Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2008, for FrameWaves, Inc. (a Nevada corporation). The registrant is classified as a Development Stage Company and a smaller reporting company. The company has no ongoing operations and has not generated revenue since 2001. It currently operates as a "blank check" company seeking a business opportunity for merger or acquisition. The company's subsidiary, Corners, Inc., was abandoned in December 2007 after its corporate charter was revoked.
Key Financial Metrics
| Metric | Q1 2008 | Q1 2007 | Balance Sheet (Mar 31, 2008) |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(3,134) | $(2,841) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $955 |
| Total Assets | N/A | N/A | $955 |
| Total Liabilities | N/A | N/A | $20,075 |
| Stockholders' Equity | N/A | N/A | $(19,120) |
| Accumulated Deficit | N/A | N/A | $(62,746) |
| Shares Outstanding | N/A | N/A | 1,208,994 |
Debt and Liquidity: The company holds a $15,000 unsecured note payable to a stockholder (director/officer) bearing 8% interest, due on demand. Accounts payable totaled $3,385, and accrued interest was $1,690. The company has a working capital deficit of $19,120.
Material Changes vs. Prior Period
- Net Loss Increase: Net loss increased by $293 (approximately 10%) from $2,841 in Q1 2007 to $3,134 in Q1 2008.
- Expense Growth: General and administrative expenses rose from $2,644 to $2,850. Interest expense increased from $197 to $284.
- Cash Position: Cash decreased from $2,422 at December 31, 2007, to $955 at March 31, 2008, a reduction of $1,467.
- Debt Increase: The note payable to a stockholder increased by $2,228 during the quarter.
Outlook, Risks, and Management Commentary
Going Concern: The filing explicitly states that the company's ability to continue as a going concern is in doubt due to accumulated losses of $62,746 and a working capital deficit. Continued operations depend on raising additional capital through stock issuance or loans and generating revenue, neither of which is currently assured.
Management Commentary: Management anticipates operating expenses of $5,000 to $7,000 for the next twelve months. They acknowledge insufficient cash to meet immediate needs and plan to seek capital via loans from officers, debt financing, or equity financing. No commitments for such funding currently exist.
Risks:
- No Operations: The company has no employees and no revenue stream.
- Acquisition Uncertainty: There is no assurance the company will successfully locate or negotiate a merger with a target company.
- Related Party Dependence: The company relies on a director/officer for office space (rent-free) and debt financing.
Investor Verification Checklist
- Cash Runway: Verify if the $955 cash balance is sufficient to cover the estimated $5,000–$7,000 annual operating expenses.
- Related Party Debt: Confirm the terms and repayment status of the $15,000 note payable to the director/officer.
- Capital Raising Plans: Investigate any active efforts or agreements to raise the necessary capital to avoid insolvency.
- Merger Targets: Determine if any specific business opportunities or merger targets have been identified or negotiated.
- Subsidiary Status: Confirm the legal status of the abandoned subsidiary, Corners, Inc., and any potential residual liabilities.