01—Abstract
Summary
Summary of the 10-K/A filed June 17, 2011. Cited figures are marked; the original filing is the authoritative source.
This amended Form 10-K/A for the fiscal year ended April 30, 2010 was filed by Techs Loanstar, Inc. (now Byrn, Inc.) and was prepared to add management's evaluation of disclosure controls, reclassify certain items in the Statements of Operations, Stockholders' Deficit and Cash Flows, and restate the auditor's report.
Following a February 2010 share exchange, the company acquired ZenZuu USA, Inc., a development-stage company whose business plan centers on an exclusive U.S. license to an online social network and advertising revenue-sharing model. The company reported no revenue for the eleven months ended April 30, 2010, an operating loss of $1,162,854a (including an $808,333 impairment of the license), and a net loss of $1,397,739, with a stockholders' deficit of $1,204,013 and cash of only $244. The auditor expressed substantial doubt about the company's ability to continue as a going concern.
The company's liquidity position is precarious. Management states that current cash will not satisfy requirements for the next twelve months, the company has $1,204,257b in total liabilities, and the remaining $550,000 license fee is owed to ZenZuu, Inc. Management estimates about $300,000 is needed over the next twelve months to continue operations, plus $48,000 to maintain reporting status, and warns that investors could lose their entire investment. Management concluded that internal control over financial reporting was not effective, citing material weaknesses including the lack of a functioning audit committee and outside directors, inadequate segregation of duties, and ineffective period-end financial reporting controls.
The filing also discloses significant dilution risk: convertible notes convert at discounts of up to 45% to market, and 5,666,912 shares were issued on April 30, 2010 to settle $838,000c of convertible notes and $108,741 of accrued interest. Shares outstanding were 43,066,912 before a two-for-one stock dividend paid in July 2010, and the company's common stock trades on the OTC Bulletin Board under the symbol TCLN.
02—Key points
Key Highlights
- No revenue was generated in the eleven months ended April 30, 2010; net loss was $1,397,739, including an $808,333 impairment of the ZenZuu license.
- Stockholders' deficit was $(1,204,013) at April 30, 2010, against total assets of only $244 in cash.
- Total liabilities were $1,204,257, including $781,258 of related-party payables and $150,000 of convertible notes.
- The auditor expressed substantial doubt about the company's ability to continue as a going concern.
- The company's ZenZuu license carries a remaining $550,000 unpaid fee, payable from 20% of month-end cash; management estimates $300,000 is needed over the next twelve months.
- Management concluded internal control over financial reporting was not effective, citing three material weaknesses.
- Convertible notes convert at up to a 45% discount to market, creating significant expected dilution for shareholders.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2010filed June 17, 2011Financial Statements
| Revenue | $0 |
| Operating Expenses | $4K |
| Operating Income | -$4K |
| Interest Expense | $0 |
| Net Income | -$4K |
| EPS (Basic) | $-0.01 |
05—Questions
Frequently Asked Questions
What is the business of Techs Loanstar, Inc. after the share exchange?
After the February 2010 share exchange with ZenZuu USA, Inc., the company ceased its historical loan management business and adopted ZenZuu's plan. It holds an exclusive 10-year U.S. license to use ZenZuu, Inc.'s online social network database and advertising revenue-sharing model, under which members who are Active Reps receive a share of advertising revenue. The company states it has limited operations and does not expect significant operations until it commercializes the license.
Why did the company record a large loss in fiscal 2010?
Operating expenses of $1,162,854 included an $808,333 impairment charge on the ZenZuu license, because management determined the remaining carrying value was not recoverable given the lack of significant revenue. Other expenses of $234,885 included a $75,000 loss on a forfeited deposit. The filing restated the statements to move the impairment into operating expenses.
Can the company continue operating without additional funding?
According to the filing, no. Cash on hand was $244 at April 30, 2010, and management believes this will not satisfy cash requirements for the next twelve months. The company estimates it needs about $300,000 to continue operations and $48,000 to maintain SEC reporting status, excluding $20,000 monthly officer compensation. Management states that without sufficient revenue or financing, it would have to cease operations, and investors could lose their entire investment.
How will shareholders be affected by the convertible notes?
The convertible notes were amended to convert at discounts to market price, including an early conversion option at 55% of a five-day average price. On April 30, 2010, 5,666,912 shares were issued to settle $838,000 of convertible notes and $108,741 of accrued interest at $0.1683 per share. The filing states that remaining conversions and other obligations may cause significant dilution, and that $150,000 of convertible debt remained outstanding.
What did management identify as internal control weaknesses?
Management concluded that internal control over financial reporting was not effective. The material weaknesses were a lack of a functioning audit committee and lack of a majority of outside directors, inadequate segregation of duties, and ineffective controls over period-end financial reporting. Management believes the first weakness could result in material misstatements in future periods, and it plans to add outside directors and a segregation-of-duties position when funds are available.
06—Continue