reportable events (as
defined in Item 304(a)(1)(v) of Regulation S-K).
(b) Engagement of Seale and Beers, CPAs
On August 24, 2009, the Registrant's Board of Directors approved the
appointment of and engaged Seale and Beers, CPAs as the Registrant's
independent registered public accounting firm. During the Registrant's two
most recent fiscal years, the subsequent interim periods thereto, and through
August 24, 2009, neither the Registrant nor anyone on its behalf consulted
the Current Accountants regarding either (1) the application of accounting
principles to a specified transaction regarding the Company, either completed
or proposed, or the type of audit opinion that might be rendered on the
Company's financial statements; or (2) any matter regarding the Company that
was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of
Regulation S-K and related instructions to Item 304 of Regulation S-K) or a
reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
30
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;
- 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.
31
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, 2009 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, 2009.
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.
32
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, 2010. Additionally, we plan to test our
updated controls and remediate our deficiencies by August 31, 2010.
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.
33
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 47 President and Director
The business address for our officers/directors is: c/o Tone in Twenty,
3433 Losee Rd., Suite 2, North Las Vegas, NV 89030, 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,
Chief General Counsel, 1998-Present.
34
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. Chief 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.
35
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.
36
(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
37
Item 11. Executive Compensation
The following table sets forth summary compensation information for the
fiscal year ended August 31, 2009 for our President and sole director. No
executive officer as of the fiscal year end of August 31, 2009 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, 2009. 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. 2009 -0- -0- -0- -0- -0-
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, 2009.
Outstanding Equity Awards at 2009 Fiscal Year-End
-------------------------------------------------
We did not have any outstanding equity awards as of August 31, 2009.
38
Option Exercises for Fiscal 2009
--------------------------------
There were no options exercised by our named executive officer in fiscal
2009.
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, 2009 or August 31, 2008.
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 9, 2009 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 9, 2009 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.
39
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, 366,666 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. 83,333 0.0% 97.0%
Stock
----------------------------------------------------------------------------
Common All Executive Officers
Stock and Directors as a
Group (1 person) 366,666 84.0% 2.1%
(1) Percent of Class based on 437,500 shares before conversion of Series
A Callable and Convertible Preferred shares.
(2) Percent of Class based on 1,704,100 after conversion of the 83,333
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.
40
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
Seale and Beers, CPAs, Certified Public Accountants, to perform audited
financials for the Company. Seale and Beers, CPAs 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.
41
Item 14. Principal Accountant Fees and Services.
Seale and Beers, CPAs served as our principal independent public accountants
for fiscal year ending August 31, 2009. Aggregate fees billed to us in the
year ended August 31, 2009 and 2008 by Seale and Beers, CPAs and our former
independent public accountants were as follows:
For the Years Ended
August 31,
-------------------
2009 2008
-------------------
(1) Audit Fees(1) $7,000 $7,500
(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-Q 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, 2009, 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.
37
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 26
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity F-4-5
Statements of Cash Flows F-6
(b) 2. Financial Statement Schedules
None.
43
(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 10-K 10.1 12-12-08
------------------------------------------------------------------------------
23.1 Consent Letter from Seale X
and Beers, CPAs
------------------------------------------------------------------------------
31.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
302 of the Sarbanes-Oxley
Act
------------------------------------------------------------------------------
32.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
906 of the Sarbanes-Oxley
Act
------------------------------------------------------------------------------
44
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
--------------
Registrant
By: /s/ John Dean Harper
-----------------------
John Dean Harper
President and Director
Date: December 9, 2009
----------------
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.
By: /s/ John Dean Harper
-----------------------
John Dean Harper
President, Secretary,
Treasurer and Director
(Principal Executive,
Principal Financial and
Principal Accounting Officer)
Date: December 9, 2009
----------------
45