Business Context and Reporting Period
Company: Emy's Salsa AJI Distribution Company, Inc. (Note: Metadata listed "INVO Fertility, Inc." is incorrect; the filing is for Emy's Salsa).
Reporting Period: Quarterly period ended September 30, 2008 (Form 10-Q).
Status: Development stage company incorporated in Nevada. The company intends to distribute "Emy's Salsa" products manufactured by a related party, Orbital Group, LLC. As of the reporting date, the company has generated no revenues since inception (July 2005) and has no employees or owned property.
Key Financial Metrics
| Metric | 9 Months Ended Sep 30, 2008 | 9 Months Ended Sep 30, 2007 | Balance Sheet (Sep 30, 2008) |
|---|---|---|---|
| Revenues | $0 | $0 | N/A |
| Net Loss | $(40,819) | $(23,829) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $440 |
| Total Assets | N/A | N/A | $6,773 |
| Total Liabilities | N/A | N/A | $19,839 |
| Stockholders' Deficit | N/A | N/A | $(13,066) |
| Loans Payable | N/A | N/A | $12,962 |
| Working Capital | N/A | N/A | $(19,399) |
Operating Expenses: General and administrative expenses totaled $40,519 for the nine months ended September 30, 2008, compared to $23,904 in the prior year period.
Material Changes vs. Prior Period
- Liquidity Deterioration: Cash on hand decreased from $4,648 at December 31, 2007, to $440 at September 30, 2008. Net cash used in operating activities increased to $16,970 (9 months 2008) from $11,546 (9 months 2007).
- Increased Debt: Loans payable surged from $200 at year-end 2007 to $12,962 at September 30, 2008, representing a 100% concentration in debt financing from third-party advances.
- Accumulated Deficit: The accumulated deficit during the development stage grew from $(51,572) to $(92,391).
- Asset Amortization: The company continues to amortize a distribution agreement asset (acquired via stock issuance), recording $19,001 in amortization expense for the nine-month period.
Outlook, Risks, and Management Commentary
- Going Concern Risk: The filing explicitly states there is significant doubt about the company's ability to continue as a going concern. The company has no revenues, a working capital deficit, and relies on future financing or business combinations to survive.
- Operational Stagnation: The manufacturer, Orbital Group, LLC, has defaulted on lease payments for equipment and real estate and suspended mass production plans due to limited funds. Consequently, Emy's Salsa has made no sales.
- Strategic Pivot: Management is exploring alternatives for the continuation of the business, which may include a change of purpose or business plans, as the current distribution model is stalled.
- Capital Needs: The company requires additional capital to maintain its status as a publicly reporting company (audit, legal, filing fees) and to pursue any new business opportunities. No credit facilities are currently in place.
- Stock Split: A 5-for-1 forward stock split was approved on November 7, 2008, increasing outstanding shares to 61,937,500.
Investor Verification Checklist
- Going Concern Status: Verify if the company has secured the necessary funding to cover operating expenses and public reporting fees for the next 12 months.
- Manufacturer Viability: Confirm the current operational status of Orbital Group, LLC, as the company's entire business plan depends on this related party's ability to manufacture and ship products.
- Debt Obligations: Review the terms of the $12,962 in loans payable, which are unsecured, bear 6% interest, and are due on demand.
- Asset Realizability: Assess the value of the remaining $6,333 in the distribution agreement asset, given the manufacturer's suspension of production.
- Internal Controls: Note that management has stated disclosure controls and procedures were not effective as of September 30, 2008.