BALUX BRANDS PLC.
BALUX BRANDS PLC.: GXG FIRST QUOTE MARKET ANNOUNCEMENT – 2013/2014 AUDITED FINANCIALS
DGAP-News: BALUX BRANDS PLC. / Key word(s): Final Results 02.12.2014 / 18:35 --------------------------------------------------------------------- Balux Brands PLC - Annual Financial Report as of June 30, 2014 London, December 02, 2014 Balux Brands PLC: GXG FIRST QUOTE MARKET ANNOUNCEMENT - 2013/2014 AUDITED FINANCIALS Date: December 02, 2014 As part of its continued compliance with the GXG First Quote Market, Balux Brands PLC has prepared the following announcement, which includes extracts from its audited financial statements as at June 30, 2014. Directors Statement: Our company started operations in March 2013. The growth, which occured during the initial financial year was positive and all corporate investments, particularly in usa4everyone.de, have shown an increased turnover. Balux Brands PLC plans to increase it's investment in usa4everyone.de. The financial development of usa4everyone.de was, as expected, very solid and hence a higher investment is reasonable. We achieved our aims in 2013/2014 and, partly, our expectations were exceeded. The initial loss was less than expected. Balux Brands PLC showes potential, even though economic environment is challenging. We seek to extend our investment program and to invest in further ventures. I hereby confirm that to the best of my knowledge, the information appearing within this announcement is true and valid of Balux Brands PLC. Due to the company only having started it's operations in 2014, there are no comparative financials from earlier accounting periodes available. The Company is not in a position to pay dividends and does not expect dividend-payment for the next accounting periode either. Sincerely, Michael Meilinger Balux Brands PLC Report of Independent Public Accounting Firm To the Board of Directors and Stockholders of Balux Brands PLC Report on the Financial Statements We have audited the financial statements of Balux Brands PLC which are comprised of the statement of financial position as at June 30, 2014 and 2013, and the related statements of profit or loss and other comprehensive income, changes in shareholders' equity, and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards "IFRS" and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying financial statements give a true and fair view of the financial position of Balux Brands PLC as at June 30, 2014 and 2013, and of their financial performance and cash flows for the years then ended, in accordance with IFRS. /s/ GregoryScott Chicago, Illinois USA November 20, 2014 June 30, June 30, Assets Note 2014 2013 Current assets Investment in affiliate 6 EUR 177.031 EUR - Investment 6 50.000 14.000 Total assets EUR 227.031 EUR 14.000 Shareholders' Equity & Liabilities Shareholders' equity Share capital 7 EUR 100.000 EUR 100.000 Other reserves 7 87.750 87.750 Accumulated deficit 7 (909.523) (173.750) Total shareholders' equity EUR (721.773) EUR 14.000 Liabilities Convertible note payable - related party 8 EUR 932.485 EUR - Interest payable - related party 8 16.319 - Total liabilities EUR 948.804 EUR - Total shareholders' equity and liabilities EUR 227.031 EUR 14.000 The accompanying notes are in integral part of the financial statements. Statement of Profit or Loss and Other Comprehensive Income For the years ended June 30, 2014 and 2013 Note 2014 2013 Revenue 3 EUR - EUR - Expenses Accounting fees EUR (2.500) EUR (5.250) Audit Fees (5.000) - Compensation - (57.050) Consulting fees (680.000) (30.000) Director fees - (4.000) Insurance - (5.950) Legal fees - (8.750) Miscellaneous - (7.300) Rent (1.237) (10.500) Stock exchange fees - (19.500) Transfer agent fees (4.218) (13.200) Telephone (30) (1.400) Travel - (8.400) Utilities - (2.450) Total expenses 3 EUR (692.985) EUR (173.750) Operating loss EUR (692.985) EUR (173.750) Equity in loss of affiliate 6 (26.469) - Interest expense 8 (16.319) - Loss before income taxes EUR (735.773) EUR (173.750) Income taxes 9 EUR - EUR - Net loss EUR (735.773) EUR (173.750) Other comprehensive income 3 EUR - EUR - Total comprehensive loss EUR (735.773) EUR (173.750) Loss per share Loss per common share - basic and diluted Basic 3 EUR (0,74) EUR (0,17) Weighted average common shares outstanding - basic and diluted Diuted 3 EUR (0,38) EUR (0,17) Weighted average of common shares outstanding Loss per common share - basic and diluted Basic 3 1.000.000 1.000.000 Weighted average common shares outstanding - basic and diluted Diuted 3 1.932.485 1.000.000 The accompanying notes are in integral part of the financial statements. Statement of Changes in Shareholders' Equity For the years ended June 30, 2014 and 2013 Share Other Accumulated Note Capital Reserves Deficit Total Balance at June 12, 2012 - EUR - EUR - EUR - Common stock issued in exchange for cash 7 100.000 - - 100.000 Investment contributed by parent company 6 14.000 14.000 Expenses paid directly by parent company 7 73.750 73.750 Net loss for the year ended June 30, 2013 7 - - (173.750) (173.750) Balance at June 30, 2013 EUR 100.000 EUR 87.750 EUR (173.750) EUR 14.000 Net loss for the year ended June 30, 2014 7 - - (735.773) (735.773) Balance at June 30, 2014 EUR 100.000 EUR 87.750 EUR (909.523) EUR (721.773) The accompanying notes are in integral part of the financial statements. A Development Stage Enterprise Statement of Cash Flows For the years ended June 30, 2014 and 2013 2014 2013 Cash flow from operating activities: Net loss EUR (735.773) EUR (173.750) Adjustments to reconcile net loss to cash flow used in operating activities: Expenses paid directly by parent company 692.985 73.750 Increase in interest payable - related party 16.319 - Equity in loss of afiliate 26.469 - Net provided by (used for) operating activities EUR - EUR (100.000) Cash flow from investing activities EUR - EUR - Cash flow from financing activities Common stock issued in exchange for cash EUR - EUR 100.000 Net cash provided by financing activities EUR - EUR 100.000 Net change in cash and cash equivalents EUR - EUR - Cash and cash equivalents at beginning of the period - - Cash and cash equivalents at end of the period EUR - EUR - Interest paid EUR - EUR - Taxes paid EUR - EUR - Non cash investing and financing activities - debit (credit) Expenses paid directly by parent company Operating expenses EUR 692.985 EUR 73.750 Other reserves EUR (692.985) EUR (73.750) Non cash investing activities - debit (credit) Investment contributed by parent company Investment EUR 239.500 EUR 14.000 Other reserves EUR (239.500) EUR (14.000) The accompanying notes are in integral part of the financial statements. 1. Organization and Nature of Operations Organization - Balux Brands PLC "Balux" or "the Company" is a United Kingdom based Public Limited Company that was initially established as Dynasty Medical Systems PLC on June 12, 2012, which changed its name to Yellowstone Resources PLC on July 12, 2012. Following a change in ownership to Pice Holding GMBH "Pice" on November 7, 2012, the Company changed its name to Balux on November 28, 2012. Nature of Operations - Balux is a management consulting and investment firm engaged in the acquisition and sale of companies, with an emphasis on the development of under-capitalized online commerce and shopping businesses. The Company's first acquisition involves a minority investment in USA 4 Everyone, Inc. "USA4E" , a Miami, Florida based online fashion & lifestyle retailer. Through its websites www.usa4everyone.de and www.usa4everyone.com, USA4E offers USA manufactured brand name clothing to German customers at discounted prices as a result of direct purchase arrangements with various distributors and manufacturers. USA4E officially commenced offering products to its customers on November 25, 2013. See Note 6 - Investments for additional information about the Company's investments. Balux conducts operations from its corporate headquarters in Luton - London, U.K, and was admitted to trading on First Quote segment of the GXG Market on September 18, 2012 under the symbol YSRS. Development Stage Enterprise - The Company has not earned any revenue from operations since its inception. Accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise". Among the disclosures required by International Financial Reporting Standards "IFRS" , the Company's financial statements are to be identified as those of a development stage enterprise, and the statements of profit or loss and other comprehensive income and cash flows disclose activity since the date of the Company's inception on June 12, 2012. 2. Summary of Significant Accounting Policies Basis of Preparation - The financial statements are presented in Euros "EUREUR" , and are prepared in in accordance with IFRS under the historical cost convention except as otherwise noted. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3 - Critical Accounting Estimates and Judgments. Basis of Consolidation - Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. The Company also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Company's voting rights relative to the size and dispersion of holdings of other shareholders give the Company the power to govern the financial and operating policies. Inter-company transactions, balances, income and expenses on transactions between companies within the group are eliminated. Profits and losses resulting from inter-company transactions are also eliminated. Business Combinations - The Company applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. During the measurement period, the acquirer shall also recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the acquirer receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. During the measurement period, the acquirer shall recognize adjustments to the provisional amounts as if the accounting for the business combination had been completed at the acquisition date. Fair Value - Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. For financial reporting purposes, fair value measurements are categorized into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable, and the significance of the inputs to the fair value measurement in its entirety. Level 1 inputs are quoted market prices available in active markets for identical assets or liabilities as of the reporting date, Level 2 inputs are those directly or indirectly observable as of the reporting date, other than quoted prices in active markets included in Level 1, and Level 3 pricing inputs are generally unobservable and not corroborated by market data. Fair value is considered to be at Level 3 when pricing models are used, such as discounted cash flow methodologies or similar techniques, and at least one significant model assumption or input is unobservable. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. Segment Reporting - Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions. As of April 30, 2013, the Company operated in a single segment as described in Note 1 - Organization and Nature of Operations. Foreign Currency - Functional and Presentation Currency - The functional currency represents the currency of the primary economic environment in which the entity operates. Management has determined the functional currency to be the EUREuro as sales prices and major costs of operating expenses are primarily influenced by fluctuations in the EUREuro. Foreign currency transactions occurring in a denomination other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in operations, except for currency translation adjustments related to equity method investments, which is recognized directly as a component of shareholder's equity in other comprehensive loss. For situations where a currency other than the functional currency is used for financial statement presentation purposes, assets and liabilities are translated at the closing rate at the date of the balance sheet; income and expenses are translated at average exchange rates unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions ; and all resulting exchange differences are recognized in other comprehensive income. The Company's functional and presentation currencies are the EUREuro. Therefore, there is no foreign currency translation adjustment to be reported. Investment in Associates - Associates are all entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor's share of the profit or loss of the investee after the date of acquisition. The Company's investment in associates includes goodwill identified on acquisition. The Company's share of post-acquisition profit or loss of the associate is recognized in the statement of profit or loss and other comprehensive income, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Company's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to 'share of profit loss of an associate in the statement of profit or loss and other comprehensive income. Investments of unlisted companies are carried at fair value when the Company owns less than 20% of the equity in the investee. Share Capital and Share Premium - Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are shown in equity as a deduction from the proceeds received. Where the Company purchases its own common shares of stock, it is deducted from equity attributable to the company's equity holders until the shares are cancelled or reissued, and is classified as treasury stock in the accompanying balance sheet. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs, is included in equity attributable to the company's equity holders. Equity-settled share-based transactions are recorded at the fair value of assets received by or services delivered to the Company. Share premium represents the amount of capital contributions in excess of par value. Other Reserves - Other reserves represent the non-cash contributions from the Company's parent in the form of investments and the payment of expenses on the Company's behalf. Revenue - The Company recognizes revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when persuasive evidence of an arrangement exists, the services have been rendered to the customer, the sales price is fixed or determinable, and collection is reasonably assured. The Company had no revenue during the year ended June 30, 2014 or 2013. Operating Expenses - Costs necessary to generate revenue are expensed in the period incurred. Start-up costs, such as fees associated with filing incorporation documents, are expensed as incurred. Leases - Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are recorded as rent expense on a straight-line basis over the period of the lease. The Company leases certain property, plant and equipment. Leases of property, plant and equipment where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. Income Taxes - The tax expense for the period comprises current and deferred tax. Tax is recognized in the statement of profit or loss and other comprehensive income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. A deferred tax asset is recognized for any unused tax losses, tax credits, and deductible temporary differences, to the extent it is probable that the future that taxable profits will be available against which they can be utilized. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Comprehensive Income- Comprehensive income is defined as all changes in shareholder's equity from transactions and other events and circumstances. Therefore, comprehensive income includes our net income and all charges and credits made directly to shareholder's equity other than capital contributions and dividends. As of the date of the statement of financial position, the Company has no items other than net income affecting comprehensive income. Income Per Common Share - Basic income per common share is calculated by dividing the net income by the weighted average number of common shares outstanding during that period. Diluted income per share is calculated by based on the treasury stock method, by dividing income available to common shareholders, adjusted for the effects of dilutive convertible securities, by the weighted average number of common shares outstanding during the period and all additional common shares that would have been outstanding had all potential dilutive common share been issued. This method computes the number of additional shares by assuming all dilutive options are exercised, except as follows: Shares that would be issued upon the exercise of any convertible debt instruments or convertible preferred shares that are contingent upon the occurrence of a future event are not reflected in the income per share calculation until the contingency is resolved. The total number of shares is then reduced by the number of common shares assumed to be repurchased from the total of issuance proceeds, using the average market price of the Company's common shares for the period. There were no dilutive securities during the period presented in the accompanying financial statements. Related Party Transactions - The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: the nature of the relationship involved, description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements, the dollar amounts of transactions; and amounts due from or to related parties as of the balance sheet date and, if not otherwise apparent, the terms and manner of settlement. Accounting Policy Changes - The following represents recently issued accounting policies that are either required to be adopted in 2013, have not been adopted due to a future effective date. In November 2009, the IASB issued IFRS 9 Financial Instruments as the first step in its project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on an entity's business model and the contractual cash flow of the financial asset. Classification is made at the time the financial asset is initially recognized, namely when the entity becomes a party to the contractual provisions of the instrument. IFRS 9 amends some of the requirements of IFRS 7 Financial Instruments: Disclosures including added disclosures about investments in equity instruments measured at fair value in OCI, and guidance on financial liabilities and de-recognition of financial instruments. In December 2011, the IASB issued an amendment that adjusted the mandatory effective date of IFRS 9 from January 1, 2013 to January 1, 2015. The adoption of this standard had no material impact on our financial statements. In May 2011, the IASB issued IFRS 10 Financial Statements to replace IAS 27 and Separate Financial Statements and SIC 12 Consolidation - Special Purpose Entities. The new consolidation standard changes the definition of control so that the same criteria apply to all entities, both operating and special purpose entities, to determine control. The revised definition focuses on the need to have both power and variable returns before control is present. IFRS 10 must be applied starting January 1, 2013 with early adoption permitted. The adoption of this standard had no material impact on our financial statements. In May 2011, the IASB issued IFRS 11 Joint Arrangements to replace IAS 31, Interests in Joint Ventures. The new standard defines two types of arrangements: Joint Operations and Joint Ventures. Focus is on the rights and obligations of the parties involved to reflect the joint arrangement, thereby requiring parties to recognize the individual assets and liabilities to which they have rights or for which they are responsible, even if the joint arrangement operates in a separate legal entity. IFRS 11 must be applied starting January 1, 2013 with early adoption permitted. The adoption of this standard had no impact on our financial statements. In May 2011, the IASB issued IFRS 12 Disclosure of Interests in Other Entities to create a comprehensive disclosure standard to address the requirements for subsidiaries, joint arrangements and associates including the reporting entity's involvement with other entities. It also includes the requirements for un-structured entities i.e. special purpose entities . IFRS 12 must be applied starting January 1, 2013 with early adoption permitted. The adoption of this standard is reflected in Note 6 - Investments relative to the Company's investment in USA4E. In May 2011, the IASB issued IFRS 13 Fair Value Measurement as a single source of guidance for all fair value measurements required by IFRS to reduce the complexity and improve consistency across its application. The standard provides a definition of fair value and guidance on how to measure fair value as well as a requirement for enhanced disclosures. Enhanced disclosures about fair value are required to enable financial statement users to understand how the fair values were derived. IFRS 13 must be applied starting January 1, 2015 with early adoption permitted. The effect of adopting this standard is included in the accompanying financial statements and these footnotes. 3. Critical Accounting Estimates and Judgments Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include: Income Taxes: Provision and Valuation - The Company is domiciled in England but has invested in companies which are based in the United States. As a result, the Company's income tax obligation may be subject to change in the event of changes in the tax laws of these jurisdictions. In addition, significant judgment is involved in determining the Company's provision for income taxes, including any valuation allowance on deferred income tax assets. There are certain transactions and computations for which the ultimate tax determination is uncertain during the normal course of business. The Company recognizes liabilities for expected tax issues based upon estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognized, such difference will impact the income tax and deferred tax positions in the year in which such determination is made. Contingent Liabilities - The Company is required to make judgments about contingent liabilities including the probability of pending and potential future litigation outcomes that, by their nature, are dependent on future events that are inherently uncertain. In making its determination of possible scenarios, management considers the evaluation of outside counsel knowledgeable about each matter, as well as known outcomes in case law. 4. Financial Risk Management Objectives and Policies The Company has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risk. Management continually monitors the Company's risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company reviews and agrees policies and procedures for the management of these risks. The Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include market risk, credit risk, and liquidity risk. The following section provides details regarding the Company's exposure to these risks and the objectives, policies and processes for the management of these risks. Market Risk - Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Company's income or the value of its holdings of financial instruments. Management believes the Company is not exposed to significant market risk at the date of the statement of financial position other than foreign exchange rate risk. A significant increase in the value of the United States dollar compared to the Euro compared will negatively impact the Company's cash flow and operating results due to lower margins on USA4's products sold to German customers. Credit Risk - Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. Credit risk arising from the inability of a customer to meet the terms of the Company's financial instrument contracts is generally limited to the amounts, if any, by which the customer's obligations exceed the obligations of the Company. The Company does not currently have exposure to credit risk. Liquidity Risk - Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Company's exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Company's liquidity risk management policy is to monitor its net operating cash flows and maintain an adequate level of cash and cash equivalents through regular review of its working capital requirements and assistance from its parent company for the payment of operating expenses. 5. Capital Management The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the amount of dividends to the shareholder. The Company has complied with all externally imposed capital requirements as of the date of the statement of financial position, and no changes were made to the Company's capital management objectives, policies or processes during the year then ended. 6. Investments Investment in Affiliate Investment Balance at Inception EUR - EUR - Investment in USA4E contributed by parent company - 14.000 Balance at June 30, 2013 EUR - EUR 14.000 Investment in USA4E 189.500 - Reclassification of investment to investment in affiliate 14.000 (14.000) Equity in loss of affiliate (26.469) - Investment in C2Call - 50.000 Balance at June 30, 2014 EUR 177.031 EUR 50.000 USA4E - At June 30, 2013, the Company's investment consisted of a 2% share in USA4E. This investment was contributed to the Company by Pice during the year ended June 30, 2013, and is recorded at cost in the accompanying statement of financial position. During the year ended June 30, 2014, the Company acquired an additional 26% interest in USA4E for EUR189,500 using proceeds from the financing described in Note 8: Note Payable - Related Party. As a result of this additional investment, the Company is able to exercise significant influence over its investment, and therefore has recorded USA4E using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor's share of the profit or loss of the investee after the date of acquisition. Summarized financial information of USA4E for the year ended June 30, 2014 is presented as follows: Assets Cash EUR 38.835 Inventory 42.086 Furniture, Fixtures, & Equipment 9.639 Computer Equipment 3.000 Total Assets EUR 93.560 Liabilities - Shareholders' equity 93.560 Total Liabilities & Shareholders Equity EUR 93.560 Sales EUR 10.000 Less: Cost of Goods Sold (4.500) Gross Profit EUR 5.500 Less: Legal Fees -24.096 Travel -16.835 Consulting Fees -6.500 Website Expenses -30.000 Compensation Expense -12.000 Phone & Internet -1.365 Computer Expenses -2.410 Rent -6.827 Total Expenses EUR (100.033) Net Loss EUR (94.533) The Company is contractually obligated to provide funding to USAE in the aggregate amount of EUR500,000 in exchange for a 49% interest. As of June 30, 2014, the Company has invested EUR203,500 in USA4E, resulting in a remaining commitment of EUR296,500. C2Call - During the year ended June 30, 2014, the Company acquired a 1% interest in C2Call, Ltd. for EUR50,000 using proceeds from the financing described in Note 8 - Related Party Transactions: Note Payable. This investment is recorded at cost in the accompanying statement of financial position at June 30, 2014. See Note 11 - Events Occurring After the End of the Reporting Period for activity related to these investments occurring after June 30, 2014. 7. Shareholder's Equity Capital Structure - The components of the Company's capital structure is described below: Common Stock Structure and Rights - The Company is authorized to issue 500,000,000 shares of its EUR0.10 par value Common Stock. At June 30, 2013, 1,000,000 shares of common stock are issued and outstanding, of which 970,000 were owned by Pice on June 30, 2013. During 2014, Pice sold approximately 300,000 of these shares in connection with the financing agreement described in Note 8 - Related Party Transactions: Note Payable. All shares of the Company's common stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each share of common stock entitles the holder thereof to one non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders, to participate equally and to receive any and all such dividends as may be declared by the Board of Directors out of funds legally available therefore, and to participate pro rata in any distribution of assets available for distribution upon liquidation. Stockholders have no pre-emptive rights to acquire additional shares of common stock or any other securities. Common shares are not subject to redemption and carry no subscription or conversion rights. All outstanding shares of common stock are fully paid and non-assessable. Capital Transactions - During the year ended June 30, 2013, 1,000,000 shares of common stock were issued in exchange for EUR100,000 in cash. Other Reserves - Other reserves represent non-cash contributions received from Pice, consisting of the EUR14,000 investment in USA4E for the year ended June 30, 2013 as described in Note 6 - Investments, and the payment of EUR73,750 in operating expenses on the Company's behalf for the year ended June 30, 2013. Accumulated Deficit - Accumulated deficit represents the Company's accumulated net loss for the years ended June 30, 2014 and 2013. No dividends were declared or paid as of June 30, 2014. 8. Related Party Transactions Note Payable - According to the terms of a Financing Agreement "FA" between Balux and Pice dated July 1, 2013, Pice has committed to provide Balux with EUR3,000,000 in capital by December 31, 2015, of which EUR932,485 was received during the year ended June 30, 2014. Pice intends to fund this commitment on an instalment, basis by selling up to 700,000 of its Balux shares through private placement offerings to unaffiliated investors. This financing is structured as a 3.5% interest bearing note payable, and requires monthly payments of at least EUR100,000 representing principal and interest, commencing on July 1, 2016 until repaid in full. The FA provides Balux with the option to issue new common shares in lieu of cash repayment on the outstanding note balance. The number of shares issuable under this option are payable at an issue price of not less than EUR1.00 per share. Based on the outstanding loan balance of EUR932,485 at June 30, 2014, the Company would be obligated to issue 932,000 common shares to extinguish the note payable. See Note 11, Events After the End of the Reporting Period for financing activity occurring after June 30, 2014. Service Agreement - Concurrent to establishing the FA, on July 1, 2013 the Company and Pice entered into a Service Agreement "SA" with NXT Level Strategy GmbH "NXT" , an affiliate of Pice, under which the Company will receive the following services in exchange for a monthly fee of EUR50,000, subject to the level of capital raised by Pice through the sale of its Balux shares: - Strategic consulting, in connection with preparing the Company for a listing on a German stock exchange; - Acquisition, particularly identification of and negotiation with potential target companies; - Investor relations, particularly soliciting and consulting with agencies, which might be able to solicit investors for the acquisition of Balux shares; - Communication, particularly enhancement of the website of Balux and its shareholdings, communication towards investors and strategic partners; - Shareholder administration, particularly documentation of private placement agreements, drafting of sales reports and reporting towards Balux sales service providers; and - All business administrative and legal matters, which could be handled without engaging external legal consultants. - When necessary to engage external legal consultants, the cost is included in the monthly service fee. During the year ended June 30, 2014, the Company incurred EUR680,000 in fees associated with services provided by NXT, and has recorded these costs as a consulting fee in the accompanying statement of profit or loss and other comprehensive income. 9. Income Taxes For the years ended June 30, 2014 and 2013, the Company generated a taxable loss. However, the Company did not record the associated tax benefit due to recording a valuation allowance against the deferred tax asset generated from the net operating loss that will be used to offset future taxable income. 10. Commitments and Contingencies Contingencies - The Company is subject to legal claims that may arise in the normal course of business. However, management is unaware of any pending or threatened claims that would require adjustment or disclosure to the accompanying financial statements. Lease Commitments - The Company leases its corporate office space for monthly rental payments of EUR82. 11. Events Occurring After the End of the Reporting Period No events occurred subsequent to June 30, 2014, that would require adjustment to the accompanying financial statements or footnotes except as follows: Financing Proceeds - During the period from July 1, 2014 to November 20, 2014, the Company received an additional EUR144,000 in funding from Pice in connection with the FA described in Note 8 - Related Party Transactions. NXT Services - During the period from July 1, 2014 to November 20, 2014, the Company incurred EUR0 in fees associated with the SA described in Note 8 - Related Party Transactions. All parties to the SA agreed to temporarily suspend the agreement until further notice, effective July 1, 2014. Investment in USA4E - During the period from July 1, 2014 to November 20, 2014, the Company acquired an additional 5% interest in USA4E in exchange for EUR60,000. Investment in C2Call - During the period from July 1, 2014 to November 20, 2014, the Company acquired an additional 1% interest in USA4E in exchange for EUR50,000. Commitment to Fund C2Call's Listing Costs - The Company has committed to pay for up to EUR450,000 in costs associated with services performed by third parties that have been engaged by C2Call in connection with listing its shares on stock exchanges. During the period from July 1, 2014 to November 20, 2014, the Company has paid EUR34,000 of such costs, and is entitled to receive an additional 5% share in C2Call upon satisfaction of the funding commitment and the approval of C2Call's listing application. 12. Approval of the Financial Statements The accompanying financial statements were approved by the Company's Board of Directors and authorized for issue on November 20, 2014. --------------------------------------------------------------------- 02.12.2014 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- 301863 02.12.2014
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