UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2009
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 000-53166
TONE IN TWENTY
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(Exact name of registrant as specified in its charter)
Nevada 77-0664193
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3433 Losee Rd., Suite 2, North Las Vegas, NV 89030
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (702) 604-7038
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. 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|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |X| No |_|
As of January 11, 2010, the registrant's outstanding common stock consisted
of 437,500 shares, $0.001 Par Value. Authorized - 195,000,000 common
voting shares. 83,333 preferred issued, 5,000,000 authorized.
Table of Contents
Tone in Twenty
Index to Form 10-Q
For the Quarterly Period Ended November 30, 2009
Part I. Financial Information
Page
Item 1. Financial Statements
Condensed Balance Sheets as of November 30, 2009 and August 31, 2009 3
Condensed Statements of Operations for the three months
ended November 30, 2009 and November 30, 2008 4
Condensed Statements of Cash Flows for the three months
ended November 30, 2009 and November 30, 2008 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 17
Part II Other Information
Item 1. Legal Proceedings 19
Item 1A. Risk Factors 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3 -- Defaults Upon Senior Securities 19
Item 4 -- Submission of Matters to a Vote of Security Holders 20
Item 5 -- Other Information 20
Item 6. Exhibits 20
Signatures 21
2
Part I. Financial Information
Item 1. Financial Statements
Tone in Twenty
(A Development Stage Company)
Condensed Balance Sheets
November 30,
2009 August 31,
(Unaudited) 2009
---------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 1,562 $ 2,013
Funds held in escrow - -
---------- ----------
Total current assets 1,562 2,013
Other Assets
Prepaid expense - 3,500
---------- ----------
Total other assets - 3,500
---------- ----------
TOTAL ASSETS $ 1,562 $ 5,513
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,670 $ 336
---------- ----------
Total current liabilities 1,670 336
---------- ----------
Stockholders' Equity (Deficit)
Convertible Preferred stock, $0.001 par value,
5,000,000 shares authorized, 83,333 shares
issued and outstanding as of 11/30/09 and
8/31/09, respectively 83 83
Common stock, $0.001 par value, 195,000,000
shares authorized, 437,500 shares
issued and outstanding as of 11/30/09 and
8/31/09, respectively 438 438
Additional Paid-in Capital 1,027,349 1,027,349
Deficit accumulated during
development stage (1,027,978) (1,022,693)
---------- ----------
Total stockholders' equity (deficit) (108) 5,177
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)$ 1,562 $ 5,513
========== ==========
The accompanying notes are an integral part of these financial statements.
3
Tone in Twenty
Condensed Statements of Operations
(A Development Stage Company)
(Unaudited)
For the three
For the three months ending August 4, 2006
months ending November 30, (Inception) to
November 30, 2008 November 30,
2009 (Restated) 2009
------------ ------------ --------------
REVENUE $ - $ - $ 7,979
------------ ------------ --------------
EXPENSES
Advertising - - 5,389
Audit fees 5,020 - 20,520
General & administrative 265 36 12,476
------------ ------------ --------------
Total expenses 5,285 36 38,385
------------ ------------ --------------
Net (loss) from operations (5,285) (36) (30,406)
OTHER INCOME/EXPENSES
Extraordinary gain - - 2,357
Beneficial conversion feature - - (994,929)
Disposition of fixed asset - - (5,000)
------------ ------------ --------------
Total other income/expenses - - (997,572)
Provision for income taxes - - -
------------ ------------ --------------
NET (LOSS) $ (5,285) $ (36) $ (1,027,978)
============ ============ ==============
(LOSS) PER SHARE - BASIC (1) $ (0.00) $ (0.00)
============ ============
(LOSS) PER SHARE - FULLY
DILUTED (1) $ (0.00) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC AND FULLY DILUTED 437,500 437,500
============ ============
(1) In-the-money options or warrants are not included in the diluted EPS
computations because there is a loss from continuing operations in the
periods being reported, and to include them would be anti-dilutive.
The accompanying notes are an integral part of these financial statements.
4
Tone in Twenty
Condensed Statements of Cash Flows
(A Development Stage Company)
(Unaudited)
For the three
For the three months ending August 4, 2006
months ending November 30, (Inception) to
November 30, 2008 November 30,
2009 (Restated) 2009
------------ ------------ --------------
OPERATING ACTIVITIES
NET (LOSS) $ (5,285) $ (36) $ (1,027,978)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities:
Increase(decrease) in:
Accounts payable 1,334 (2,559) 1,670
Accrued liability - - -
(Increase)decrease in:
Prepaid expense 3,500 - -
------------ ------------ --------------
Net cash (used in)
operating activities (451) (2,595) (1,026,308)
INVESTING ACTIVITIES
Purchase of fixed assets - - (5,000)
Disposition of fixed assets - - 5,000
------------ ------------ --------------
Net cash provided by
investing activities - - -
FINANCING ACTIVITIES
Issuances of common stock - - 6,450
Issuances of preferred stock - - 10,000
Contributed capital - 2,559 16,491
Beneficial Conversion of
preferred stock - - 994,929
------------ ------------ --------------
Net cash provided by financing
activities - 2,559 1,027,870
------------ ------------ --------------
NET CHANGE IN CASH (451) (36) 1,562
CASH AND CASH EQUIVALENTS -
BEGINNING 2,013 2,860 -
------------ ------------ --------------
CASH AND CASH EQUIVALENTS -
ENDING $ 1,562 $ 2,824 $ 1,562
============ ============ ==============
SUPPLEMENTAL DISCLOSURES:
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
Non-cash transactions $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
5
Tone in Twenty
(A Development Stage Company)
Notes to the Condensed Financial Statements
November 30, 2009
(Unaudited)
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
In the opinion of management, the accompanying balance sheets and related
interim statements of income and cash flows include all adjustments,
consisting only of normal recurring items, necessary for their fair
presentation in conformity with accounting principles generally accepted in
the United States of America ("U.S. GAAP"). Preparing financial statements
requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, and expenses. Actual
results and outcomes may differ from management's estimates and assumptions.
Interim results are not necessarily indicative of results for a full year.
The information included in this Form 10-Q should be read in conjunction
with information included in the Form 10-K.
NOTE 2 - GOING CONCERN
These condensed financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. As of November 30, 2009, the
Company has recognized revenues of $7,979 and has accumulated operating
losses of approximately $1,027,978 since inception. The Company's ability
to continue as a going concern is contingent upon the successful completion of
additional financing arrangements and its ability to achieve and maintain
profitable operations. Management plans to raise equity capital to finance
the operating and capital requirements of the Company. Amounts raised will be
used to further development of the Company's products, to provide financing
for marketing and promotion, to secure additional property and equipment, and
for other working capital purposes. While the Company is putting forth its
best efforts to achieve the above plans, there is no assurance that any such
activity will generate funds that will be available for operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
6
Tone in Twenty
(A Development Stage Company)
Notes to the Condensed Financial Statements
November 30, 2009
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS
The officer and director of the Company is involved in other business
activities. This person may face a conflict in selecting between the Company
and their other business interests. The Company has not formulated a policy
for the resolution of such conflicts.
NOTE 4 - CONCENTRATION OF CREDIT RISK
Cash Balances
-------------
The Company maintains its cash in various financial institutions in the
United States. Balances maintained are insured by the Federal Deposit
Insurance Corporation (FDIC). This government corporation insured balances
up to $100,000 through October 13, 2008. As of October 14, 2008 all
non-interest bearing transaction deposit accounts at an FDIC-insured
institution, including all business checking deposit accounts that do not
earn interest, are fully insured for the entire amount in the deposit
account. This unlimited insurance coverage is temporary and will remain in
effect for participating institutions until December 31, 2009. All other
deposit accounts at FDIC-insured institutions are insured up to at least
$250,000 per depositor until December 31, 2013.
7
Tone in Twenty
(A Development Stage Company)
Notes to the Condensed Financial Statements
November 30, 2009
(Unaudited)
NOTE 5 - RESTATEMENT
The Company has restated its financial statements as of and for the quarter
ended November 30, 2008 to reflect a correction to expenses that were
reflected in the wrong period. This restatement resulted in an overstatement
of expenses for the three month period being recorded of $6,441.
Additionally, restatement was made to the financing activities as an officer
contributed capital to the Company during the quarter ended November 30, 2008
in the amount of $2,559. The Company's summarized financial statements
comparing the restated financial statements to those originally filed are as
follows:
For the three months ended
November 30, 2008
Original Restated Change
---------- ---------- ----------
STATEMENT OF OPERATIONS
Revenue $ - $ - $ -
Total Expense 6,477 36 (6,441)
---------- ---------- ----------
Net (loss) $ (6,477) $ (36) 6,441
========== ========== ==========
STATEMENT OF CASH FLOWS
Operating Activities $ (2,595) $ (2,595) -
Investing Activities - - -
Financing Activities - 2,559 2,559
Net Change in Cash (2,595) (36) 2,559
Cash and cash equivalents - ending $ 2,824 $ 2,824 $ -
========== ========== ==========
NOTE 6 - SUBSEQUENT EVENTS
None. The Company has evaluated subsequent events through January 11, 2010,
the date which the financial statements were available to be issued.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information
The Company may from time to time make written or oral "forward-looking
statements" including statements contained in this report and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements include statements of the Company's plans,
objectives, expectations, estimates and intentions, which are subject to change
based on various important factors (some of which are beyond the Company's
control). The following factors, in addition to others not listed, could cause
the Company's actual results to differ materially from those expressed in
forward looking statements: the strength of the domestic and local economies in
which the Company conducts operations, the impact of current uncertainties in
global economic conditions and the ongoing financial crisis affecting the
domestic and foreign banking system and financial markets, including the impact
on the Company's suppliers and customers, changes in client needs and consumer
spending habits, the impact of competition and technological change on the
Company, the Company's ability to manage its growth effectively, including its
ability to successfully integrate any business which it might acquire, and
currency fluctuations. All forward-looking statements in this report are based
upon information available to the Company on the date of this report. The
Company undertakes no obligation to publicly update or revise any forward-
looking statement, whether as a result of new information, future
events, or otherwise, except as required by law.
Critical Accounting Policies
----------------------------
There have been no material changes to our critical accounting policies and
estimates from the information provided in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", included in our
Annual Report for the fiscal year ended August 31, 2009.
8
Results of Operations
---------------------
Overview of Current Operations
------------------------------
Tone in Twenty ("Tone" or "the Company") was incorporated in the State of
Nevada on August 4, 2006, under the name Tone in Twenty. We are in the
business of providing personal fitness training using isometric techniques. It
is management's belief that isometric training is an intense form of training
which requires less hours of work for the same results. It is a form of
exercise where muscle exertion is used to strengthen and tone the muscle
without changing the length of the muscle fibers. Isometric training involves
the exertion of muscle force that must overcome and a counter-balancing force
that increases in intensity to the point where the muscle force can no longer
hold the counter-balancing force in place. Isometrics are done in static
positions, rather than a range of motion. The joint and muscle are either
worked against an immovable force or are held in a static position while
opposed by resistance. This counter-balancing force comes from a pneumatic air
pressure which is pumped into the exercise equipment. The greater the muscle
force exerted against the isometric equipment results in greater counter-
balancing force.
Activities to date have been limited primarily to organization, initial
capitalization, establishing an appropriate operating facility in Las Vegas,
Nevada, and commencing its initial operational plans. As of the date of this
quarterly report, the Company has developed a business plan, established
administrative offices and tested its business model.
Tone in Twenty's Business Plan
------------------------------
Our Business
------------
Tone in Twenty is a development stage company. The Company is not operational.
We generated minimal revenues from an evaluation program we conducted from
January - June 2007, in Las Vegas, NV. We conducted an evaluation of our
business plan to define our physical fitness services and advertising
program. This evaluation entailed: 1) renting space, by the hour, in a
physical fitness training center; 2) hiring and training a physical fitness
trainer on using isometric techniques; 3) advertising this physical fitness
program in the newspaper; 4) scheduling clients for training sessions; and
5) providing isometric physical fitness training for clients.
9
The Company's business plan is to establish a model physical fitness facility
in order to train personal trainers on these isometric training techniques.
Once these trainers have been fully educated and demonstrate competencies in
these techniques, the Company will seek additional locations to host
isometric fitness training. The Company's goal is to open four locations
throughout the Las Vegas valley in order to have economies of scale in its
marketing. Our major obstacle in moving our business plan forward is
funding. Management believes we need to raise $100,000 in order to fund our
business. It is management's goal to obtain the necessary funding in the
next six months.
Currently, the Company is not operational, the Company did conduct an
evaluation of its personal fitness training using isometric techniques
between January-June, 2007, in Las Vegas, NV. Management identified a
physical fitness center that permitted the use of its facilities to conduct
this evaluation. The Company spent $1,624 to advertise its fitness training
program in the local newspapers and subsequently generated $7,979 in
business. This evaluation model helped management define the Company's
services and advertising program.
Based on this evaluation, management believes it can duplicate this model.
Management is preparing this Registration Statement with the plan to raise
$100,000 in funding, provided the Company is listed on the Over the Counter
Bulletin Board. Management believes that if the Company is listed on the
Over the Counter Bulletin Board, it might be easier to fund the Company, as
it gives potential investors an exit strategy. However, there are no
assurance even if the Company is listed on the OTC-Bulletin Board that it
will be able to fund its future operations.
These funds will be used to establish four (4) separate isometric fitness
training centers in Las Vegas, NV. With four fitness centers, the Company
can use economy of scale to advertise its centers in the local newspapers and
on the local television cable. This will minimize advertising costs, per
customer, and provide a location convenient for future customers. Management
anticipates that the four planned isometric training centers can be in place
within approximately six months of obtaining funding it requires.
Our Strategy
------------
Our marketing success will be determined by our ability to create brand
awareness for our personal fitness service, acquire customers and provide our
services at a competitive price. The Company has developed a few strategies
to accomplish this goal. This includes waiving any start-up fee. Many of
the larger companies charge a start-up fee to begin membership.
10
Management plans to target our services primarily towards individuals with
limited time to spend on personal fitness training, such as business
professionals and owners. The difference between isometric physical training
and traditional physical training is the time involved. Because of the
intensity of isometric training, a training session will not last more than
20-minutes per session, as compared traditional physical training programs
that can last one-two hours. Management anticipates to charge $40.00 for a
twenty (20) minute training session.
Therefore, management plans to market its services, through newspaper ads,
and its local television cable market, to individuals who do not have a great
deal of time to devote to physical training, but can afford to spend a 20-
minutes a week in an isometric physical fitness training program.
Competition
-----------
The personal fitness industry is highly competitive. Competition is generally
based upon brand name recognition, price, service, reach and target
marketing. There are many larger companies who provide similar services as
Tone in Twenty. The competition includes larger companies, such as, Gold's
Gym, 24-Hour Fitness, Las Vegas Athletic Clubs and Bally's Gyms. We are an
insignificant player as compared to these larger fitness centers. These
companies are better funded and more established than Tone in Twenty. The
competition has built brand loyalty and has the resources to build its
customer bases through promotional advertising. We do not have the
advertising dollars available to compete against our competitors and we might
not be able to compete successfully with these competitors in the future.
All of our competitors have significantly greater financial, marketing, other
resources, and larger customer bases than we have and are less financially
leveraged than we are. As a result, these competitors may be able to adapt
changes in customer requirements more quickly; introduce new and more
innovative products more quickly; better adapt to downturns in the economy or
other decreases in sales; better withstand pressure for cancelled services,
take advantage of acquisition and other opportunities more readily; devote
greater resources to the marketing and sale of their products; and adapt more
aggressive pricing policies.
Tone in Twenty's Funding Requirements
-------------------------------------
Tone in Twenty does not have the required capital or funding to open its
planned fitness centers. Management anticipates Tone in Twenty will require at
least $100,000 to complete to train personnel, and open these fitness centers.
The Company has started seeking funding from a number of sources, but has not
secured any funding at this time. Management has been seeking funding from a
number of sources, but has not secured any funding at this time. Management
has been unable to raise the necessary capital during these weak economic
conditions.
11
Future funding could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, results of
operations and financial condition. Any future acquisitions of other
businesses, technologies, services or product(s) might require the Company to
obtain additional equity or debt financing, which might not be available on
terms favorable to the Company, or at all, and such financing, if available,
might be dilutive.
Results of Operations for the quarter ended November 30, 2009
-------------------------------------------------------------
For the quarter ending November 30, 2009, we experienced a net loss of $5,285
as compared to a net loss of $(36) for the same period last year. The net
loss for the quarter ending November 30, 2009 was contributed to general and
administrative expense of $265 and audit fees of $5,020. Since
our inception on August 4, 2006, we experienced a net loss of $1,027,978
which was mostly based on the accounting of the beneficial conversion feature
of our preferred stock to common stock. Most of the actual general and
administrative expenses, since our inception, represented legal and audit
fees. Our cash at hand as of November 30, 2009 was $1,562. In our November
30, 2009 quarterly financials, our auditor issued an opinion that our financial
condition raises substantial doubt about the Company's ability to continue as
a going concern.
Revenues
--------
We generated no revenues during the quarter ending November 30, 2009. Since
our inception on August 4, 2006 through November 30, 2009, we generated
$7,979 in revenues derived from an evaluation program. We do not anticipate
earning any significant revenues until such time as we can establish fitness
centers.
12
Plan of Operation
-----------------
Management does not believe that the Company will be able to generate
any significant profit during the coming year, as the company seeks financing
to execute its business plan. Management believes developmental and marketing
costs will most likely exceed any anticipated revenues for the coming year.
Management intends to personally finance Tone in Twenty, without seeking
reimbursement, to ensure that the Company has enough funds to operate
for the next twelve (12) months without the need to raise additional capital
to meet its fully reporting obligations in its normal course of business.
Going Concern
-------------
Our independent auditors included an explanatory paragraph in their report on
the accompanying financial statements regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional
note disclosures describing the circumstances that lead to this disclosure by
our independent auditors.
Summary of any product research and development that we will perform for the
term of our plan of operation.
----------------------------------------------------------------------------
We do not anticipate performing any additional significant product research and
development under our current plan of operation.
Expected purchase or sale of plant and significant equipment.
-------------------------------------------------------------
We do not anticipate the purchase or sale of any plant or significant
equipment; as such items are not required by us at this time.
Significant changes in the number of employees.
------------------------------------------------
As of November 30, 2009, we did not have any employees. We are dependent upon
our sole officer and director for our future business development. As our
operations expand we anticipate the need to hire additional employees,
consultants and professionals; however, the exact number is not quantifiable
at this time.
13
Liquidity and Capital Resources
-------------------------------
The Company is authorized to issue 195,000,000 shares of its $0.001 par value
common stock and 5,000,000 shares of its $0.001 par value preferred stock.
As of January 11, 2010, the Company has 437,500 shares of common stock
issued and outstanding.
The Company has limited financial resources available, which has had an
adverse impact on the Company's liquidity, activities and operations.
These limitations have adversely affected the Company's ability to obtain
certain projects and pursue additional business. Without realization of
additional capital, it would be unlikely for the Company to continue as a
going concern. In order for the Company to remain a Going Concern it will
need to find additional capital. Additional working capital may be sought
through additional debt or equity private placements, additional notes
payable to banks or related parties (officers, directors or stockholders),
or from other available funding sources at market rates of interest, or a
combination of these. The ability to raise necessary financing will depend
on many factors, including the nature and prospects of any business to be
acquired and the economic and market conditions prevailing at the time
financing is sought. No assurances can be given that any necessary financing
can be obtained on terms favorable to the Company, or at all.
Our sole officer/director has agreed to donate funds to the operations of the
Company, in order to keep it fully reporting for the next twelve (12) months,
without seeking reimbursement for funds donated.
As a result of our the Company's current limited available cash, no officer
or director received compensation through the three months ended November 30,
2009. No officer or director received stock options or other non-cash
compensation since the Company's inception through November 30, 2009 . The
Company has no employment agreements in place with its officers. Nor does the
Company owe its officers any accrued compensation, as the Officers agreed to
work for company at no cost, until the company can become profitable on a
consistent Quarter-to-Quarter basis.
Off-Balance Sheet Arrangements
------------------------------
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results or operations, liquidity,
capital expenditures or capital resources that is material to investors.
14
Critical Accounting Policies and Estimates
------------------------------------------
Revenue Recognition: We recognize revenue from product sales once all of the
following criteria for revenue recognition have been met: pervasive evidence
that an agreement exists; the services have been rendered; the fee is fixed
and determinable and not subject to refund or adjustment; and collection of
the amount due is reasonable assured.
New Accounting Standards
------------------------
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements". This statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling (minority) interest
in a subsidiary and for the de-consolidation of a subsidiary. It clarifies
that a non-controlling interest in a subsidiary is equity in the consolidated
financial statements. SFAS No. 160 is effective for fiscal years and interim
periods beginning after December 15, 2008. The adoption of SFAS 160 is not
expected to have a material impact on the Company's financial position,
results of operation or cash flows.
As of January 1, 2008 we adopted SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159
allows the company to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. The adoption of
SFAS 159 has not had a material impact on our financial position, results of
operation or cash flows.
As of January 1, 2008 we adopted SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value and provides guidance for
measuring and disclosing fair value. The adoption of SFAS 157 has not had a
material impact on our financial position, results of operation or cash flows.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
15
Item 4T. Controls and Procedures
(a) Evaluation of Internal Controls and Procedures
Tone in Twenty is committed to maintaining disclosure controls and procedures
that are designed to ensure that information required to be disclosed in its
Exchange Act reports is recorded, processed, summarized, and reported within
the time periods specified in the U.S. Securities and Exchange Commission's
rules and forms, and that such information is accumulated and communicated to
its management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.
As required by Rule 13a-15(b) of the Exchange Act, Tone in Twenty has carried
out an evaluation, under the supervision and with the participation of its
management, including its Chief Executive Officer and the Chief Financial
Officer, (who is also our principal financial and accounting officer), to
provide reasonable assurance regarding the reliability of financial reporting
and the reparation of the financial statements in accordance with U. S.
generally accepted accounting principles.
The evaluation examined those disclosure controls and procedures as of
November 30, 2009, the end of the period covered by this report. 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 November 30, 2009.
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.
16
Additional procedures were performed in order for management to conclude with
reasonable assurance that the Company's financial statements contained in this
Quarterly Report on Form 10-Q present fairly, in all material respects, the
Company's financial position, results of operations and cash flows for the
periods presented.
(b) 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.
(c) 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, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
17
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
From time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in
these or other matters may arise from time to time that may harm our
business.
Item 1A - Risk Factors
See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 2009 and the discussion in
Item 1, above, under "Liquidity and Capital Resources."
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
None.
Item 5 -- Other Information
None.
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Item 6 -- Exhibits
Incorporated by reference
-------------------------
Filed Period Filing
Exhibit Exhibit Description herewith Form ending Exhibit date
------------------------------------------------------------------------------
3.1 Tone in Twenty Articles SB-2 3.1 11-02-07
of Incorporation
------------------------------------------------------------------------------
3.2 Bylaws as currently SB-2 3.2 11-02-07
in effect
------------------------------------------------------------------------------
3.2 Amended Articles of SB-2 3.2 11-02-07
incorporation in effect
------------------------------------------------------------------------------
10.1 Preferred share lock-up
agreement dated Nov. 10, 2008 10K 8/31/08 10.1 12-12-08
------------------------------------------------------------------------------
31.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
302 of the Sarbanes-Oxley
Act
------------------------------------------------------------------------------
32.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
906 of the Sarbanes-Oxley
Act
------------------------------------------------------------------------------
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Tone in Twenty
--------------------------
Registrant
Date: January 11, 2010 By: /s/ John Dean Harper
---------------- ----------------------------
John Dean Harper
President and Director
20