Note 1 - Organization and summary of significant accounting policies:
Following is a summary of the Company’s organization and significant accounting policies:
Organization and nature of business –Rainbow International Corp
., (“We,” or “the Company”) is a Nevada corporation incorporated on April 22, 2011. The Company was primarily engaged in the distribution of Bohemian Crystal produced in the Czech Republic. Since the reorganization of the Company, they have changed their primary purpose. The Company is now primarily engaged in the acquisition and exploration of mining properties.
The Company has been in the exploration stage since the reorganization and has not yet realized any revenues from its planned operations. Upon the location of commercially mineable reserves, the Company plans to prepare for mineral extraction and enter the development stage.
Basis of presentation -
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of February 28, 2014.
Use of estimates -
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents -
The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of February 28, 2014 and May 31, 2013.
Property and Equipment
- The Company values its investment in property and equipment at cost less accumulated depreciation. Depreciation is computed primarily by the straight line method over the estimated useful lives of the assets ranging from three to five years.
Mineral Property Acquisition and Exploration Costs -
The Company is primarily engaged in the business of the acquisition, exploration, development, mining, and production of domestic strategic energy and mineral properties, with emphasis on lithium carbonate and additional strategic minerals. Mineral claim and other property acquisition costs are capitalized as incurred. Such costs are carried as an asset of the Company until it becomes apparent through exploration activities that the cost of such properties will not be realized through mining operations. Mineral exploration costs are expensed as incurred, and when it becomes apparent that a mineral property
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RAINBOW INTERNATIONAL CORP.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Unaudited
can be economically developed as a result of establishing proven or probable reserve, the exploration costs, along with mine development cost, are capitalized. The costs of acquiring mineral claims, capitalized exploration costs, and mine development costs are recognized for depletion and amortization purposes under the units-of-production method over the estimated life of the probable and proven reserves. If mineral properties, exploration, or mine development activities are subsequently abandoned or impaired, any capitalized costs are charged to operations in the current period.
Asset retirement obligations
- The Company has adopted the provisions of FASB ASC 410-20 “Asset Retirement and Environmental Obligations," which requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the related mining properties. As of February 28, 2014 and May 31, 2013, there have been no asset retirement obligations recorded.
Fair value of financial instruments
- The Company’s financial instruments include cash, accounts receivable, accounts payable, and notes payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at February 28, 2014 and May 31, 2013. The Company did not engage in any transaction involving derivative instruments.
Income Taxes
- The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
Net loss per share calculation
- Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”. Basic net loss per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive..
Stock Based Compensation -
The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
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RAINBOW INTERNATIONAL CORP.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Unaudited
For non-employee stock-based compensation, we have adopted ASC Topic 505 “Equity-Based Payments to Non-Employees”, which requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or options or the fair value of the
services on the grant date, whichever is more readily determinable in accordance with ASC Topic 718.
Exploration Stage Enterprise
- The Company’s financial statements are prepared pursuant to the provisions of Topic 26, “Accounting for Development Stage Enterprises,” as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence. Until such interests are engaged in major commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the development stage. Mining companies subject to Topic 26 are required to label their financial statements as an “Exploratory Stage Company,” pursuant to guidance provided by SEC Guide 7 for Mining Companies.
Recently Issued Accounting Pronouncements
- As of and for the periods ended February 28, 2014 and May 31, 2013, the Company does not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.
Note 2 - Uncertainty, going concern:
At February 28, 2014, we were engaged in a business and had suffered losses from exploration stage activities to date. In addition, we have minimal operating funds. Although management is currently attempting to identify business opportunities and is seeking additional sources of equity or debt financing, there is no assurance these activities will be successful. Accordingly, we must rely on our officers to perform essential functions without compensation until a business operation can be commenced.
These factors raise doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 3 - Federal income tax:
We follow Accounting Standards Codification regarding Accounting for Income Taxes. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss
because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed likely to be realized.
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RAINBOW INTERNATIONAL CORP.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Unaudited
The provision for refundable Federal income tax consists of the following:
2013
2012
Refundable Federal income tax attributable to:
Current operations
$(82,916)
$(15,788)
Less, Nondeductible expenses
-0-
-0-
-Less, Change in valuation allowance
82,916
15,778
Net refundable amount
-
-
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
2013
2012
Deferred tax asset attributable to:
Net operating loss carryover
$ 98,840
$15,924
Less, Valuation allowance
( 98,840)
(15,924)
Net deferred tax asset
-
-
At May 31, 2013, an unused net operating loss carryover approximating $290,707 is available to offset future taxable income; it expires beginning in 2031.
Note 4 – Cumulative sales of stock:
Since its inception, we have issued shares of common stock as follows:
On May 27, 2011, the Company issued 3,000,000 shares of common stock at a price of $0.001 per share for a total cash proceeds of $3,000.
During February 2012, the Company issued 540,000 shares of common stock at a price of $0.04 per share and received proceeds in the amount of $21,600.
On May 15, 2012, the Company issued 2,207,508 shares of common at a price $0.12 per share for $264,867 in cash. The Company has received these funds but has not issued the shares. This is recorded as a stock subscription until issued.
The Company authorized but has not issued 2,500,000 shares of stock for the purchase of Aslanay Madencilik Sanayi Ve Ticaret Limited Sirketi, (translated -Aslanay Mining Trade and Ind. Limited Co.). These shares are recorded as a stock subscription until issued. The value of these shares is the net asset value of Aslanay Mining Trade and Ind. Limited Co at July 31, 2012 in the amount of $377,115. On December 5, 2012, the Company issued these shares.
On June 26, 2013, the Company received and cancelled 7,563,820 as part of the terminated merger with Aslanay Madencilik Sanayi Ve Ticaret Limited Sirketi, (translated -Aslanay Mining Trade and Ind. Limited Co.) a Turkish enterprise.
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RAINBOW INTERNATIONAL CORP.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Unaudited
On July 9, 2013, the Company enacted a 400:1 forward stock split. This resulted in the shares outstanding to increase from 683,688 to 273,475,200.
Note 5 – Shareholder Payable:
On August 20, 2013, the Company received $74,965 as a note payable. The loan carries no stated interest and due on demand.
Note 6 – Related Party Transactions:
During 2011, a Director of the Company loaned the Company an amount equal to $500. The loan carries no stated interest and due on demand.
During 2012, a Director of the Company loaned the Company an amount equal to $5,060. The loan carries no stated interest and due on demand.
On May 2012, a payment of $5,000 was applied to this account. The balance at August 31, 2012 was $560. This amount was fully paid by May 31, 2013.
During the period ending May 31, 2013, the Company loaned to a related party $30,000. This receivable carries no stated interest and due on demand.
Note 7 – Change in Control:
On March 26, 2012, a change of control of the registrant was made when Emine Ozer acquired 2,856,312 common shares from selling shareholders which represented 80.69% of the issued and outstanding common shares.
Subsequently, based on the issuances of these shares Mr. Aslan Ozer became the majority shareholder of the registrant, owning 57.085 of the issued and outstanding common shares,
Effective April 1, 2012, Vladimir Bibik, the sole officer and director of the registrant appointed Donald L. Perks as president, chief executive officer, chief financial officer and director and thereafter resigned due to the change of control.
Donald L. Perks was the founder, officer and director of Canada Pay Phone, a telecommunications company, from 1994 to 2001. Mr. Perks was an officer and director of Global Immune Technologies Inc, a natural resource exploration company, from 2003 through February 2012.
11
RAINBOW INTERNATIONAL CORP.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Unaudited
Note 8 – Terminated Business Combination:
On July 31, 2012, the Company acquired all of the member interests of Aslanay Madencilik Sanayi Ve Ticaret Limited Sirketi, (translated -Aslanay Mining Trade and Ind. Limited Co.) a Turkish enterprise, from Aslan Ozer, its sole member, for 2,500,000 common shares of the Company. The purchase is being accounted for as an acquisition as required by ACS 805. The purchase is being reported and operating as a wholly owned subsidiary of the parent company.
On May 31, 2013, the Company terminated this business combination.
Note 9 – Subsequent Events:
In accordance with SFAS 165 (ASC 855-10) management has reviewed events between
February 28, 2014
and April 10, 2014 and has determined that it does not have any material subsequent events to disclose in these financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements include those concerning the following: Our intentions, beliefs and expectations regarding the fair value of all assets and liabilities recorded; our strategies; growth opportunities; product development and introduction relating to new and existing products; the enterprise market and related opportunities; competition and competitive advantages and disadvantages; industry standards and compatibility of our products; relationships with our employees; our facilities, operating lease and our ability to secure additional space; cash dividends; excess inventory, our expenses; interest and other income; our beliefs and expectations about our future success and results; our operating results; our belief that our cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements, our expectations regarding our revenues and customers; investments and interest rates. These statements are subject to risk and uncertainties that could cause actual results and events to differ materially.
The registrant undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q.
Trends and Uncertainties
There are no material commitments for capital expenditure at this time. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on our limited operations. There are no known causes for any material changes from period to period in one or more line items of the registrant’s financial statements.
Liquidity and Capital Resources
At February 28, 2014, the registrant had a cash balance of $47, which represents a $3,153 increase from the $3,200 balance at May 31, 2013. This decrease was the result of the payment of legal and accounting expenses required to satisfy the requirements of a reporting company.
During the nine months ended February 28, 2014 and 2013, there were no investing activities.
For the nine months ended February 28, 2014, the registrant received proceeds from note payable of $74,965 resulting in net cash flows from financing activities of $74,965.
For the nine months ended February 28, 2013, the registrant had cash in excess of deposits of $437 and payments to shareholder of $50,000. As result, the registrant had net cash flows from financing activities of $(49,453) for the nine months ended February 28, 2013
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The focus of the registrant’s efforts is to acquire or develop an operating business. Despite no active operations at this time, management intends to continue in business and has no intention to liquidate the registrant. The registrant has considered various business alternatives including the possible acquisition of an existing business, but to date has found possible opportunities unsuitable or excessively priced. The registrant does not contemplate limiting the scope of its search to any particular industry. Management has considered the risk of possible opportunities as well as their potential rewards. Management has invested time evaluating several proposals for possible acquisition or combination; however, none of these opportunities were pursued. The registrant presently owns no real property and at this time has no intention of acquiring any such property. The registrant’s sole expected expenses are comprised of professional fees primarily incident to its reporting requirements.
The accompanying financial statement has been prepared assuming the registrant will continue as a going concern. As shown in the accompanying financial statements, the registrant has incurred losses of $51,400 and $200,629 for the nine months ended February 28, 2014 and 2013, respectively, and a working capital deficiency that raises substantial doubt about the registrant’s ability to continue as a going concern.
Management believes the registrant will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the registrant, but cannot assure that such financing will be available on acceptable terms. The registrant’s continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. Our auditors have included a “going concern” qualification in their auditors’ report dated September 11, 2013. Such a “going concern” qualification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot be assured.
The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve the registrant’s operating results.
On June 26, 2013, the registrant cancelled 7,563,820 common shares as a part of the terminated merger with Aslanay Madencilik Sanayi Ve Ticaret Limited Sirketi (translated – Aslanay Mining Trand and Ind. Limited Co.), a Turkish enterprise.
On July 9, 2013, the registrant enacted a 400 for 1 forward stock split. As a result, the shares outstanding increased from 683,688 to 273,475,200.
Our long-term liquidity is dependent on the commencement of operations, and the receipt of revenues.
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Results of Operations.
We have not yet earned any revenues.
For the three months ended February 28, 2014, we paid legal and professional fees of $4,250 and other general and administrative expenses of $96. As a result, we had a loss from operations of $4,346 for the three months ended February 28, 2014.
Comparatively, for the three months ended February 28, 2013, we paid exploration costs of $11,779 and legal and professional fees of $18,717. We paid contract labor expenses of $20,000 and other general and administrative expenses of $175. As a result, we had a loss from operations of $50,671 for the three months ended February 28, 2013.
Our operations were minimal during the three months ended February 28, 2014 and 2013. The substantial decrease in operating loss was primarily a result of decreased operations resulting in decreased legal and administrative expenses, contract labor costs and exploration costs.
For the nine months ended February 28, 2014, we paid exploration costs of $15,120, legal and professional fees of $31,984 and other general and administrative expenses of $4,296. As a result, we had a loss from operations of $51,400 for the nine months ended February 28, 2014.
Comparatively, for the nine months ended February 28, 2013, we paid exploration costs of $45,825 and legal and professional fees of $94,044. We paid contract labor expenses of $60,000 and other general and administrative expenses of $760. As a result, we had a loss from operations of $200,629 for the nine months ended February 28, 2013.
Our operations were minimal during the nine months ended February 28, 2014. The substantial decrease in operating loss compared to the nine months ended February 28 2013 was primarily a result of decreased operations resulting in decreased legal and administrative expenses, contract labor costs and exploration costs.
Plan of Operation.
The registrant may experience problems, delays, expenses and difficulties, many of which are beyond the registrant’s control. These include, but are not limited to, unanticipated problems relating to additional costs and expenses that may exceed current estimates and competition.
Critical Accounting Policies
The financial statements and accompanying footnotes included in this report has been prepared in accordance with accounting principles generally accepted in the United States with certain amount based on management’s best estimates and judgments. To determine appropriate carrying values of assets and liabilities that are not readily available from other sources, management uses assumptions based on historical results and other factors that believe are reasonable. Actual results could differ from those estimates.
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Our critical accounting policies are described in our Annual Report on Form 10-K for the year ended May 31, 2013. There have been no material changes to our critical accounting policies as of and for the nine months ended February 28, 2014.
Recent Pronouncements
We have determined that all recently issued accounting standards will not have a material impact on our financial statements, or do not apply to our operations.
