UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended February 28, 2010
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period _____________ to _____________
Commission File Number: 333-158386
BUSINESS OUTSOURCING SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0583166
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1001 SW 5th Avenue, Suite 1100, Portland, Oregon, 97204
(Address of principal executive offices)
(503) 206-0935
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check 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 preceding 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days [X] Yes [ ] No
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 2,300,000 common shares as of April
14, 2010
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits 17
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the SEC instructions to Form 10-Q. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the interim period ended February 28, 2010
are not necessarily indicative of the results that can be expected for the full
year.
3
BUSINESS OUTSOURCING SERVICES INC.
(A Development Stage Company)
BALANCE SHEETS
February 28, November 30,
2010 2009
-------- --------
(unaudited) (audited)
ASSETS
Current assets
Cash and bank accounts $ 11,995 $ 16,424
Prepaid expenses -- 428
-------- --------
11,995 16,852
Software development 15,000 15,000
-------- --------
Total assets $ 26,995 $ 31,852
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,422 $ 5,500
Due to Stockholder 500 500
-------- --------
Total liabilities 3,922 6,000
-------- --------
Stockholders' equity
Authorized
50,000,000 Common shares with a par value of $0.001 per share
Issued and outstanding
2,300,000 Common Shares (Note 4) 2,300 2,300
Additional paid-in capital 52,700 52,700
Deficit accumulated during the development stage (31,927) (29,148)
-------- --------
Total stockholders' equity 23,073 25,852
-------- --------
Total liabilities and stockholders' equity $ 26,995 $ 31,852
======== ========
The accompanying notes are an integral part of these financial statements.
4
BUSINESS OUTSOURCING SERVICES INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(unaudited)
From Date of
Three Months Three Months Incorporation
Ended Ended (June 5, 2008) to
February 28, February 28, February 28,
2010 2009 2010
---------- ---------- ----------
REVENUE $ -- $ -- $ --
---------- ---------- ----------
OPERATING EXPENSES
Accounting and legal 1,750 1,500 25,310
Office and miscellaneous 1,029 206 6,117
Incorporation costs -- -- 500
---------- ---------- ----------
Loss before income taxes (2,779) (1,706) (31,927)
---------- ---------- ----------
Provision for income taxes -- -- --
---------- ---------- ----------
Net loss $ (2,779) $ (1,706) $ (31,927)
========== ========== ==========
Basic and Diluted loss per share (1) (1) (1)
========== ========== ==========
Weighted Average Number of Common
Shares Outstanding 2,300,000 2,300,000
========== ==========
----------
(1) less than $0.01
The accompanying notes are an integral part of these financial statements.
5
BUSINESS OUTSOURCING SERVICES INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
Deficit
Accumulated
Common Stock Additional During the Total
------------------- Paid in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Inception, June 5, 2008 -- $ 0 $ 0 $ 0 $ 0
Shares issued to founder on
June 5, 2008 @ $0.0125 per share 1,600,000 1,600 18,400 -- 20,000
Private placement on June 5, 2008
@ $0.05 per share 700,000 700 34,300 -- 35,000
Net loss for the period -- -- -- (3,500) (3,500)
--------- ------- -------- -------- --------
Balance, November 30, 2008 2,300,000 2,300 52,700 (3,500) 51,500
Net loss for the period -- -- -- (25,648) (25,648)
--------- ------- -------- -------- --------
Balance, November 30, 2009 2,300,000 2,300 52,700 (29,148) 25,852
Net loss for the period -- -- -- (2,779) (2,779)
--------- ------- -------- -------- --------
Balance, February 28, 2010 2,300,000 $ 2,300 $ 52,700 $(31,927) $ 23,073
========= ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements.
6
BUSINESS OUTSOURCING SERVICES INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(unaudited)
From Date of
Three Months Three Months Incorporation
Ended Ended (June 5, 2008) to
February 28, February 28, February 28,
2010 2009 2010
-------- -------- --------
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss for the period $ (2,779) $ (1,706) $(31,927)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
(Increase) Decrease in prepaid expenses 428 (3,000) --
Increase (Decrease) in accrued liabilities (2,078) (1,500) 3,422
Increase (Decrease) in due to stockholder -- -- 500
-------- -------- --------
Net cash used in operating activities (4,429) (6,206) (28,005)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Software development -- (9,000) (15,000)
-------- -------- --------
Cash used in investing activities -- (9,000) (15,000)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- -- 55,000
-------- -------- --------
Cash from financing activities -- -- 55,000
-------- -------- --------
Change in cash during the period (4,429) (15,206) 11,995
Cash, beginning of the period 16,424 55,000 --
-------- -------- --------
Cash, end of the period $ 11,995 $ 39,794 $ 11,995
======== ======== ========
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ -- $ -- $ --
Cash paid for interest $ -- $ -- $ --
Non cash activities:
Stock issued for services $ -- $ -- $ --
Stock issued for accounts payable $ -- $ -- $ --
Stock issued for notes payable and interest $ -- $ -- $ --
Stock issued for convertible debentures and interest $ -- $ -- $ --
Convertible debentures issued for services $ -- $ -- $ --
Warrants issued $ -- $ -- $ --
Note payable issued for finance charges $ -- $ -- $ --
Forgiveness of note payable and accrued interest $ -- $ -- $ --
Stock issued for penalty on default of convertible debenture $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements.
7
BUSINESS OUTSOURCING SERVICES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
Business Outsourcing Services Inc. ("the Company"), incorporated in the state of
Nevada on June 5, 2008, is engaged in providing online bookkeeping services to
small and medium sized companies.
The company has limited operations and is considered to be in the development
stage.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission ("SEC"), and
should be read in conjunction with the audited financial statements and notes
thereto contained in the Company's Form 10-K filed with the SEC as of and for
the period ended November 30, 2009. In the opinion of management, all
adjustments necessary in order for the financial statements to be not misleading
have been reflected herein. The results of operations for interim periods are
not necessarily indicative of the results to be expected for the full year.
FINANCIAL INSTRUMENT
The Company's financial instruments consist of cash, prepaid expenses, accounts
payable, and an amount due to a stockholder. The amount due to a stockholder is
non interest-bearing. It is management's opinion that the Company is not exposed
to significant interest, currency or credit risks arising from its other
financial instruments and that their fair values approximate their carrying
values except where separately disclosed. See Note 3 below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
8
BUSINESS OUTSOURCING SERVICES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER SHARE
Net income (loss) per common share is computed based on the weighted average
number of common shares outstanding and common stock equivalents, if not
anti-dilutive. The Company has not issued any potentially dilutive common
shares.
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward.
NOTE 3 - DUE TO STOCKHOLDER
The amount owing to stockholder is unsecured, non-interest bearing and has no
specific terms of repayment.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Shares - Authorized
The company has 50,000,000 common shares authorized at a par value of $0.001 per
share.
Common Shares - Issued and Outstanding
During the year, the company issued 2,300,000 common shares for total proceeds
of $55,000.
As at February 28, 2010, the company has no warrants or options outstanding.
9
BUSINESS OUTSOURCING SERVICES INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES
The Company provides for income taxes using an asset and liability approach..
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In the Company's opinion, it is
uncertain whether they will generate sufficient taxable income in the future to
fully utilize the net deferred tax asset. Accordingly, a valuation allowance
equal to the deferred tax asset has been recorded. The total deferred tax asset
is $7,023, which is calculated by multiplying a 22% estimated tax rate by the
cumulative NOL of $31,927.
NOTE 6 - RELATED PARTY TRANSACTION
As at February 28, 2010, there is a balance owing to a stockholder of the
Company in the amount of $500.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about the Company's ability to continue as a going
concern. Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. The financial statements do not include
any adjustments that might result from this uncertainty.
The Company's activities to date have been supported by equity financing. It has
sustained losses in all previous reporting periods with an inception to date
loss of $31,927 as of February 28, 2010. Management continues to seek funding
from its shareholders and other qualified investors to pursue its business plan.
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
Management does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow.
NOTE 9 - SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to February 28, 2010 through
the date these financial statements were submitted to the Securities and
Exchange Commission and has determined that it does not have any material
subsequent events to disclose in these financial statements.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
Certain statements, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives,
and expected operating results, and the assumptions upon which those statements
are based, are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements generally are identified by the words "believes,"
"project," "expects," "anticipates," "estimates," "intends," "strategy," "plan,"
"may," "will," "would," "will be," "will continue," "will likely result," and
similar expressions. We intend such forward-looking statements to be covered by
the safe-harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and are including this
statement for purposes of complying with those safe-harbor provisions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. Our ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse affect on our operations
and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of
capital, interest rates, competition, and generally accepted accounting
principles. These risks and uncertainties should also be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
OVERVIEW
We were incorporated in the state of Nevada on June 5, 2008 and are engaged in
providing online accounting and bookkeeping services to small and medium sized
companies who seek to save money by outsourcing these services. Our offices are
currently located at 1001 SW 5th Avenue, Suite 1100, Portland, Oregon, 97204.
Our telephone number is (503) 206-0935.
We are a development stage company that has not generated any revenue and has
had limited operations to date. From June 5, 2008 (inception) to February 28,
2010, we have incurred accumulated net losses of $31,927. As of February 28,
2010, we had total assets of $26,995 and total liabilities of $3,922. Based on
our financial history since inception, our independent auditor has expressed
doubt as to our ability to continue as a going concern.
We plan to use a secure web site for our services and to facilitate the exchange
of information between our clients and ourselves.
Prospective clients who visit our web will find comprehensive information
regarding the services we offer. If they so choose, prospective clients may also
register for our services through the same website. Our products and services
will be delivered and/or rendered through a "Client Portal" on our web site.
Upon registration, we will offer each client a one-hour telephone "Needs
Analysis" to start each client engagement. The Needs Analysis will be conducted
at a pre-arranged time and date before we commence any work for the client. The
Needs Analysis will enable us to assess which services best suit the individual
needs of each client. This will also enable us to provide each client with a
more accurate quote for the services rendered for first three months of
engagement. The initial three month period is further intended to allow us to
develop a foundation for ongoing discussions with the client about what they can
expect from us and the services that we are able to provide.
11
PLAN OF OPERATION
Below is a summary of the various phases of our plan for the next twelve (12)
months in order to execute our business plan. We must complete all the items
listed below in order for us to generate revenues.
SECOND FISCAL QUARTER 2010 - During this time, we intend to conclude discussions
with a development contractor for the establishment and creation of our website,
design the specifications of our system and procure a web hosting company. We
expect that this process will take roughly one month. We also intend to proceed
with acquiring office space, obtain telephone and internet service. At the end
of the fourth quarter of 2010, we intend to complete the "information only"
version of our website in order to build interest in the company during the
development phase and encourage web site visitors to return at a later date.
THIRD FISCAL QUARTER 2010 - During this period, we intend to continue with our
web site development work, including the "Client Portal" and the "Administrative
Module." To further strengthen our future marketing campaign, we intend to study
our Google Adwords marketing program in order to determine whether it is
necessary for the Company to consider alternate marketing programs. We also
anticipate developing an orientation program for our staff members during the
first quarter of 2011. Lastly, we anticipate that we will complete the
development of our software during this period.
FOURTH FISCAL QUARTER OF 2010 - During the fourth quarter of 2010, the Company
will continue the development and testing of all aspects of our website and
complete the orientation and training program of our staff. We also anticipate
using this period to review and modify, if found to be necessary, the benchmarks
set during the previous (2) quartersand make any adjustments thereto in
anticipation of our launch in the second quarter of 2011.
FIRST FISCAL QUARTER OF 2011 - We anticipate completing all development work on
our website during the second quarter of 2011. We also intend to initial the
beta testing of our Client Portal with potential clients, as well as test the
Administrative Portal with our contractors. We will make any modifications to
our Client Portals and Administrative Portals based on the outcome of our beta
testing and we anticipate that any such modifications will be completed during
this period. During this time, we also intend to begin hiring the necessary
staff for our operations, as well as launching an aggressive marketing campaign
for our product. Lastly, we anticipate launching our website towards the end of
the second quarter of 2011.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED FEBRUARY 28, 2010 AND 2009, AND
THE PERIOD FROM INCEPTION (JUNE 5, 2008) TO FEBRUARY 28, 2010
We did not earn any revenues from inception through the period ending February
28, 2010. We incurred net operating expenses in the amount of $2,779 for the
three months ended February 28, 2010 compared with $1,706 for the three months
ended February 28, 2009. We incurred net operating expenses of $31,927 for the
period from our inception on June 5, 2008 to February 28, 2010. Our operating
expenses incurred for the three months ended February 28, 2010 included $1,750
for accounting and legal fees and $1,029 in miscellaneous expenses compared with
$1,500 and $206 for the respective expenses for the respective periods ended
February 28, 2009. Our operating expenses incurred for the period from our
inception on June 5, 2008 to February 28, 2010 included $25,310 for accounting
and legal fees, $6,117 in miscellaneous fees and $500 in incorporation costs.
Thus, our net loss was $2,779 for the three months ended February 28, 2010 and
$1,706 for the three months ended February 28, 2009. We anticipate our operating
expenses will increase as we undertake our plan of operations. The increase will
be attributable to undertaking operations and the professional fees that we will
incur in connection with becoming a reporting company under the Securities
Exchange Act of 1934.
12
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 2010, we had current assets in the amount of $11,995,
consisting solely of cash. Our current liabilities as of February 28, 2010 were
$3,922. Thus our working capital on February 28, 2010 was $8,073.
Our cash used in operating activities was $4,429 and $6,206 for the three months
ended February 28, 2010 and 2009. Our cash used in operating activities was
$28,005 for the period from inception on June 5, 2008 to February 28, 2010.
Our cash used in investing activities was $Nil and $9,000 for the three months
ended February 28, 2010 and 2009. Our cash used in operating activities was
$15,000 for the period from inception on June 5, 2008 to February 28, 2010.
Our cash provided by financing activities was $Nil and $Nil for the three months
ended February 28, 2010 and 2009. Our cash provided by operating activities was
$55,000 for the period from inception on June 5, 2008 to February 28, 2010.
We have not attained profitable operations and are dependent upon obtaining
financing to pursue our business plan over the next twelve months. If we do not
generate revenue sufficient to sustain operations, we may not be able to
continue as a going concern.
OFF BALANCE SHEET ARRANGEMENTS
As of February 28, 2010, there were no off balance sheet arrangements.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in the notes to the
financial statements, we have no established source of revenue. Our auditors
have expressed substantial doubt about our ability to continue as a going
concern. Without realization of additional capital, it would be unlikely for us
to continue as a going concern. The financial statements do not include any
adjustments that might result from this uncertainty.
Our activities to date have been supported by equity financing. We have
sustained losses in all previous reporting periods with an inception to date
loss of $31,927 as of February 28, 2010. Management continues to seek funding
from its shareholders and other qualified investors to pursue our business plan.
In the alternative, we may be amenable to a sale, merger or other acquisition in
the event such transaction is deemed by management to be in the best interests
of the shareholders.
CRITICAL ACCOUNTING POLICIES
In December 2001, the SEC requested that all registrants list their most
"critical accounting polices" in the Management Discussion and Analysis. The SEC
indicated that a "critical accounting policy" is one which is both important to
the portrayal of a company's financial condition and results, and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. We believe that the following accounting policies fit this
definition.
13
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared on
the accrual basis of accounting in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission ("SEC"), and should be read in conjunction
with the audited financial statements and notes thereto contained in the
Company's annual report filed with the SEC on Form 10-K. In the opinion of
management, all adjustments necessary in order to make the financial statements
not misleading have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year. Notes to the financial statements which would substantially duplicate
the disclosure contained in the audited financial statements as of and for the
periods ended November 30, 2009 as reported in Form 10-K, have been omitted.
ACCOUNTING BASIS
These financial statements are prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of
America.
FINANCIAL INSTRUMENT
The Company's financial instrument consists of amount due to stockholder.
The amount due to stockholder is non interest-bearing. It is management's
opinion that the Company is not exposed to significant interest, currency or
credit risks arising from its other financial instruments and that their fair
values approximate their carrying values except where separately disclosed. See
Note 3 below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
LOSS PER SHARE
Net income (loss) per common share is computed based on the weighted average
number of common shares outstanding and common stock equivalents, if not
anti-dilutive. The Company has not issued any potentially dilutive common
shares.
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
14
INCOME TAXES
The Company provides for income taxes under Statement of Financial Accounting
Standards No. 109,"Accounting for Income Taxes." (ASC 740-10). SFAS No. 109 (ASC
740-10) requires the use of an asset and liability approach in accounting for
income taxes.
SFAS No. 109 (ASC 740-10) requires the reduction of deferred tax assets by a
valuation allowance if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
realized. No provision for income taxes is included in the statement due to its
immaterial amount, net of the allowance account, based on the likelihood of the
Company to utilize the loss carry-forward.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The adoption of recently issued accounting pronouncements is not expected to
have a material effect on our current financial position, results or operations,
or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
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.
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.
15
As of February 28, 2010 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 Chief Executive Officer in connection with the review of our financial
statements as of February 28, 2010.
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.
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 February 28, 2010. Additionally, we plan to test our updated
controls and remediate our deficiencies by February 28, 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, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding. We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of 5% or more of our voting securities are adverse to us or
have a material interest adverse to us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to our security holders for a vote, through the
solicitation of proxies or otherwise, during the quarterly period ended February
28, 2010.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
17
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Business Outsourcing Services, Inc.
Date: April 15, 2010
By: /s/ Guilbert Cuison
--------------------------------------
Guilbert Cuison
Title: President, Secretary Director
18