UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X . QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2011
. TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number 333-158584
VETERANS IN PACKAGING, INC. |
(Exact Name of Registrant as Specified in its Charter) |
Nevada |
| 57-1221013 |
(State or Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
48 Zephyr Lane, Springfield, MA |
| 01128 |
| ||
(Address of Principal Executive Offices) |
| (Zip Code) |
413-796-8396 |
(Issuer's telephone number, including area code) |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 . No X .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes . No X .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer . Accelerated Filer . Non-Accelerated Filer . Smaller Reporting Company X .
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) (check one): Yes . No X .
The number of shares of the Registrants Common Stock outstanding as of May 16, 2011 was 9,000,000.
1
VETERANS IN PACKAGING, INC.
Table of Contents
PART I-- FINANCIAL INFORMATION
|
| Page |
Item 1. | Financial Statements: |
|
| Balance Sheets as of March 31, 2010 and December 31, 2009 (Unaudited) | 3 |
| Statements of Operations for the three months ended March 31, 2010 and 2009 (Unaudited) | 4 |
| Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (Unaudited) | 5 |
| Notes to Financial Statements (Unaudited) | 6 |
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 7 |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 10 |
Item 4. | Control and Procedures | 10 |
PART II-- OTHER INFORMATION
Item 1 | Legal Proceedings | 10 |
Item 1A | Risk Factors | 10 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
Item 3. | Defaults Upon Senior Securities | 17 |
Item 4. | (Removed and Reserved) | 17 |
Item 5. | Other Information | 17 |
Item 6. | Exhibits | 17 |
2
ITEM 1. Financial Information
VETERANS IN PACKAGING, INC.
Balance Sheets
(Unaudited)
|
| March 31, 2011 |
| December 31, 2010 |
|
|
|
|
|
ASSETS |
|
|
|
|
Current Assets: |
|
|
|
|
Cash | $ | 67,415 | $ | 28,485 |
Accounts receivable |
| 164,898 |
| 69,768 |
Other current assets |
| 7,775 |
| - |
Total current assets |
| 240,088 |
| 98,253 |
|
|
|
|
|
|
|
|
|
|
Vehicle - net of accumulated depreciation of $9,900 and $9,000, respectively |
| 2,139 |
| 3,039 |
Total |
| 2,139 |
| 3,039 |
|
|
|
|
|
TOTAL ASSETS | $ | 242,227 | $ | 101,292 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
|
|
|
|
|
Current Liabilities: |
|
|
|
|
Accounts payable | $ | 160,377 | $ | 48,424 |
Accrued expenses |
| 25,039 |
| 14,408 |
Total current liabilities |
| 185,416 |
| 62,832 |
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
Preferred stock: $0.001 par value; 1,000,000 shares authorized; no shares issued or outstanding |
| - |
| - |
Common stock: $0.001 par value; 99,000,000 shares authorized; 9,000,000 shares issued and outstanding |
| 9,000 |
| 9,000 |
Additional paid-in capital |
| 30,813 |
| 30,813 |
Retained earnings (accumulated deficit) |
| 16,998 |
| (1,353) |
Total stockholders equity |
| 56,811 |
| 38,460 |
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | $ | 242,227 | $ | 101,292 |
|
|
|
|
|
See accompanying notes to the financial statements. |
3
VETERANS IN PACKAGING, INC.
Statements of Operations
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
|
| 2011 |
| 2010 |
|
|
|
|
|
Revenues |
|
|
|
|
Sales | $ | 381,343 | $ | 267,286 |
Commissions |
| 36,556 |
| 30,827 |
|
|
|
|
|
Total revenues |
| 417,899 |
| 298,113 |
|
|
|
|
|
Cost of goods sold |
| 294,930 |
| 209,305 |
|
|
|
|
|
Gross profit |
| 122,969 |
| 88,808 |
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
Compensation |
| 69,958 |
| 52,318 |
General and administrative |
| 25,447 |
| 27,500 |
Total operating expenses |
| 95,405 |
| 79,818 |
|
|
|
|
|
Income Before Taxes |
| 27,564 |
| 8,990 |
|
|
|
|
|
Income taxes |
| 9,213 |
| - |
|
|
|
|
|
Net Income | $ | 18,351 | $ | 8,990 |
|
|
|
|
|
Net income per common share - basic and diluted | $ | 0.00 | $ | 0.00 |
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted |
| 9,000,000 |
| 9,000,000 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the financial statements. |
4
VETERANS IN PACKAGING, INC.
Statements of Cash Flows
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
5
VETERANS IN PACKAGING, INC.
Notes to Financial Statements (Unaudited)
NOTE 1 ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Veterans In Packaging, Inc. was incorporated under the laws of the Commonwealth of Massachusetts on February 11, 2005 and became a corporation in the State of Nevada on January 7, 2009. The Company sells protective packaging solutions for product shipment principally to defense contractors in New England.
Basis of Presentation
Veterans in Packaging, Inc. prepared these financial statements according to the instructions for Form 10-Q. Therefore, the financial statements do not include all disclosures required by generally accepted accounting principles. However, Veterans in Packaging< Inc. has recorded all transactions and adjustments necessary to present fairly the financial statements included in this Form 10-Q. The adjustments made are normal and recurring. The following notes describe only the material changes in accounting policies, account details or financial statement notes during the first three months of 2011. Therefore, please read these financial statements and notes to the financial statements together with the audited financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2010. The income statement for the three months ended March 31, 2011 cannot necessarily be used to project results for the full year.
Recently Issued Accounting Pronouncements
There were no new accounting pronouncements that had a significant impact on the Companys operating results or financial position.
NOTE 2 SIGNIFICANT CUSTOMERS
A significant portion of the Companys revenues is derived from a limited number of unrelated customers. For the three months ended March 31, 2011, all of its commissions were earned from one unrelated company. Three unrelated customers comprised 92.5% of its sales revenues, with the individual customers comprising 44.2%, 24.2% and 24.1% of total revenues. For the three months ended March 31, 2010, its commissions were earned from two unrelated companies which individually comprised 73% and 27%, respectively, of the total. One unrelated customer comprised 74.8% of its sales revenues. The Company has no ongoing agreements with any of these companies. The loss of any one or group of major customers would have a material adverse impact on the Companys operations.
NOTE 3 SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet date of March 31, 2011 through May 16, 2011, the date that these financial statements were issued. The Management of the Company determined that there were no reportable events that occurred during that subsequent period to be disclosed or recorded.
6
ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
Except for the historical information contained herein, the matters addressed in this Item 2 constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are subject to a variety of risks and uncertainties, including those discussed below under the heading "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those anticipated by the Company's management. The Private Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe harbor" provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the Act. The Company undertakes no obligation to publicly release the results of any revisions to its forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. The Company cautions readers that important factors may affect the Companys actual results and could cause such results to differ materially from forward-looking statements made by or on behalf of the Company. These factors include the Companys lack of historically profitable operations, dependence on key personnel, the success of the Companys business, ability to manage anticipated growth and other factors identified in the Company's filings with the Securities and Exchange Commission, press releases and/or other public communications. Unless the context otherwise requires, the words "AI," the "Company," "we," "us" and "our" refer to AI Document Service Inc.
This management's discussion and analysis should be read in conjunction with the managements discussion included in the Companys Annual report on Form 10-K for the fiscal year ended December 31. 2010, previously filed with Securities and Exchanges Commission.
Operations
A summary of our operations for the three months ended March 31, 2011 and 2010 follows:
|
| 2011 |
| 2010 |
|
|
|
|
|
Revenues |
|
|
|
|
Sales | $ | 381,343 | $ | 267,286 |
Commissions |
| 36,556 |
| 30,827 |
|
|
|
|
|
Total revenues |
| 417,899 |
| 298,113 |
|
|
|
|
|
Cost of goods sold |
| 294,930 |
| 209,305 |
|
|
|
|
|
Gross profit |
| 122,969 |
| 88,808 |
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
Compensation |
| 69,958 |
| 52,318 |
General and administrative |
| 25,447 |
| 27,500 |
Total operating expenses |
| 95,405 |
| 79,818 |
|
|
|
|
|
Income Before Taxes | $ | 27,564 | $ | 8,990 |
Revenues We marketed and priced our services and products in the same way in 2011 as in 2010. However, we received significant increases in sales from three major customers which accounted for much of the sales increase in 2011.
A significant portion of the Companys revenues is derived from a limited number of unrelated customers. For the three months ended March 31, 2011, all of its commissions were earned from one unrelated company. Three unrelated customers comprised 92.5% of its sales revenues, with the individual customers comprising 44.2%, 24.2% and 24.1% of total revenues. For the three months ended March 31, 2010, its commissions were earned from two unrelated companies which individually comprised 73% and 27%, respectively, of the total. One unrelated customer comprised 74.8% of its sales revenues. The Company has no ongoing agreements with any of these companies. The loss of any one or group of major customers would have a material adverse impact on the Companys operations.
7
Cost of sales Cost of sales is entirely a function of the number of proposals we win and the mixture of the products covered by the orders.
Compensation was paid substantially to Mr. Peplinski.
General and administrative consist of the following:
|
| 2011 |
| 2010 |
|
|
|
|
|
Advertising | $ | 10,000 | $ | 10,500 |
Automobile and travel |
| 3,919 |
| 700 |
Charitable contributions |
| 185 |
| - |
Computer |
| 69 |
| 241 |
Insurance |
| 1,780 |
| 1,714 |
Entertainment |
| 348 |
| 636 |
Office supplies |
| 660 |
| 223 |
Professional fees |
| 6,566 |
| 9,477 |
Telephone |
| 870 |
| 982 |
Depreciation |
| 900 |
| 900 |
Other |
| 150 |
| 2,127 |
| $ | 25,447 | $ | 27,500 |
Other
As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in Liquidity below.
Liquidity
VIP will pay all costs relating to our offering which became effective in December 2010. These costs are estimated at $65,000, the majority of which will become payable if and when we receive a trading symbol. This amount, when due, will be paid as and when necessary and required or otherwise accrued on the books and records of VIP until we are able to pay the full amount due either from revenues or loans from our president. Absent sufficient revenues to pay these amounts within six months of the date of the effective date of our Registration Statement (assuming that we have received a trading symbol), our president has agreed to loan us the funds to cover the balance of outstanding professional and related fees relating to our prospectus to the extent that such liabilities cannot be extended or satisfied in other ways and our professionals insist upon payment. If and when loaned, the loan will be evidenced by a noninterest-bearing unsecured corporate note to be treated as a loan until repaid, if and when VIP has the financial resources to do so. A formal written arrangement exists with respect to our presidents commitment to loan funds for this purpose and, accordingly, the agreement between VIP, our president and our counsel is binding upon all parties.
Private capital, if sought, will be sought from former business associates of our founder or private investors referred to us by those business associates. To date, we have not sought any funding source and have not authorized any person or entity to seek out funding on our behalf. If a market for our shares ever develops, of which there can be no assurances, we may use restricted shares of our common stock to compensate employees/consultants and independent contractors wherever possible.
Our fixed costs of operations are low. We can control our variable costs, including current payroll costs of our president. We do not have to maintain much inventory and incur operating costs when new sales orders are received. The revenue from the sales orders match the related costs. If the reporting costs of being a public company exceed the cash being generated from operations, we can either (i) reduce our presidents salary or (ii) after a year following the effective date of the Registration Statement, we could elect to suspend our reporting obligations under Section 15(d) of the Securities Exchange Act of 1934 provided that we have fewer than 300 shareholders. Therefore, we believe that operations are generating sufficient cash to continue operations for the next 12 months from the date of this prospectus provided that our costs of being a public company remain equal to or below the maximum estimate provided below.
8
We have embarked upon an effort to become a public company and, by doing so, have incurred and will continue to incur additional significant expenses for legal, accounting and related services. Once we become a public entity, subject to the reporting requirements of the Exchange Act of 1934, we will incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses including annual reports and proxy statements, if required. We estimate that these costs will range up to $50,000 per year for the next few years and will be higher if our business volume and activity increases. These obligations will reduce our ability and resources to expand our business. We hope to be able to use our status as a public company to increase our ability to use noncash means of settling obligations and compensate independent contractors who provide professional services to us, although there can be no assurances that we will be successful in any of those efforts. We will reduce the compensation levels paid to management if there is insufficient cash generated from operations to satisfy these costs.
There are no current plans to seek private investment. We do not have any current plans to raise funds through the sale of securities except as set forth herein. We hope to be able to use our status as a public company to enable us to use non-cash means of settling obligations and compensate persons and/or firms providing services to us, although there can be no assurances that we will be successful in any of those efforts. We believe that the perception that many people have of a public company make it more likely that they will accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own beliefs. Issuing shares of our common stock to such persons instead of paying cash to them would increase our chances to expand our business. Having shares of our common stock may also give persons a greater feeling of identity with us which may result in referrals. However, these actions, if successful, will result in dilution of the ownership interests of existing shareholders, may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing managements ability to maintain control of VIP because the shares may be issued to parties or entities committed to supporting existing management. VIP may offer shares of its common stock to settle a portion of the professional fees incurred in connection with its registration statement. No negotiations have taken place with any professional and no assurances can be made as to the likelihood that any professional will accept shares in settlement of obligations due them. There are no other significant liabilities outside of standard vendor obligations outstanding at March 31, 2011.
Off Balance Sheet Arrangements
We do not have any transactions, arrangements and other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provide off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in swap agreements, or outsourcing of research and development services, that could expose us to liability that is not reflected on the face of our financial statements.
Recently Issued Accounting Pronouncements
There were no new accounting pronouncements that had a significant impact on the Companys operating results or financial position.
Critical Accounting Policies
The preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 2 to the financial statements included in the Companys Annual Report on Form 10K includes a summary of the significant accounting policies and methods used in the preparation of our financial statements.
9
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a smaller reporting company, as defined by Rule 229.10(f)(1).
ITEM 4
CONTROLS AND PROCEDURES
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting 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 generally accepted accounting principles, and
·
that our receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
As of March 31, 2011, our management conducted an assessment of the effectiveness of the Company's internal control over financial reporting. In making this assessment, management followed an approach based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (known as COSO). Based on this assessment, management determined that the Company's internal control over financial reporting contained certain significant weaknesses as of March 31, 2011 because of the Companys lack of resources and the lack of financial and record-keeping experience and knowledge of officers as of that date. Improvements have been implemented which Management believes result in the Company's internal control over financial reporting being effective.
This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this quarterly report.
ITEM 1 - LEGAL PROCEEDINGS
No legal proceedings were initiated by or served upon the Company in the three-month period ended March 31, 2011.
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition.
ITEM 1A RISK FACTORS
If any of the following risks develop into actual events, then our business, financial condition, results of operations and/or prospects could be materially adversely affected. If that happens, the market price of our common stock, if any, could decline, and investors may lose all or part of their investment.
10
Risks Related to the Business
1.
VIP is and will continue to be completely dependent on the services of our founder and president, Edward Peplinski, the loss of whose services may cause our business operations to cease, and we will need to engage and retain qualified employees and consultants to further implement our strategy.
VIPs operations and business strategy are completely dependent upon the knowledge, status as a military veteran and reputation of Edward Peplinski. We receive most of our business because of our status as a Veteran-Owned Small Business. Public Law 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999, amended the Small Business Act to establish new assistance programs for small businesses owned and controlled by veterans (VOSB) and small businesses owned and controlled by service-disabled veterans. See also Business Direct Sales
Mr. Peplinski is under no contractual obligation to remain employed by us. If he should choose to leave us for any reason or if he becomes ill and is unable to work for an extended period of time before we have hired additional personnel, our operations will likely fail. Even if we are able to find additional personnel, it is uncertain whether we could find someone who could develop our business along the lines that it currently operates. We will fail without the services of Mr. Peplinski or an appropriate replacement(s).
We intend to acquire key-man life insurance on the life of Mr. Peplinski naming us as the beneficiary when and if we obtain the resources to do so and he remains insurable. We have not yet procured such insurance, and there is no guarantee that we will be able to obtain such insurance in the future. Accordingly, it is important that we are able to attract, motivate and retain highly qualified and talented personnel and independent contractors.
2.
A significant portion of our revenues was derived from sales to and commissions from a small number of unrelated companies.
A significant portion of our revenues is derived from a limited number of unrelated customers. In 2010 and 2009, all of our commissions were earned from the same two unrelated companies. In 2010. two unrelated customers comprised 57.3% and 17.9% of our sales revenues. In 2009. two unrelated customers comprised 62.8% and 9.2% of our sales revenues. We have no ongoing agreements with any of these companies. The loss of any one or group of these companies would have a material adverse impact on our operations.
For the three months ended March 31, 2011, all of our commissions were earned from one unrelated company. Three unrelated customers comprised 92.5% of our sales revenues, with the individual customers comprising 44.2%, 24.2% and 24.1% of total revenues. For the three months ended March 31, 2010, our commissions were earned from two unrelated companies which individually comprised 73% and 27%, respectively, of the total. One unrelated customer comprised 74.8% of our sales revenues.
We have no ongoing agreements with any of these companies. The loss of any one or group of these companies would have a material adverse impact on our operations.
3.
Edward J. Peplinski, our chief executive officer, chief financial officer and chief accounting officer has no meaningful accounting or financial reporting education or experience and, accordingly, our ability to meet Exchange Act reporting requirements on a timely basis will be dependent to a significant degree upon others.
Edward J. Peplinski has no meaningful financial reporting education or experience. He is and will be heavily dependent on advisors and consultants. As such, there is risk about our ability to comply with all financial reporting requirements accurately and on a timely basis.
4.
The costs of being a public company could result in us being unable to continue as a going concern.
As a public company, we will have to comply with numerous financial reporting and legal requirements, including those pertaining to audits and internal control. The costs of this compliance could be significant. If our revenues do not increase and/or we cannot satisfy many of these costs through the issuance of our shares, we may be unable to satisfy these costs in the normal course of business which would result in our being unable to continue as a going concern.
5.
We intend to become subject to the periodic reporting requirements of the Securities Exchange Act of 1934 that will require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit.
11
We are required to file periodic reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time because factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit.
We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees.
6.
Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the 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 generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and (iii) 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. Our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.
7.
Having only two directors limits our ability to establish effective independent corporate governance procedures and increases the control of our president.
We have only two directors (including our president). Accordingly, we cannot establish board committees comprised of independent members to oversee functions like compensation or audit issues. In addition, a tie vote of board members is decided in favor of the chairman, which gives him significant control over all corporate issues.
Until we have a larger board of directors that would include some independent members, if ever, there will be limited oversight of our presidents decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of minority shareholders.
8.
Mr. Peplinski, our president, has made all decisions concerning his compensation.
There is no employment contract with Mr. Peplinski at this time. Nor are there any agreements for compensation in the future. Mr. Peplinskis compensation has not been fixed or based on any percentage calculations. He has made all decisions determining the amount and timing of his compensation. He will continue making decisions about the timing and amount of his compensation until we have a sufficient number of directors to establish a compensation committee of the board of directors. Mr. Peplinskis decisions about his compensation may not be in the best interests of other shareholders.
Risks Related to Our Common Stock
1.
The Company is selling the shares that were registered on a Form S-1 without an underwriter and may not be able to sell any of the shares offered herein.
The common shares that were registered on a Form S-1 that was declared effective in December 2010 are being offered on our behalf by Edward Peplinski, president of the Company, on a best-efforts basis. No broker-dealer has been retained as an underwriter and no broker-dealer is under any obligation to purchase any common shares. There are no firm commitments to purchase any of the shares in this offering. Consequently, there is no guarantee that the Company, through its president, is capable of selling all, or any, of the common shares offered hereby.
12
2.
Shareholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through issuance of additional shares of our common stock.
We have no committed source of financing. Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued 90,000,000 shares. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing shareholders, may further dilute common stock book value, and that dilution may be material.
3.
The interests of shareholders may be hurt because we can issue shares of our common stock to individuals or entities that support existing management with such issuances serving to enhance existing managements ability to maintain control of our Company.
Our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued common shares. Such issuances may be issued to parties or entities committed to supporting existing management and the interests of existing management which may not be the same as the interests of other shareholders. Our ability to issue shares without shareholder approval serves to enhance existing managements ability to maintain control of our Company.
4.
Our articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability that may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors.
Our articles of incorporation and applicable Nevada law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person's written promise to repay us therefor if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us that we may be unable to recoup.
We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develops.
5.
Currently, there is no established public market for our securities, and there can be no assurances that any established public market will ever develop or that our common stock will be quoted for trading and, even if quoted, it is likely to be subject to significant price fluctuations.
There is and has never been any established trading market for our common stock, and there is currently no established public market whatsoever for our securities. A market maker has filed an application with FINRA on our behalf so as to be able to quote the shares of our common stock on the OTCBB maintained by FINRA. There can be no assurance that the market makers application will be accepted by FINRA nor can we estimate as to the time period that the application will require. We are not permitted to file such application on our own behalf. If the application is accepted, there can be no assurances as to whether:
i.
any market for our shares will develop;
ii.
the prices at which our common stock will trade; or
iii.
the extent to which investor interest in us will lead to the development of an active, liquid trading market. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors.
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If we become able to have our shares of common stock quoted on the OTCBB, we will then try, through a broker-dealer and its clearing firm, to become eligible with the Depository Trust Company ("DTC") to permit our shares to trade electronically. If an issuer is not DTC-eligible, then its shares cannot be electronically transferred between brokerage accounts, which, based on the realities of the marketplace as it exists today (especially the OTCBB), means that shares of a company will not be traded (technically the shares can be traded manually between accounts, but this takes days and is not a realistic option for companies relying on broker dealers for stock transactions - like all the companies on the OTCBB). What this boils down to is that while DTC-eligibility is not a requirement to trade on the OTCBB, it is a necessity to process trades on the OTCBB if a companys stock is going to trade with any volume. There are no assurances that our shares will ever become DTC-eligible or, if they do, how long it will take.
In addition, our common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for our common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common stock is fully distributed and an orderly market develops in our common stock, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these Risk Factors, investor perception of VIP and general economic and market conditions. No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock.
Because of the anticipated low price of the securities being registered, many brokerage firms may not be willing to effect transactions in these securities. Purchasers of our securities should be aware that any market that develops in our stock will be subject to the penny stock restrictions.
6.
Any market that develops in shares of our common stock will be subject to the penny stock regulations and restrictions pertaining to low priced stocks that will create a lack of liquidity and make trading difficult or impossible.
The trading of our securities, if any, will be in the over-the-counter market which is commonly referred to as the OTCBB as maintained by FINRA. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.
Rule 3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $4.00 per share or with an exercise price of less than $4.00 per share, subject to a limited number of exceptions which are not available to us. It is likely that our shares will be considered to be penny stocks for the immediately foreseeable future. This classification severely and adversely affects any market liquidity for our common stock.
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and 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 obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that 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 prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:
·
the basis on which the broker or dealer made the suitability determination, and
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading and 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. Additionally, 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.
Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if and when our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares, in all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, find it difficult to sell their securities.
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7.
The market for penny stocks has experienced numerous frauds and abuses that could adversely impact investors in our stock.
Company management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:
·
Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
·
Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
·
"Boiler room" practices involving high pressure sales tactics and unrealistic price projections by sales persons;
·
Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
·
Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
8.
Any trading market that may develop may be restricted by virtue of state securities Blue Sky laws that prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states.
There is currently no established public market for our common stock, and there can be no assurance that any established public market will develop in the foreseeable future. Transfer of our common stock may also be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as Blue Sky laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions prohibit the secondary trading of our common stock. We currently do not intend to and may not be able to qualify securities for resale in approximately 17 states which do not offer manual exemptions and require shares to be qualified before they can be resold by our shareholders. Accordingly, investors should consider the secondary market for our securities to be a limited one. See also Plan of Distribution-State Securities-Blue Sky Laws.
9.
Our board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and with the ability to affect adversely stockholder voting power and perpetuate their control over us.
Our articles of incorporation allow us to issue shares of preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.
10.
The ability of our president to control our business may limit or eliminate minority shareholders ability to influence corporate affairs.
Upon the completion of the offering of 1,200,000 shares registered on a Form s-1 that was declared effective in December 2010, our president will beneficially own an aggregate of approximately 88.2% of our outstanding common stock assuming the sale of all shares that have been registered. Because of his beneficial stock ownership, our president will be in a position to continue to elect our board of directors, decide all matters requiring stockholder approval and determine our policies. The interests of our president may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of officers and directors and other business decisions. The minority shareholders would have no way of overriding decisions made by our president. This level of control may also have an adverse impact on the market value of our shares because our president may institute or undertake transactions, policies or programs that result in losses, may not take any steps to increase our visibility in the financial community and/or may sell sufficient numbers of shares to significantly decrease our price per share.
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11.
All of our presently issued and outstanding common shares are restricted under rule 144 of the Securities Act, as amended. When the restriction on any or all of these shares is lifted, and the shares are sold in the open market, the price of our common stock could be adversely affected.
All of the presently outstanding shares of common stock (9,000,000 shares) are "restricted securities" as defined under Rule 144 promulgated under the Securities Act and may only be sold pursuant to an effective registration statement or an exemption from registration, if available. Rule 144 provides in essence that a person who is not an affiliate and has held restricted securities for a prescribed period of at least six months if purchased from a reporting issuer or 12 months (as is the case herein) if purchased from a non-reporting Company, may, under certain conditions, sell all or any of his shares without volume limitation, in brokerage transactions. Affiliates, however, may not sell shares in excess of 1% of the Companys outstanding common stock each three months. As a result of revisions to Rule 144 which became effective on February 15, 2008, there is no limit on the amount of restricted securities that may be sold by a non-affiliate (i.e., a stockholder who has not been an officer, director or control person for at least 90 consecutive days) after the restricted securities have been held by the owner for the aforementioned prescribed period of time. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop.
All 9,000,000 issued and outstanding shares of our common stock are owned by our president who received the shares in exchange for all shares of Veterans in Packaging, Inc., which was incorporated in Massachusetts in February 2005.
12.
We do not expect to pay cash dividends in the foreseeable future.
We have never paid cash dividends on our common stock. We do not expect to pay cash dividends on our common stock at any time in the foreseeable future. The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our board of directors will consider. Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock.
13.
Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director transactions, conflicts of interest and similar matters.
The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures.
Because none of our directors are independent directors, we do not currently have independent audit or compensation committees. As a result, these directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.
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14.
You may have limited access to information regarding our business because our obligations to file periodic reports with the SEC could be automatically suspended under certain circumstances.
Upon the effectiveness of our Registration Statement on Form S-1 in December 2010, we became subject to certain informational requirements of the Exchange Act, as amended, and we are required to file periodic reports (i.e., annual, quarterly and special reports) with the SEC which will be immediately available to the public for inspection and copying. Except during the year following the date that our registration statement became effective, these reporting obligations may (in our sole discretion) be automatically suspended under Section 15(d) of the Securities Exchange Act of 1934 if we have less than 300 shareholders and do not file a registration statement on Form 8A (which we have no current plans to file). If this occurs after the year in which our registration statement becomes effective we will no longer be obligated to file periodic reports with the SEC provided that we have fewer than 300 shareholders. If we no longer submit our filings with the SEC, your access to our business information would then be even more restricted. After this registration statement on Form S-1 becomes effective, we may be required to deliver periodic reports to security holders. However, we will not be required to furnish proxy statements to security holders and our directors, officers and principal beneficial owners will not be required to report their beneficial ownership of securities to the SEC pursuant to Section 16 of the Exchange Act until we have both 500 or more security holders and greater than $10 million in assets. This means that your access to information regarding our business will be limited.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None for the period ended March 31, 2010.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
ITEM 4 (REMOVED AND RESERVED)
ITEM 5 - OTHER INFORMATION
ITEM 6 EXHIBITS
Exhibit Number |
| Description |
31.1 |
| Section 302 Certification Of Chief Executive And Chief Financial Officer |
|
|
|
32.1 |
| Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 Chief Executive And Chief Financial Officer |
Pursuant to 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.
Veterans in Packaging, Inc.
(Registrant)
/s/ Edward J. Peplinski
Edward J. Peplinski
Title: President and Chief Financial Officer
May 16, 2011
17
Exhibit 31.1
Section 302 Certification of Chief Executive Officer and Chief Financial Officer
I, Edward J. Peplinski, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Veterans in Packaging, Inc.
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)
evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and
c)
presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;
5.
I have disclosed, based on my most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls
6.
I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 16, 2011
/s/ Edward J. Peplinski
Edward J. Peplinski
Title: President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Veterans in Packaging, Inc. (the Company) on Form 10-Q for the period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Edward J. Peplinski, Chief Executive and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1.
The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Edward J. Peplinski
Edward J. Peplinski
Title: President and Chief Financial Officer
May16, 2011
1