UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 2
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year period Ended
June 30, 2010
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ______________ to _____________
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Commission File Number:
001-31669
SUNRIDGE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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98-0348905
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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16857 E. Saguaro Blvd.
Fountain Hills, Arizona
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85268
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(Address of principal executive offices)
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(Zip Code)
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(480) 837-6165
(Registrant’s telephone number, including area code)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
o
No
þ
Indicate by check mark if the registrant is not required to file reports pursuant of Section 13 or Section 15(d) of the Act. Yes
o
No
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Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.): Yes
o
No
þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer at November 11, 2010, was $1,237,997.
At May 16, 2011, 49,322,619 shares of Sunridge International, Inc. common stock were outstanding.
EXPLANATORY NOTE
Sunridge International, Inc. (referred to in this annual report as “we,” “us” or the “Company”) is filing this Amendment No. 2 on Form 10-K/A (this “Amendment”) to amend its Annual Report on Form 10-K for the fiscal year ended June 30, 2010, filed with the Securities and Exchange Commission (the “SEC”) on November 15, 2010 (the “Original 10-K”), as first amended on April 6, 2011.
This Amendment is being filed to amend the Original 10-K to provide (i) the inclusion of critical accounting policies, judgments, and estimates in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, (ii) updated information regarding the assumption of debt associated with the Plan of Reorganization in Note 1 – Organization and Description of Business, (iii) revised information regarding prepaids in Note 2 – Summary of Significant Accounting Policies, (iv) revised information related to number of shares issued and the loss on stock issuances in Note 5 – Loss on Conversion of Debt, (v) revised information related to amount owed to the Company’s president in Note 6 – Related Party Transactions, (vi) revised information related to commitments and contingencies in Note 9, and (vii) included management’s report on internal control over financial reporting and removal of material weakness for lack of testing in Item 9A – Controls and Procedures. The Company is also updating its lists of exhibits in Item 15 of this report to include the revised certifications to include the introductory language of paragraph 4 and the language of paragraph 4(b) of Item 601(b)(31) of Regulation S-K and the certifications specified in Rule 13(a)-14(a) under the Securities Exchange Act of 1934 required to be filed with this Amendment. Except for the foregoing amendments and updates, the Amendment does not modify or update the Original 10-K.
SUNRIDGE INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART II
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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3
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Item 8.
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Financial Statements and Supplementary Data
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5
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Item 9A.
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Controls and Procedures
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23
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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24
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Signatures
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24
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fiscal Year Ending June 30, 2010
Operations
The Company’s revenue in fiscal year 2010 increased by 71.0% ($61,290) over fiscal year 2009, but total expenses far exceeded our revenues in fiscal year 2010. Our gross margin increased from 66.6% in fiscal year 2009 to 76.4% in fiscal year 2010 as a result of a higher per unit price charged customers in 2010.
Our loss from operations increased by 423.6% in fiscal year 2010 in comparison to fiscal year 2009 because of our increased general and administrative expenses. Our total general and administrative expenses increased by 344.8% in the fiscal year ended June 30, 2010 in comparison to the 2009 fiscal year as a result primarily of Reorganization Costs, Loss on Stock Issuance, increased Employee and Consultant Expenses, Legal and Professional Fees, Selling and Marketing Expenses and Rent Expense. The Reorganization Costs of $199,673 were incurred as a result of the Company's acquisition of Ophthalmic International, Inc. in October 2009. The Loss on Stock Issuance of $186,159 occurred as a result of issuing restricted stock at a value less than the market value of free trading stock to induce conversion of debt. Our Employee and Consultants Expenses increased by more than 864.3% in the 2010 fiscal year over the 2009 fiscal year as a result of the hiring of our European consultant in the second quarter of our 2010 fiscal year and hiring a public relations firm in the fourth quarter of the year. Our Employee and Consultant Expenses will likely increase as we expand the shipment of our products to China, Europe and the Caribbean in the future, assuming we can obtain sufficient working capital. We will likely commence paying our officers and Directors compensation some time in the future. Our Legal and Professional Fees increased by 158.0% during the 2010 fiscal year because of the acquisition of Ophthalmic International in October 2009 and the increased legal and accounting expenses incurred as an operating SEC reporting company. Our Selling and Marketing Expenses increased by 112.4% during the 2010 fiscal year over the 2009 fiscal year as a result of our increased marketing activities in India and the Middle East. Our Selling and Marketing Expenses will likely increase as we expand sales of our products to China, Europe and the Caribbean in the future. We are likely to incur additional research and development expenses in fiscal year 2011 if we apply to the FDA for our U.S. clinical study protocols. There is no assurance that we will ever be profitable.
Liquidity and Capital Resources
We suffered a severe liquidity shortage in 2009 and 2010. From July 1, 2009 to June 30, 2010, we borrowed a total of $619,711. These loans bear annual interest from 12% and all of the loans are due on demand or prior to June 30, 2011. Our interest expense increased by 25.0% ($14,412) from fiscal year 2009 to fiscal year 2010. Without substantial funding in the near future, our liquidity shortage will become critical. We are hopeful we will be able to obtain substantial funding during the remainder of fiscal year 2011, but we presently have no agreements or arrangements to obtain any such funding. The consolidated financial statements contained in this Form 10-K have been prepared assuming we will continue to operate as a going concern and do not include any adjustments that might be necessary if we are unable to continue as a going concern. As a result, our independent registered public accountants have issued a going concern explanatory paragraph to their audit report on our consolidated financial statements for the fiscal year ended June 30, 2010.
Over the next three years, we must obtain at least $6,500,000 of funding to finance our two planned patient clinical studies in Canada and the US, and a minimum level of administrative staff. If such funding is not obtained, it is unlikely we will receive FDA approval for the sale of our product in the U.S. Without FDA approval our revenues will be totally dependent on foreign sales.
Critical Accounting Policies, Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.
There are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, our price is fixed or determinable, and collection is reasonably assured. We recognize revenue on our standard products when title passes to the customer upon shipment. The standard products do not have customer acceptance criteria. We have standard rights of return that are accounted for as a warranty provision, although it is deemed immaterial at this time. We do not have any price protection agreements or other post shipment obligations. For custom equipment where customer acceptance is part of the sales agreement, revenue will be recognized when the customer has accepted the product. In cases where custom equipment does not have customer acceptance as part of the sales agreement, revenue will be recognized upon shipment, as long as the system meets the specifications as agreed upon with the customer. Certain transactions may have multiple deliverables, with the deliverables clearly defined. To the extent that the secondary deliverables are other than perfunctory, we will recognize the revenue on each deliverable as it is delivered, if separable, or on the completion of all deliverables, if not separable.
Debt and Equity-Based transactions
We have received capital investment in exchange for promissory notes. These promissory notes are typically short-term and are issued at fair market rates at the time of the issuance. From time to time, we have offered the promissory note holders the opportunity to convert their promissory notes to common stock. As an incentive to induce the conversion, we offered the promissory note holders a conversion price at a discount to the closing price of our common stock on the date of the election to convert. We recognize these discounts as a loss on stock issuances.
Allowance for Bad Debts
We maintain an allowance for potential credit losses based on historical experience and other information available to management.
Contingencies
We accrue for contingent obligations, including legal costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available.
Income Taxes
We use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SUNRIDGE INTERNATIONAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Page
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Report of Independent Registered Public Accounting Firm
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6
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Consolidated Balance Sheets as of June 30, 2010 and 2009
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7
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Consolidated Statements of Operations for the Years Ended June 30, 2010 and 2009
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8
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Consolidated Statements of Stockholders’ Equity for the Years Ended June 30, 2010 and 2009
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9
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Consolidated Statements of Cash Flows for the Years Ended June 30, 2010 and 2009
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10
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Notes to Consolidated Financial Statements
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11
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Sunridge International, Inc.
We have audited the accompanying consolidated balance sheets of Sunridge International, Inc. as of June 30, 2010 and 2009, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sunridge International, Inc. as of June 30, 2010 and 2009 and the results of its operations, changes in shareholders' equity, and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, anticipates additional losses in the next year, and has insufficient working capital as of June 30, 2010 to fund the anticipated losses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Semple, Marchal & Cooper, LLP
Certified Public Accountants
Phoenix, Arizona
November 15, 2010, except for Note 13, as to which the date is May 18, 2011
SUNRIDGE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
S
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6/30/2010
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6/30/2009
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ASSETS
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CURRENT ASSETS
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Cash & Cash Equivalents
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$
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–
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$
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–
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Accounts Receivable
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8,927
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–
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Employee Advances
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3,400
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–
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Prepaids
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179,814
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–
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Inventory
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20,920
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3,556
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Total Current Assets
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213,061
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3,556
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Property and equipment, net
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2,871
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3,669
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OTHER ASSETS
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Deposits
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–
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4,520
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TOTAL ASSETS
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$
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215,932
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$
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11,745
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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CURRENT LIABILITIES
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Notes payable - related parties
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$
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203,976
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$
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269,726
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Notes payable
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293,202
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|
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215,300
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Accounts payable
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307,805
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|
|
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101,452
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Cash Overdraft
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|
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1,633
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|
|
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2,463
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Accrued interest
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|
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44,902
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61,553
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TOTAL LIABILITIES
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$
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851,518
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$
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650,494
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COMMITMENTS
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–
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–
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Preferred Stock - $0.0001 par value; 50,000,000 shares
authorized, none issued or outstanding
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–
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–
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Common Stock - $0.001 par value;
550,000,000
shares
authorized 42,942,180 and 40,000,000 shares outstanding at
June 30, 2010 and June 30, 2009, respectively
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42,942
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40,000
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Additional paid-in capital
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13,407,088
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12,386,970
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Accumulated deficit
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(14,085,616
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)
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(13,065,719
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)
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TOTAL STOCKHOLDERS' EQUITY(DEFICIT)
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(635,586
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)
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(638,749
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)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
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$
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215,932
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$
|
11,745
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The accompanying notes are an integral part of these consolidated financial statements.
SUNRIDGE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
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Year ended June 30,
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2010
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2009
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|
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PRODUCT REVENUES
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$
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147,566
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$
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86,276
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Cost of Product Revenues
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34,827
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|
|
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28,834
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GROSS PROFIT
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112,739
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57,442
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GENERAL & ADMINISTRATIVE EXPENSES
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|
|
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Employee and Consultant Expenses
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297,496
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|
|
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30,850
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FDA Expenses
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|
|
2,008
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|
|
|
–
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|
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Freight
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|
|
8,415
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|
|
|
1,397
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|
|
Depreciation
|
|
|
798
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|
|
|
799
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|
|
Telephone & Utilities
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|
|
6,218
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|
|
|
10,546
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|
|
Office Expenses
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|
|
4,941
|
|
|
|
26,014
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|
|
Insurance
|
|
|
21,035
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|
|
|
30,726
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|
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Travel & Entertainment
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|
|
9,723
|
|
|
|
300
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|
|
Loss on Stock Issuances
|
|
|
186,159
|
|
|
|
–
|
|
|
Legal and professional fees
|
|
|
164,947
|
|
|
|
63,931
|
|
|
Reorganization Costs
|
|
|
199,673
|
|
|
|
–
|
|
|
Bank Service Fees
|
|
|
2,522
|
|
|
|
213
|
|
|
Auto Expense
|
|
|
5,195
|
|
|
|
–
|
|
|
Dues & Subscriptions
|
|
|
703
|
|
|
|
997
|
|
|
Repairs & Maintenance
|
|
|
9,040
|
|
|
|
–
|
|
|
Rent expense
|
|
|
70,646
|
|
|
|
54,240
|
|
|
Selling & marketing expenses
|
|
|
36,209
|
|
|
|
17,045
|
|
|
Other General and Operating Expenses
|
|
|
35,376
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL GENERAL & ADMINISTRATIVE EXPENSES
|
|
|
1,061,104
|
|
|
|
238,558
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(948,365
|
)
|
|
|
(181,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
Other Income
|
|
|
422
|
|
|
|
1,755
|
|
|
Interest expense
|
|
|
(71,954
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)
|
|
|
(57,542
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)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSES)
|
|
|
(71,532
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)
|
|
|
(55,787
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(1,019,897
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)
|
|
$
|
(236,903
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)
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Share
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
40,531,829
|
|
|
|
40,000,000
|
|
The accompanying notes are an integral part of these consolidated financial statements.
SUNRIDGE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED JUNE
30, 2010 AND 2009
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Stockholders'
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Equity
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT JULY 1, 2008
|
|
|
19,450,000
|
|
|
$
|
19,450
|
|
|
$
|
12,407,520
|
|
|
$
|
(12,828,816
|
)
|
|
$
|
(401,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of recapitalization (See Note 1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,500,000
|
)
|
|
|
(12,500
|
)
|
|
|
12,500
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Stock
|
|
|
33,050,000
|
|
|
|
33,050
|
|
|
|
(33,050
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT JULY 1, 2008 RECAPITALIZED
|
|
|
40,000,000
|
|
|
|
40,000
|
|
|
|
12,386,970
|
|
|
|
(12,828,816
|
)
|
|
|
(401,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for the year ended
June 30, 2009
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(236,903
|
)
|
|
|
(236,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT JUNE 30, 2009
|
|
|
40,000,000
|
|
|
$
|
40,000
|
|
|
$
|
12,386,970
|
|
|
$
|
(13,065,719
|
)
|
|
$
|
(638,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued for Services
|
|
|
1,160,855
|
|
|
|
1,161
|
|
|
|
327,875
|
|
|
|
–
|
|
|
|
329,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued for Debt
and Interest
|
|
|
1,781,325
|
|
|
|
1,781
|
|
|
|
506,084
|
|
|
|
–
|
|
|
|
507,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Stock Issuances
|
|
|
–
|
|
|
|
–
|
|
|
|
186,159
|
|
|
|
–
|
|
|
|
186,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for the year ended
June 30, 2010
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,019,897
|
)
|
|
|
(1,019,897
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT JUNE 30, 2010
|
|
|
42,942,180
|
|
|
|
42,942
|
|
|
|
13,407,088
|
|
|
|
(14,085,616
|
)
|
|
|
(635,586
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
SUNRIDGE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
|
|
|
Year ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,019,897
|
)
|
|
$
|
(236,903
|
)
|
|
Adjustments to reconcile net loss to net
cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
798
|
|
|
|
799
|
|
|
Reorganization Costs
|
|
|
199,673
|
|
|
|
–
|
|
|
Loss on Stock Issuances
|
|
|
186,159
|
|
|
|
–
|
|
|
Stock and debt issued for interest and services
|
|
|
391,482
|
|
|
|
–
|
|
|
Changes in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
4,520
|
|
|
|
–
|
|
|
Inventory
|
|
|
(17,364
|
)
|
|
|
11,168
|
|
|
Prepaids
|
|
|
(179,814
|
)
|
|
|
–
|
|
|
Accounts receivable and employee advances
|
|
|
(12,327
|
)
|
|
|
10,491
|
|
|
Accounts payable and advances
|
|
|
153,846
|
|
|
|
71,114
|
|
|
Accrued interest
|
|
|
(16,651
|
)
|
|
|
39,312
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(309,575
|
)
|
|
|
(104,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Overdraft borrowings (repayment)
|
|
|
(830
|
)
|
|
|
2,053
|
|
|
Repayment on notes payable, related party
|
|
|
(48,033
|
)
|
|
|
(42,675
|
)
|
|
Repayment on notes payable
|
|
|
(114,107
|
)
|
|
|
(5,000
|
)
|
|
Proceeds from borrowings
|
|
|
471,518
|
|
|
|
149,641
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
308,548
|
|
|
|
104,019
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds from reorganization
|
|
|
1,027
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY INVESTING ACTIVITIES
|
|
|
1,027
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH & CASH EQUIVALENTS
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT JUNE 30, 2010 AND 2009
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
30,755
|
|
|
$
|
18,230
|
|
|
Income Taxes
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
Common stock paid for services
|
|
|
329,036
|
|
|
|
–
|
|
|
Common stock paid for interest
|
|
|
62,446
|
|
|
|
–
|
|
|
Common stock paid for debt
|
|
|
437,012
|
|
|
|
–
|
|
The accompanying notes are an integral part of these consolidated financial statements.
SUNRIDGE INTERNATIONAL, INC.
NO
TES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Ophthalmic International, Inc. (“OI”) was incorporated in March 1997 in the state of Nevada. OI had been a wholly owned subsidiary of Coronado Industries, Inc. until January 26, 2007, when OI and its subsidiaries were purchased from Coronado Industries, Inc. for cash and other consideration.
Tari, Inc. (“Tari”) was incorporated on May 2, 2001 under the laws of the State of Nevada and located in Toronto, Ontario, Canada. The accounting and reporting policies of Tari conform to accounting principles generally accepted in the United States of America. Tari’s fiscal year end was March 31.
In September 2009, Tari consummated an Agreement of Share Exchange and Plan of Reorganization (the “Agreement”) with OI. Pursuant to the Agreement, Tari agreed to issue an aggregate of 33,050,000 shares of its restricted common stock to the shareholders of OI in exchange for all the issued and outstanding common stock shares of OI.
The exchange of shares has been accounted for as a reverse acquisition in the form of a recapitalization with OI as the “accounting acquirer.” Prior to the acquisition, Tari changed its name to SunRidge International, Inc. (hereinafter referred to as “SunRidge” or the “Company”). Following the acquisition, OI became the wholly-owned subsidiary of SunRidge. SunRidge has adopted a fiscal year end of June 30. Operations after the acquisition have been based in Fountain Hills, Arizona, where the Company manufactures and markets a patented Vacuum Fixation Device and patented suction rings to major medical supply companies and health care providers throughout the world. As a recapitalization, the accompanying financial statements represent the activity of OI.
As a part of the completion of this Agreement, the Company assumed certain debt in the amount of $138,193 from the former President. This debt was unsecured and was non-interest bearing. The Company recorded it as notes payable and subsequently converted to common stock as of June 30, 2010.
GOING CONCERN
The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not made an operating profit since 1996. Further, the Company has a working capital deficit of $(638,457) and a negative net worth of $(14,085,616) as of June 30, 2010, which causes a doubt about the ability of the Company to remain a going concern.
The financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the uncertainty of the Company’s ability to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial position, results of operations, cash flows and changes in stockholders’ equity (deficit) of the Company and its wholly owned subsidiary. All material intercompany transactions, accounts and balances have been eliminated.
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include, but are not limited to, collectibility of accounts receivable, depreciable lives, realization of net operating losses, and valuation of stock-based transactions.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three (3) months or less.
PREPAIDS
At June 30, 2010, the Company had $179,814, or 83% of total assets, recorded as prepaid services. This amount is related to the issuance of 800,000 shares of common stock, valued at $224,000, for professional services to be performed over a one year period ending April 18, 2011, which is being amortized on a straight-line basis over the service period. As of June 30, 2010, $179,814 was unearned and recorded as prepaid.
INVENTORIES
Inventories consist primarily of materials and parts and are stated at the lower of cost, as determined on a first-in, first-out (FIFO) basis, or market.
ACCOUNTS RECEIVABLE
The Company follows the allowance method of recognizing uncollectible accounts receivable. The allowance method recognizes bad debt expense as a percentage of accounts receivable based on a review of the individual accounts outstanding and the Company’s prior history of uncollectible accounts receivable. As of June 30, 2010 and 2009, the Company has not established an allowance for uncollectible accounts receivable. The Company does not record interest income on delinquent receivable balances until it is received. Accounts receivable are generally unsecured.
The Company had one significant customer accounting for 89% and 0% of total revenues during the year ended June 30, 2010 and 2009. There were no accounts receivable from this customer at June 30, 2010 and 2009.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to operations as incurred. Betterments or renewals are capitalized when incurred. Depreciation is provided using accelerated methods over the following useful lives:
|
|
Office furniture & Equipment
|
|
5 – 7 Years
|
|
|
Machinery
|
|
5 – 7 Years
|
|
|
Leasehold Improvements
|
|
5 Years
|
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LONG-LIVED ASSETS
We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
CONTINGENCIES
We accrue for contingent obligations, including legal costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available.
DEFERRED INCOME TAXES
Deferred income taxes are provided on an asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
LOSS PER SHARE
Basic loss per share includes no dilution and is computed by dividing loss to common stockholders by the weighted average number of common shares outstanding for the period. The effect of the recapitalization is included in all periods presented.
Assumed conversion of a convertible promissory note for approximately 160,000 shares at June 30, 2010 has been excluded from the calculation of diluted net loss per common share as its effect would be anti-dilutive (decreases the loss per share). In addition, as the Company has a net loss available to common stockholders for the fiscal years ended June 30, 2010 and 2009, the diluted EPS calculation has been excluded from the financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of our financial instruments included in current assets and current liabilities approximated their respective fair values at each balance sheet date due to the immediate or short-term maturity of these financial instruments.
RECENT ACCOUNTING PRONOUNCEMENTS
With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the fiscal year ended June 30, 2010, that are of significance, or potential significance, to us.
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In October 2009, the FASB issued guidance on revenue recognition for multiple-deliverable revenue arrangements. The guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The Company is currently assessing the impact of this guidance on its financial position and results of operations.
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, our price is fixed or determinable, and collection is reasonably assured. We recognize revenue on our standard products when title passes to the customer upon shipment. The standard products do not have customer acceptance criteria. The Company has standard rights of return that are accounted for as a warranty provision, although it is deemed immaterial at this time. The Company does not have any price protection agreements or other post shipment obligations. For custom equipment where customer acceptance is part of the sales agreement, revenue will be recognized when the customer has accepted the product. In cases where custom equipment does not have customer acceptance as part of the sales agreement, revenue will be recognized upon shipment, as long as the system meets the specifications as agreed upon with the customer. Certain transactions may have multiple deliverables, with the deliverables clearly defined. To the extent that the secondary deliverables are other than perfunctory, the Company will recognize the revenue on each deliverable as it is delivered, if separable, or on the completion of all deliverables, if not separable.
NOTE 3 – DEBT AND DEBT CONVERSION
From July 1, 2009 to June 30, 2010, the Company received $619,711 of investment in exchange for promissory notes. These promissory notes were for a duration of one month to one year with an interest rate of 10% for the term and a default rate of 12%.
The Company offered the promissory note holders the opportunity to convert their principal and accrued interest into restricted common stock of the Company at various times during the fiscal year ended June 30, 2010.
The first conversion took place March 31, 2010 at the closing bid stock price of $.30 cents per share and converted $302,553 of principal and interest.
Additional conversions took place between April 1, 2010 and June 30, 2010, at the closing bid stock prices between $.33 and $.20 cents per share and converted $205,310 of principal and interest.
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – EQUITY
Preferred Stock
As of June 30, 2010, our authorized preferred stock is 50,000,000 shares of preferred stock with par value of $0.001 per share. The Company’s Board of Directors has the authority to divide the preferred stock shares into series and to fix the voting powers, designation, preference, and relative participating, option or other special rights, and the qualifications, limitations, or restrictions of the shares of any series so established. The Company has issued no preferred stock shares as of June 30, 2010.
Common Stock
In September 2009, Tari, Inc. completed a 5-for-1 forward stock split which brought the shares outstanding of Tari, Inc. from 3,890,000 to 19,450,000. The 5-for-1 forward split has been accounted for retroactively for all periods presented.
The President of Tari, Inc. contributed 12,500,000 shares of common stock to the Company as part of the exchange of shares with OI.
In September, 2009, Tari consummated an Agreement of Share Exchange and Plan of Reorganization (the “Agreement”) with OI. Pursuant to the Agreement, Tari agreed to issue an aggregate of 33,050,000 shares of its restricted common stock to all of the shareholders of OI in exchange for all the issued and outstanding common stock of OI.
During the year ended June 30, 2010, the Company issued 1,160,855 shares of common stock totaling $329,036 to various consultants and vendors for services performed. During the year ended June 30, 2010, the Company also issued 1,781,325 of shares of common stock totaling $507,865 to various note holders for payment of principal and interest.
NOTE 5 – LOSS ON CONVERSION OF DEBT
The Company’s promissory note holders were given an incentive to convert the promissory notes to common stock by issuing the stock at a discount from the closing bid trade price. As a result of promissory note holders electing to convert their debt to common stock, the Company recorded a loss in the amount of $186,159 on the conversion of 1,781,325 shares of common stock.
NOTE 6 – RELATED PARTY TRANSACTIONS
From July 1, 2009 to June 30, 2010, G. Richard Smith, the Company's President and a Director, loaned the Company an additional $70,647 and was repaid $57,397. This debt bears an interest rate of 10% for the term and 12% default per annum after and is due on demand. At June 30, 2010, G. Richard Smith was owed $225,099 by the Company comprised of $199,976 in notes payable – related parties and $25,123 in accrued interest.
During the year ended June 30, 2010 the following transactions occurred:
Gary R. Smith, the Company's Chief Financial Officer and Treasurer, was repaid his loans of $12,500 and accrued interest thereon.
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – RELATED PARTY TRANSACTIONS (Continued)
On March 31, 2010, The Smith Foundation, Inc., a charitable foundation of which G. Richard Smith, the Company's President and a Director, is President, was issued 49,600 shares of restricted common stock in conversion of $12,000 in loans and accrued interest thereon.
On March 31, 2010, John Sharkey, a Director of the Company, was issued 97,121 shares of restricted common stock in conversion of $29,136 of expense he incurred on behalf of the Company in 2007.
On April 18, 2008, Marston & Webb, Inc. loaned Ophthalmic International $20,000. This loan bears an interest rate of 12% per annum and is due on demand. On September 29, 2009, Victor Webb, a principal on Marston & Webb, Inc., became a Director of the Company. At March 31, 2010, Marston & Webb, Inc. was issued 79,671 shares of restricted common stock for the $20,000 of principal and $3,901 of accrued interest thereon.
Between January 1, 2010 and June 30, 2010, we received loans in the total amount of $323,352 from five non-affiliated sources and our President. $190,500 of this amount was used to pay off the debt owed to third parties and Theodore Tsagkaris, our prior President, Secretary, Treasurer, as required by the agreement between Ophthalmic International, Inc. and the Company. After the payments of these debts, Mr. Tsagkris resigned as a Director of the Company, effective February 11, 2010.
An employee had received money in advance of a business trip, however, the trip was canceled the funds are to be paid back to the Company in the amount of $3,400.
As of June 30, 2010 and 2009, notes payable to related parties consisted of the following:
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
10% for the first 90 days and 12% per annum, thereafter, note payable to stockholders, principal and interest due on demand, secured by the assets of the Company
|
|
$
|
203,976
|
|
|
$
|
258,726
|
|
|
|
|
|
|
|
|
|
|
|
|
18% per annum note payable to a stockholder, principal and interest due on demand; unsecured
|
|
|
–
|
|
|
|
11,000
|
|
|
|
|
|
203,976
|
|
|
|
269,726
|
|
|
Less: Current Portion
|
|
|
(203,976
|
)
|
|
|
(269,726
|
)
|
|
|
|
$
|
–
|
|
|
$
|
–
|
|
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – PROPERTY AND EQUIPMENT
At June 30, 2010 and 2009, property and equipment consisted of the following:
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Office furniture and equipment
|
|
$
|
58,433
|
|
|
$
|
58,433
|
|
|
Machinery and equipment
|
|
|
15,613
|
|
|
|
15,613
|
|
|
Leasehold improvements
|
|
|
3,000
|
|
|
|
3,000
|
|
|
|
|
|
77,046
|
|
|
|
77,046
|
|
|
Less: accumulated depreciation
|
|
|
(74,175
|
)
|
|
|
(73,377
|
)
|
|
Net property and equipment
|
|
$
|
2,871
|
|
|
$
|
3,669
|
|
Depreciation expense was $798 and $799, for the years ended June 30, 2010 and 2009, respectively.
NOTE 8 – INVENTORY
As of June 30, 2010 and 2009, inventory consisted of the following:
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
15,502
|
|
|
$
|
3,556
|
|
|
Finished goods
|
|
|
5,418
|
|
|
|
–
|
|
|
|
|
$
|
20,920
|
|
|
$
|
3,556
|
|
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company entered into a non-cancelable lease agreement for office space in Fountain Hills, Arizona commencing December 1, 2004, through December 15, 2009. Monthly rental payments were $4,520. After the lease expired, the Company extended the lease to December 31, 2010, at a monthly rate of $4,520. There is no immediate plan to sign a new rental agreement. As of December 31, 2009, the Company had been delinquent in its rent payments. In order to make up past due payments, the Company issued a promissory note dated January 27, 2010 to convert $70,308.83 in rent and related late and legal fees into a note to pay $17,627 in four quarterly payments for a total principal amount of $70,308.83, including interest at 12% per annum after July 1, 2010. As of June 30, 2010, the Company had not made all the payments required and were in default on the note.
Indemnification
The Company has agreed to indemnify its officers and directors for certain events or occurrences that may arise as a result of the officer or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company believes the estimated fair value of these indemnification agreements is minimal and has no liabilities recorded for these agreements as of June 30, 2010 and 2009.
Contingent Liability
The Company had a consulting agreement with Francesco Aspes whereby a clause stated that the Company would reimburse Mr. Aspes for documented expenses, up to a maximum of 80,000 euros (or $109,000 USD currently). There is a claim by Mr. Aspes for the maximum amount, however, the Company believes that the reimbursement claim is unenforceable as no underlying documentation in support of this claim has been received. Therefore, the Company believes that it is reasonably possible that no loss has been incurred. As such, there is no accrued expense related to the potential reimbursement at June 30, 2010.
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – COMMITMENTS AND CONTINGENCIES (Continued)
Litigation
On December 16, 2009, the Company's patent attorneys, Meschkow & Gresham, P.L.C., filed a lawsuit (CV 2009-037698) in the Superior Court for Maricopa County, Arizona against the Company and Mr. Richard Smith for breach of contract in the failure to pay for legal services in the amount of $12,063 plus costs and legal fees. The Company's answer to the complaint admitted that legal services had been provided but claimed no knowledge of the value of those services. This case was transferred to arbitration and an award was rendered in the amount of $8,064 against G. Richard Smith, our President and Director, his wife, Karen Smith and the Ophthalmic International, Inc., our wholly owned subsidiary, plus court costs of $453 and attorney fees of $1,500. This arbitration award has not been filed with the Clerk of the Court to proceed to judgment yet.
During our fourth quarter 2010, Charles E. Brokup filed a lawsuit (CV 2010-054295) in Superior Court for Maricopa County, Arizona against Ophthalmic International, Inc. and Mr. G. Richard Smith for breach of promise to pay $10,000 principal on a promissory note and $1,000 per month in interest. The Company's answer to the complaint admitted that the principal amount of $10,000 was owed but denies that more than legal interest is owed after the first month expressly stated interest of $1,000.
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – NOTES PAYABLE
As of June 30, 2010 and 2009, notes payable consisted of the following:
|
|
|
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Convertible Note Payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% per annum note payables to XL Lending, principal and interest payable on demand; includes an option to convert into approximately 160,000 shares of the Company’s common stock based on the bid price of the common stock at time of payment.
|
|
$
|
38,000
|
|
|
$
|
–
|
|
|
Notes Payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15% per annum note payable to Vickie Goulette, principal and interest payable on demand.
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
15% per annum note payables to Robert Suliot, principal and interest payable on demand.
|
|
|
100,000
|
|
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
|
10% for the first 90 days and 12% per annum, thereafter note payable to Victor Webb, principal and interest payable on demand. (1)
|
|
|
–
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
10% for the first 90 days and 12% per annum, thereafter note payables to XL Lending, principal and interest payable on demand.
|
|
|
12,000
|
|
|
|
32,000
|
|
|
|
|
|
|
|
|
|
|
|
|
10% for the first 90 days and 12% per annum, thereafter note payables to Harvey Wish, principal and interest payable on demand.
|
|
|
16,000
|
|
|
|
2,300
|
|
|
|
|
|
|
|
|
|
|
|
|
10% for the first 90 days and 12% per annum, thereafter note payable to Larry Belcamino, principal and interest payable on demand.
|
|
|
–
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
10% for the first 90 days and 12% per annum, thereafter note payable to Charles Brokof, principal and interest payable on demand.
|
|
|
10,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
12% per annum note payable to Pettibone Properties, principal and interest payable in four quarterly installments.
|
|
|
57,202
|
|
|
|
–
|
|
|
|
|
|
293,202
|
|
|
|
215,300
|
|
|
Less: Current Portion
|
|
|
(293,202
|
)
|
|
|
(215,300
|
)
|
|
|
|
$
|
–
|
|
|
$
|
–
|
|
______________________
(1) Victor Webb became a Director of the Company during fiscal 2010 and is now considered a related party.
The above notes are secured by the assets of the Company.
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – INCOME TAXES
The Company's income tax expense for the years ended June 30, 2010 and 2009 differed from the United States statutory rates:
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate, Combination Federal and State
|
|
|
40
|
%
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Statutory rate applied to loss before income taxes
|
|
$
|
407,000
|
|
|
$
|
95,000
|
|
|
Change in valuation allowance
|
|
|
(407,000
|
)
|
|
|
( 95,000
|
)
|
|
Income tax expense
|
|
$
|
–
|
|
|
$
|
–
|
|
The significant components of the Company’s deferred tax assets are as follows:
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
Net operating losses carryforward
|
|
$
|
608,000
|
|
|
$
|
201,000
|
|
|
Less: Valuation allowance
|
|
|
(608,000
|
)
|
|
|
(201,000
|
)
|
|
Deferred tax assets
|
|
$
|
–
|
|
|
$
|
–
|
|
The amount taken into income as deferred tax assets must reflect that portion of the income tax loss carryforward that is more likely than not to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carry-forward, regardless of their time of expiration.
At June 30, 2010, the Company has incurred accumulated net operating losses in the United States of America totaling approximately $1,522,000 which are available to reduce taxable income in future taxation years, subject to statutory time limitations.
Losses expire as follows:
|
|
|
Year of Expiration
|
|
Amount
|
|
|
|
|
Federal
|
|
State
|
|
Federal
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year End: June 30,
|
|
2028
|
|
2013
|
|
$
|
267,000
|
|
|
$
|
267,000
|
|
|
|
|
2029
|
|
2014
|
|
|
237,000
|
|
|
|
237,000
|
|
|
|
|
2030
|
|
2015
|
|
|
1,020,000
|
|
|
|
1,020,000
|
|
|
|
|
|
|
|
|
$
|
1,524,000
|
|
|
$
|
1,524,000
|
|
SUNRIDGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – SUBSEQUENT EVENTS
Stock Issuances
Between July 1, 2010 and November 11, 2010, the Company issued the following restricted common stock: (i) 105,578 shares for $16,800 of services by one Non-Accredited Investor, as defined by SEC Rule 501; (ii) 432,058 shares in conversion of $72,750 of debt and accrued interest by six Non-Accredited Investors; (iii) 700,000 shares for $144,000 of public relations services by three Non-Accredited firms; (iv) 890,909 shares to three Non-Accredited Investors for $51,000 cash; and (v) 259,091 shares for $27,500 of consulting services by two Non-Accredited Investors. These sales were made without public solicitation. There were no underwriting discounts or commissions paid on these sales of securities.
Litigation
During the first quarter of fiscal year 2011, Francesco Aspes, our former European marketing consultant, filed a lawsuit (CV 2010-028530) in the Superior Court for Maricopa County, Arizona against the Company for failure to pay him $180,000 of employee wages earned previously plus 80,000 Euros of expenses incurred as an employee of the Company. Our answer to this complaint has not yet been filed.
NOTE 13 – RESTATEMENT OF FINANCIAL STATEMENTS
The Company has restated the financial statements and revised, updated, and/or modified certain footnotes and disclosures to provide (i) updated information regarding the assumption of debt associated with the Plan of Reorganization in Note 1 - Organization and Description of Business, (ii) revised information regarding prepaids in Note 2 - Summary of Significant Accounting Policies (iii) revised information related to number of shares issued and the loss on stock issuances in Note 5 - Loss on Conversion of Debt, (iv) revised information related to amount owed to the Company's president in Note 6 - Related Party Transactions, and (v) revised information related to commitments and contingencies in Note 9.
The restatement does not affect the Balance Sheet, Statement of Operations, Statement of Owners’ Equity, or Statement of Cash flows as filed in its Annual Report on Form 10-K for the fiscal year ended June 30, 2010, filed with the SEC on November 15, 2010 (the “Original 10-K”) as first amended on April 6, 2011.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Accordingly, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act were not effective as of June 30, 2010 to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure.
A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will occur and not be detected by management before the financial statements are published. In its assessment of the effectiveness of internal control over financial reporting as of June 30, 2010, the Company determined that there was a control deficiency that constituted a material weakness, as described below.
|
·
|
The Company did not maintain a sufficient complement of personnel with the appropriate level of knowledge, experience, and training to analyze, review, and monitor the accounting of year end adjustments that are significant or non-routine. This material weakness resulted in errors in the preliminary June 30, 2010 consolidated financial statements and more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected.
|
Due to this material weakness, management concluded that our internal control over financial reporting was not effective as of June 30, 2010.
The Company is in the process of developing and implementing a remediation plan to address this material weakness as described above.
The Company has taken the following actions to improve internal control over financial reporting:
|
·
|
During the remaining period through the year ending June 30, 2011, we intend to devote resources, to properly assess, and remedy if needed, our control environment and entity-level controls.
|
|
·
|
During the remaining period through the year ending June 30, 2011, we will enhance our risk assessment, internal control design and documentation and develop a plan for testing in accordance with COSO standards.
|
In light of the aforementioned material weakness, management conducted a thorough review of all significant or non-routine adjustments for the year ended June 30, 2010. As a result of this review, management believes that there are no material inaccuracies or omissions of material fact and, to the best of its knowledge, believes that the consolidated financial statements for the year ended June 30, 2010 fairly present in all material respects the financial condition and results of operations for the Company in conformity with U.S. generally accepted accounting principles.
Inherent Limitations Over Internal Controls
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining an effective system of internal control over financial reporting as this term is defined under Rule 13a-15(f) of the Exchange Act and has made organizational arrangements providing appropriate divisions of responsibility and has established communication programs aimed at assuring that its policies, procedures and principles of business conduct are understood and practiced by its employees. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
We have assessed the effectiveness of our internal control over financial reporting as of June 30, 2010, the period covered by this Annual Report on Form 10-K, as discussed above. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework
. Based on these criteria and our assessment, we have determined that, as of June 30, 2010, our internal control over financial reporting was not effective.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting.
We have made no change in our internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
(a)
|
(1) and (2) Financial Statements and Schedules.
|
The information required by this item is included in Part II Item 8 of the original 10-K.
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
31.1
|
|
Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
|
|
31.2
|
|
Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
|
|
32
|
|
Certification by Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act *
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
SUNRIDGE INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Charles B. Mathews
|
|
|
Charles B. Mathews
|
|
|
Chief Financial Officer
|
Date: May 19, 2011
Sunridge (CE) (USOTC:SNDZ)
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Sunridge (CE) (USOTC:SNDZ)
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