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| KRTF.OB > SEC Filings for KRTF.OB > Form 10KSB on 9-Jan-2009 | All Recent SEC Filings |
9-Jan-2009
Annual Report
The following discussion contains forward-looking statements regarding us, our business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: our ability to successfully develop new products and services for new markets; the impact of competition on our revenues, changes in law or regulatory requirements that adversely affect or preclude clients from using us for certain applications; delays our introduction of new products or services; and our failure to keep pace with our competitors.
When used in this discussion, words such as "believes", "anticipates", "expects", "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.
Results of Operations
Our accountants have expressed doubt about our ability to continue as a going concern as a result of our history of net loss. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully develop a catering business and our ability to generate revenues.
We began our operations in May, 2005. For the fiscal year ended September 30, 2008, we had sales of $181,455, compared to sales of $454,514 for year ended September 30, 2007.
Costs of goods include all direct costs incurred in providing services. Direct costs consist of food, beverages, and catering supplies. Our costs of goods for the fiscal year ended September 30, 2008 was $103,186 or approximately 56.9 % of sales. Our costs of goods for the fiscal year ended September 30, 2007 was $252,046 or approximately 55.5 % of sales.
The difference between total sales and costs of goods is gross profit. Our gross profit for the fiscal year ended September 30, 2008 was $121,769, which included management fee revenue. Our gross profit for the fiscal year ended September 30, 2007 was $202,468, which did not include management fee revenue.
In 2008, we began a management project of a restaurant in Durango, Colorado. This restaurant is known as the Swing at Dalton Ranch Restaurant. We receive a management fee of $ 4,000 per month under an oral management agreement, which is terminable at will.
The major components of operating expenses include salaries and associated payroll costs, professional fees, rent and telephone expenses.
Operating expenses, which includes depreciation and general and administrative expenses for the fiscal year ended September 30, 2008 were $139,069. Operating Expenses for the fiscal year ended September 30, 2007 were $348,510. Our general and administrative expenses were the single largest item of our operating expenses. The major components of these general and administrative expenses were salaries and associated payroll costs and professional fees. While our general and administrative expenses will continue to be our largest expense item, we believe that this expense will stabilize in the coming fiscal year but will remain largely composed of salaries and associated payroll costs.
We had a net loss of $28,106 ($0.00 per share) for the fiscal year ended September 30, 2008, compared to a net loss of $151,601 ($0.01 per share) for the fiscal year ended September 30, 2007. While we have been able to substantially reduce our losses, we have had several years of losses and our losses may continue into the future.
We believe that overhead cost in current operations should remain fairly constant as sales improve. Each additional sale and correspondingly the gross profit of such sale have minimal offsetting overhead cost.
Liquidity and Capital Resources
As of September 30, 2008, we had cash or cash equivalents of $463, compared to cash or cash equivalents of $9,530 at September 30, 2007.
Net cash used in operating activities was $20,660 for the fiscal year ended September 30, 2008, compared to $115,811 for the fiscal year ended September 30, 2007. We anticipate that overhead costs in current operations will remain fairly constant as sales improve.
Cash flows provided by investing activities were $1,750 for the fiscal year ended September 30, 2008, compared to cash flows used in investing activities of $25,805 for the fiscal year ended September 30, 2007. These activities represent the purchase of equipment for our operations in 2007 and the sale of equipment in 2008.
Cash flows provided by financing activities were $9,843 for the fiscal year ended September 30, 2008, compared to cash flows provided by financing activities of $28,417 for the fiscal year ended September 30, 2007. The cash flows in 2007and 2008 were each related to borrowings to finance our operations.
Over the next twelve months we do not plan to have any material capital costs.
Our recent public offering provided sufficient capital in the short term for our current level of operations. However, we anticipate needing to raise additional capital resources in the next twelve months. Until our current operations become cash flow positive, our officers and directors will fund the operations to continue the business. At this time we have no other resources on which to get cash if needed without their assistance and no definitive plans to do raise additional capital.
Our principal source of liquidity is our operations. Our variation in sales is based upon the level of our catering event activity and will account for the difference between a profit and a loss. Also business activity is closely tied to the economy of Colorado and the U.S. economy. A slow down in entertaining activity will have a negative impact to our business. In any case, we try to operate with minimal overhead. Our primary activity will be to seek to expand the number of catering events and, consequently, our sales. If we succeed in expanding our customer base and generating sufficient sales, we will become profitable. We cannot guarantee that this will ever occur. Our plan is to build our Company in any manner which will be successful.
Plan of Operation
We will attempt to operate for the coming fiscal year at a profit or at break even.
Currently, we are conducting business in only one location in the Durango, Colorado area. We have no plans to expand into other locations or areas. We believe that we can achieve profitability as we are presently organized with sufficient catering business.
If we are not successful in our operations we will be faced with several options:
1. Cease operations and go out of business;
2. Continue to seek alternative and acceptable sources of capital;
3. Bring in additional capital that may result in a change of control; or
4. Identify a candidate for acquisition that seeks access to the public marketplace and its financing sources.
Our recent public offering provided sufficient capital in the short term for our current level of operations However, we anticipate needing to raise additional capital resources in the next twelve months. Until our current operations become cash flow positive, our officers and directors will fund the operations to continue the business. At this time we have no other resources on which to get cash if needed without their assistance and no definitive plans to do raise additional capital.
To date, we have never had any discussions with any possible acquisition candidate nor have we any intention of doing so.
Proposed Milestones to Implement Business Operations
At the present time, we are operating from one location in the Durango, Colorado area. Our plan is to operate in a profitable manner. We estimate that we must generate at least $50,000 in sales per month to be profitable. We generated approximately $15,000 in sales per month for the fiscal year ended September 30, 2008.We generated approximately $38,000 in sales per month for the fiscal year ended September 30, 2007.
Our goal is to be profitable or at break even by the end of our next fiscal year, assuming sufficient sales.
We anticipate the need to raise additional capital resources in the next twelve months unless we are more successful than we have anticipated, and we determine to expand further go into other cities in this period. In such a case, we expect the source of such funding to be generated internally or and through another offering.
No commitments to provide additional funds have been made by management or current shareholders. There is no assurance that additional funds will be made available to us on terms that will be acceptable, or at all, if and when needed. We expect to continue to generate and increase sales, but there can be no assurance we will generate sales sufficient to continue operations or to expand.
We also are planning to rely on the possibility of referrals from customers and will strive to satisfy our customers. We believe that referrals will be an effective form of advertising because of the quality of service that we bring to customers. We believe that satisfied customers will bring more and repeat customers.
In the next 12 months, we do not intend to spend any substantial funds on research and development and do not intend to purchase any large equipment.
Recently Issued Accounting Pronouncements
We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows.
Seasonality
We have found that our sales are impacted by seasonal demands for our services, with greater sales coming at the end of the calendar year and around major holidays.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to bad debts, impairment of intangible assets and long lived assets, contractual adjustments to revenue, and contingencies and litigation. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions or results of operations.
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