UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
þ
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended June 30, 2010
OR
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from
to
Commission File Number:
000-53802
ANV
Security Group, Inc.
(Exact
name of registrant as specified in its charter)
Nevada
|
|
13-3089537
|
(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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2nd Floor, Tower B, Jiada R&D Building, No 5
|
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Songpingshan Road, Shenzen, China
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518057
|
(Address
of principal executive offices)
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(Zip
Code)
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0086-755-86656426
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
No þ
As of
August 16, 2010, 47,930,071 shares of common stock, par value $.001 per share,
were outstanding, of which 34,040,071 shares were held by
non-affiliates.
ANV
SECURITY GROUP, INC.
FORM
10-Q
CONTENTS
PART
I
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FINANCIAL
INFORMATION
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Item
1.
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Financial
Statements
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Balance
Sheets as of June 30, 2010 (unaudited) and
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March
31, 2010
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3
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Statements
of Operations (unaudited) for the three months
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ended
June 30, 2010 and 2009
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4
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Statements
of Cash Flows (unaudited) for the three months
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ended
June 30, 2010 and 2009
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5
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Notes
to Condensed Financial Statements (unaudited)
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6
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Item
2.
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Management's
Discussion and Analysis of Financial
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Condition
and Results of Operations
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11
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Item
4.
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Controls
and Procedures
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12
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PART
II
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OTHER
INFORMATION
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Item
1.
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Legal
Proceedings
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13
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Item
2.
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Changes
in Securities and Use of Proceeds
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13
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Item
3.
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Defaults
Upon Senior Securities
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13
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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13
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Item
5.
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Other
Information
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13
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Item
6.
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Exhibits
and Reports on Form 8-K
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13
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SIGNATURES
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14
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CERTIFICATIONS
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PART I
Financial Information
Item 1
Financial Statements
ANV
Security Group, Inc.
Consolidated
Balance Sheets
(Expressed
in US dollars)
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As of
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June 30,
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March 31,
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2010
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2010
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(Unaudited)
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(Audited)
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ASSETS
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Current
Assets
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Cash
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$ |
560,258 |
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$ |
31,756 |
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Accounts
Receivable
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32,373 |
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- |
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GST
Receivable
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2,662 |
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2,547 |
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Inventory
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154,476 |
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81,490 |
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Other
Assets
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8,470 |
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5,227 |
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Total
Current Assets
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758,239 |
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121,020 |
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Property
and Equipment , net
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43,044 |
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21,015 |
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Software
Purchased
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1,201,422 |
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1,325,376 |
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Organization
Cost
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49,387 |
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54,482 |
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Intangible
Assets
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2,258,774 |
|
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- |
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Total
Assets
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$ |
4,310,866 |
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$ |
1,521,893 |
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
Liabilities
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Accounts
payable
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$ |
2,854 |
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$ |
7,303 |
|
Deposit
payable
|
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2,208,852 |
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- |
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Due
to related parties
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149,214 |
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38,188 |
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Total
Liabilities
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2,360,920 |
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45,491 |
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Commitments
and Contingencies
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Stockholders’
Equity
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Common
Stock, Unlimited shares authorized, without par value 34,830,071 and
33,190,071 shares issued and outstanding, respectively
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2,754,907 |
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1,999,139 |
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Additional
Paid-in Capital for Stock Options
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24,836 |
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24,836 |
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Deficit
Accumulated
|
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|
(934,818 |
) |
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|
(739,448 |
) |
Accumulated
Other Comprehensive Income (Loss)
|
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|
105,021 |
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191,875 |
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Total
Stockholders’ Equity
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1,949,946 |
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1,476,402 |
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Total
Liabilities and Stockholders’ Equity
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$ |
4,310,866 |
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|
$ |
1,521,893 |
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See Notes
to Financial Statements
ANV
Security Group, Inc.
Consolidated
Statements of Operations
(Expressed
in US dollars)
(Unaudited)
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Three
Months
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Three
Months
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Ended
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Ended
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June
30,
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June
30,
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2010
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2009
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Revenue
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$ |
27,335 |
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$ |
5,670 |
|
Cost
of Sales
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12,556 |
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2,122 |
|
Gross
profit
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14,779 |
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3,548 |
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Expenses
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Advertising
and promotion
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- |
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4,158 |
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Amortization
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69,743 |
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|
1,311 |
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Automobile
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- |
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- |
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Commission
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38,900 |
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30,630 |
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Dues
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- |
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54 |
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General
and administrative
|
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|
20,745 |
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6,516 |
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Insurance
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|
1,532 |
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- |
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Licence
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- |
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- |
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Payroll
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|
49,810 |
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|
14,484 |
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Stock-based
Compensation
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- |
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Professional
fees
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|
3,841 |
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19,035 |
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Rent
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|
7,204 |
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|
5,577 |
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Research
and Development
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- |
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- |
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Repair
and Maintenance
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|
584 |
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- |
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Travel
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11,208 |
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|
2,597 |
|
Total
Expenses
|
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|
203,567 |
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|
84,362 |
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|
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|
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Other
Income (Expenses)
|
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Interest
Income
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- |
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Rental
Income
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- |
|
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|
2,827 |
|
Customer
Rebate
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|
8 |
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|
3,038 |
|
Exchange
Loss
|
|
|
(5,898 |
) |
|
|
(7,322 |
) |
Interest
Expense
|
|
|
(692 |
) |
|
|
(381 |
) |
Total
Other Income (Expense)
|
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|
(6,582 |
) |
|
|
(1,838 |
) |
|
|
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|
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|
Net
(Loss) Before Income Tax Expense
|
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|
(195,370 |
) |
|
|
(82,652 |
) |
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Income
Tax Expense, Net of Income Tax Benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(195,370 |
) |
|
|
(82,652 |
) |
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Adjustment
|
|
|
(86,854 |
) |
|
|
110,087 |
|
|
|
|
|
|
|
|
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|
Comprehensive
Income
|
|
$ |
(282,224 |
) |
|
$ |
27,435 |
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Share – Basic and Diluted
|
|
|
(0.01 |
) |
|
|
(0.00 |
) |
|
|
|
|
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|
Weighted
Average Shares Outstanding
|
|
|
33,418,960 |
|
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|
28,957,266 |
|
See Notes
to Financial Statements
ANV
Security Group, Inc.
Consolidated
Statements of Cash Flows
(Expressed
in US dollars)
(Unaudited)
|
|
Three
Months
|
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|
Three
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(195,370 |
) |
|
|
(82,652 |
) |
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
69,879 |
|
|
|
1,311 |
|
Stock-Based
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
(32,373 |
) |
|
|
|
|
Prepaid
expenses and deposits
|
|
|
(3,243 |
) |
|
|
|
|
GST
Receivable
|
|
|
(115 |
) |
|
|
532 |
|
Inventory
|
|
|
(72,986 |
) |
|
|
1,921 |
|
Accounts
Payable
|
|
|
(4,449 |
) |
|
|
1,567 |
|
Deposit
Payable
|
|
|
2,208,852 |
|
|
|
- |
|
Due
to related parties
|
|
|
111,026 |
|
|
|
(1,169 |
) |
|
|
|
|
|
|
|
|
|
Net
Cash (Used for) by Operating Activities
|
|
|
2,081,221 |
|
|
|
(78,490 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of equipment and furniture
|
|
|
(86,813 |
) |
|
|
|
|
Long
term investment
|
|
|
|
|
|
|
|
|
Acquisition
of good will
|
|
|
(2,134,820 |
) |
|
|
|
|
Incorporation
costs
|
|
|
|
|
|
|
(26,643 |
) |
|
|
|
|
|
|
|
|
|
Net
Cash (Used for) Provided by Investing Activities
|
|
|
(2,221,633 |
) |
|
|
(26,643 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from related party
|
|
|
|
|
|
|
|
|
Issuance
of Common stock
|
|
|
755,768 |
|
|
|
357,649 |
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
755,768 |
|
|
|
357,649 |
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(86,854 |
) |
|
|
17,353 |
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease) In Cash
|
|
|
528,502 |
|
|
|
269,869 |
|
|
|
|
|
|
|
|
|
|
Cash
– Beginning of Period
|
|
|
31,756 |
|
|
|
28,470 |
|
|
|
|
|
|
|
|
|
|
Cash
– End of Period
|
|
$ |
560,258 |
|
|
|
298,339 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Schedule of Cash Flows Disclosures
|
|
|
|
|
|
|
- |
|
Interest
paid
|
|
$ |
(692 |
) |
|
|
|
|
Income
taxes paid
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Schedule of Non-Cash Flows Activities
|
|
|
|
|
|
|
|
|
Stock-based
Compensation, Stock Options Issued
|
|
$ |
- |
|
|
|
131,440 |
|
See Notes
to Financial Statements
ANV
Security Group, Inc.
Notes
to Consolidated Financial Statements
June 30,
2010
Note
1. Organization and Summary of Significant Accounting Policies
Organization
ANV
Security Group inc. (the “Company”) was incorporated in British Columbia, Canada
on December 18, 2006. and changed its name from Canada ANV Systems Inc. The
Company owns 100 % of ANV Video Alarm Service Inc. which was incorporated in
British Columbia, Canada on May 30, 2008 and ANV Security Group ( Asia) Co.
Limited, incorporated in December 2009 under the laws of the Hong Kong Special
Administrative Region (“Hong Kong”). Effective June 1, 2010 ANV Security Group (
Asia) Co. Limited, has a wholly owned subsidiary, Flybit International Limited,
which was incorporated in August 15, 2008 in Hong Kong.
The Company is an innovator in video
systems and specialize in both silicon and software solutions for the video
products design and manufacturing. The Company offers enabling technologies that
can provide the digital consumer and enterprise applications with excellent
video quality and extended hours of portable operations across networks, be it
home, enterprise or telecom networks. Also the Company offers a wide range of
video cameras powered by the next generation H.264 video technologies and our
patent pending USCI8.com services platforms.
Summary
of Significant Accounting Policies
These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company’s fiscal year-end is March 31.
|
b)
|
Principles of
Consolidation
|
These
consolidated financial statements include the accounts of ANV Security Group
Inc. and its wholly-owned subsidiaries, ANV Video Alarm Service Inc in Canada
and ANV Security Group (Asia) Co., Limited. ANV Security Group (Asia) Co.,
Limited has its wholly-owned subsidiary, Flybit International Limited.. All
intercompany accounts and transactions have been eliminated in
consolidation.
The
preparation of financial statements in conformity with United States generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and assumptions
related to useful life and recoverability of long-lived assets, donated
expenses, and deferred income tax valuation allowances. The Company bases its
estimates and assumptions on current facts, historical experience and various
other factors that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities and the accrual of costs and expenses that are not
readily apparent from other sources. The actual results experienced by the
Company may differ materially and adversely from the Company’s estimates. To the
extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
Certain
account reclassifications have been made to the financial statements of the
prior year in order to conform to classifications used in the current year.
These changes had no impact on previously stated financial statements of the
Company.
|
e)
|
Comprehensive
Income (Loss)
|
SFAS No.
130, “Reporting Comprehensive
Income,” establishes standards for the reporting and display of
comprehensive loss and its components in the financial statements. As at June 30, 2010, the Company’s
component of comprehensive income consisted of foreign currency translation
adjustments and profit margin.
|
f)
|
Cash
and Cash Equivalents
|
The Company considers all highly liquid
instruments with maturity of three months or less at the time of issuance to be
cash equivalents.
|
g)
|
Concentration
of Credit Risks
|
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and trade accounts receivable. The Company
places its cash with high credit quality financial institutions in Canada. The
Company has not experienced any losses in such bank accounts through June 30,
2010. At June 30, our bank deposits were as follows:
|
|
June
30,
|
|
|
March
31,
|
|
COUNTRY
|
|
2010
|
|
|
2010
|
|
Canada
|
|
$ |
524,848 |
|
|
$ |
31,756 |
|
China
|
|
|
35,410 |
|
|
|
-0- |
|
Total
cash and cash equivalents
|
|
$ |
560,258 |
|
|
$ |
31,756 |
|
In an
effort to mitigate any potential risk, the Company periodically evaluates the
credit quality of the financial institutions at which it holds
deposits.
Accounts
receivable are presented net of an allowance for doubtful accounts. The Company
maintains allowances for doubtful accounts for estimated losses. The Company
reviews the accounts receivable on a periodic basis and makes general and
specific allowances when there is doubt as to the collectability of individual
balances. In evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the balance, customer's
historical payment history, its current credit-worthiness and current economic
trends. Accounts are written off after exhaustive efforts at
collection.
Inventories
are stated at the lower of average cost or market and consist of raw materials
and finished goods. The Company writes down inventory for estimated obsolescence
or unmarketable inventory based upon assumptions and estimates about future
demand and market conditions. If actual market conditions are less favorable
than those projected by the Company, additional inventory write-downs may be
required.
GST
receivable represents tax credit that the Canadian Company receives when the
Company pays GST tax during normal operations. As of June 30, 2010, the Company
had a GST tax receivable of $2,662.
Advances
to suppliers included in other assets represent the cash paid in advance for
purchasing of inventory items from Suppliers and the amount as of June 30, 2010
was none.
|
l)
|
Property
and Equipment
|
Property
and equipment consists of furniture, office equipment, computer
equipment/software and leasehold improvement, is recorded at cost. The property
and equipment other than leasehold improvement is depreciated on a straight line
basis over an estimated useful life of three years. Leasehold improvement is
depreciated on a straight line basis over the lease period of ten
years.
Intangible
assets consist of two parts. The first is a surveillance recording system,
surveillance software, technical know-how and non-compete agreements, developed
by Jiwei Zhang, Xianbo Fu, Kewei Feng, Mingyue Fan (all individuals), acquired
originally by Landmark Enterprise Group Inc.(“Landmark”) , a related party, and
subsequently sold to the Company in exchange for common shares. The value of
intangible assets acquired from Landmark was established by an independent
valuation report. The second part is incorporation cost of Shell Company
purchasing. Intangible assets are depreciated on a straight line basis over an
estimated useful life of five years.
In
accordance with SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, the Company tests long-lived assets or
asset groups for recoverability when events or changes in circumstances indicate
that their carrying amount may not be recoverable. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair
value.
|
o)
|
Financial
Instruments and Fair Value Measures
|
SFAS No.
157 “Fair Value
Measurements” requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. SFAS No.
157 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A
financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value
measurement. SFAS No. 157 prioritizes the inputs into three levels that may be
used to measure fair value:
The
Company follows the guidance of the Securities and Exchange Commission's Staff
Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements". In
general, the Company records revenue when persuasive evidence of an arrangement
exists, services have been rendered or product delivery has occurred, the sales
price to the customer is fixed or determinable, and collectability is reasonably
assured. The following policies reflect specific criteria for the various
revenues streams of the Company:
|
q)
|
Foreign
Currency Translation
|
The
Company’s functional currency is the Canadian dollar. The financial statements
are translated to United States dollars in accordance with SFAS No. 52 “Foreign Currency Translation”
using period-end rates of exchange for assets and liabilities, and
average rates of exchange for the year for revenues and expenses. Translation
gains (losses) are recorded in accumulated other comprehensive income (loss) as
a component of stockholders’ equity (deficit). Gains and losses arising on
translation or settlement of foreign currency denominated transactions or
balances are included in the determination of income. Foreign currency
transactions are primarily undertaken in United States dollars. The Company has
not, to the date of these financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
|
r)
|
Basic
and Diluted Net Income (Loss) Per
Share
|
The
Company computes net income (loss) per share in accordance with SFAS No. 128,
"Earnings per Share".
SFAS No. 128 requires presentation of both basic and diluted earnings per share
(EPS) on the face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding during the
period using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti dilutive.
Basic net
earnings (loss) per share equals net earnings (loss) divided by the weighted
average shares outstanding during the year. The computation of diluted net
earnings per share does not include dilutive common stock equivalents in the
weighted average shares outstanding as they would be anti-dilutive. The
Company's common stock equivalents at June 30, 2010 include the
following:
|
|
June
30,
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2010
|
|
Options
|
|
|
140,000 |
|
|
|
140,000 |
|
Warrants
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
140,000 |
|
|
|
140,000 |
|
|
s)
|
Stock-based
Compensation
|
|
The
Company records stock-based compensation in accordance with SFAS No. 123R
“Share Based Payments”, using the fair value method. The Company provides
its officers, consultants, and directors stock options to purchase common
stock of the Company on a discretionary basis. Generally, options are
granted at exercise prices not less than the fair market value at the date
of grant. As of June 30, 2010, the Company has granted 140,000 shares
stock options to its director, consultant and top manager and the fair
market value is $24,836.
|
|
t)
|
Recent
Accounting Pronouncements
|
Impact
of New Accounting Standards
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position, or cash flow.
Note 2. Accounts
Receivable
Accounts
receivable as of June 30, 2010 consists of $32,373 of trade receivable for ANV
Video Alarm Service Inc. ANV Security Group (Asia) Co., Limited has no accounts
receivable as at June 30, 2010.
Note
3. Inventory
At June
30 and March 31, 2010, inventories consisted of:
|
|
June
30,
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2010
|
|
Parts
|
|
$ |
-0- |
|
|
$ |
-0- |
|
Finished
goods
|
|
|
154,476 |
|
|
|
81,490 |
|
|
|
|
154,476 |
|
|
|
81,490 |
|
Less:
Reserve for slow moving inventory
|
|
|
-0- |
|
|
|
-0- |
|
|
|
$ |
154,476 |
|
|
$ |
81,490 |
|
Note
4. Other Assets
Other
assets consist of rental deposit of $8,470 as at June 30 and $5,227 as at March
31, 2010, respectively.
Note
5. Property and Equipment
Fixed
assets are summarized by classifications as follows:
|
|
|
|
|
|
|
|
June
30,
2010
|
|
|
March
31,
2010
|
|
|
|
|
|
|
Accumulated
|
|
|
Net
Carrying
|
|
|
Net
Carrying
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture
and equipment
|
|
$ |
28,628 |
|
|
$ |
5,744 |
|
|
$ |
22,884 |
|
|
$ |
1,599 |
|
Computer
equipment
|
|
|
7,969 |
|
|
|
5,417 |
|
|
|
2,552 |
|
|
|
3,347 |
|
Customer
software
|
|
|
596 |
|
|
|
519 |
|
|
|
77 |
|
|
|
132 |
|
Leasehold
Improvement
|
|
|
20,709 |
|
|
|
3,178 |
|
|
|
17,531 |
|
|
|
15,937 |
|
|
|
$ |
57,902 |
|
|
$ |
14,858 |
|
|
$ |
43,044 |
|
|
$ |
21,015 |
|
The
furniture, equipment and software are depreciated on a straight line basis over
an estimated useful life of three years. Leasehold improvement is depreciated on
a straight line basis over the lease period of ten years.
Note
6. Intangible Assets
Intangible
assets are summarized by classifications as follows:
|
|
|
|
|
|
|
|
June 30,
2010
|
|
|
March 31,
2010
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Net Carrying
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
|
Value
|
|
Research
& Development
|
|
$ |
1,264,655 |
|
|
$ |
63,233 |
|
|
$ |
1,201,422 |
|
|
$ |
1,325,376 |
|
Incorporation
Cost
|
|
|
51,986 |
|
|
|
2,599 |
|
|
|
49,387 |
|
|
|
54,482 |
|
Goodwill
|
|
|
2,258,774 |
|
|
|
0 |
|
|
|
2,258,774 |
|
|
|
|
|
|
|
$ |
3,575,415 |
|
|
$ |
65,832 |
|
|
$ |
3,509,583 |
|
|
$ |
1,379,858 |
|
Intangible
assets are depreciated on a straight line basis over an estimated useful life of
five years.
Note
7. Accounts Payable
As at
June 30, 2010 accounts payable amounted $2,211,706 consisted of vacation payable
of $1,733, PST payable of $125, customer deposit of $996 and advanced share
acquisition deposit of 2,208,852. As at March 31, 2010, accounts payable
amounted $7,303 consists of amounts owing to Visa $5,487 and government agency
payable $1,816, respectively.
Note
8. Related Party Transactions
Amounts
owing to the related parties of the shareholders amounted $149,214 as at June 30
and $38,188 as at March 31, 2010, respectively.
Note
9. Capital Stock
The
company is authorized to issue unlimited shares of common stocks – Class A and
Class B, no par value share. As of June 30 and March 31, 2010, the amount of
voting common shares issued and outstanding are 34,830,071 and 33,190,071,
respectively.
On
June 28, 2009, Company entered in to an agreement and plan of reorganization
(“agreement”) by and among Dini Products, Inc. (“DINP”) , a Nevada corporation
whereas, each of the common share in the Company was exchanged on a share for
share basis so that after such exchange DINP has 33,190,071 shares of common
stock issued and outstanding inclusive of 29,860,000 shares issued to the
Company’s stockholders.
Upon
execution of agreement, the Company has amended its name to ANV Security Group,
Inc.
Note
10. Foreign Currency Translation
Accounting
for Canada ANV System Inc. and its subsidiary is conducted in Canadian currency.
It converts figures on a period basis in accordance with FASB # 52. The
functional currency is in Canadian currency. The Companies balance sheet as of
June 30, 2010 was translated at three months ended rate of 0.9393 (Canadian
currency to US currency) and 0.1285 (Hong Kong currency to US currency) for the
two subsidiaries, respectively. Statements of operations were reported on the
weighted average for the three months ended June 30, 2010 as required by FASB #
52 at the rate of 0.9725 (Canadian currency to US currency) and 0.1287 (Hong
Kong currency to US currency) for the two subsidiaries, respectively. Statement
of cash flows were reported on the weighted average for the three months ended
June 30, 2010 as required by FASB # 52 at the rate of 0.9725 (Canadian currency
to US currency) and 0.1284 (Hong Kong currency to US currency) for the two
subsidiaries, respectively.
Note
11. Commitments and Contingencies
11.1
Lease Commitments
Company
leases its office space and laboratory facility in Richmond, British Columbia
which starts on April 1, 2010 and expires on March 31, 2013. Its total monthly
minimum rental fee is $ 3,285.
11.2
Litigation
As per
the Company, as of June 30, 2010, there are no actions, suits, proceedings or
claims pending against or materially affecting the Company, which if adversely
determined, would have a material adverse effect on the financial condition of
ANV.
Note
12 Acquisitions
On June 1
2010 ANV Security Group (Asia) Co., Limited, acquired 100% shares of Flybit
International Ltd.
In
January 2010, Company has established ANV Security Group (Asia) Co. Ltd. a Hong
Kong Company (“ ANV Asia”) as a wholly- owned subsidiary of the registrant for
the purpose of acquiring operating companies in China. ANV Asia has no operation
to this date.
On
January 19, 2010, Mr. Wilson Wang acting as legal representative of ANV Security
Group ( Asia) Co. Ltd. entered into an agreement (the “Flybit Agreement”) to
acquire all of the issued and outstanding stock of Flybit International, Ltd., a
Hong Kong corporation, from its sole owner Zhaohui Zeng for three million
shares of the Company’s common stock and $720,000 in cash. The closing under the
Flybit Agreement was held on February 1, 2010 with effective date of June 1,
2010. Flybit is in developing and marketing mobile video security system used on
vehicles and it is a certified OEM manufacturer for Panasonic in mobile video
systems.
The
purchase price under each agreement is subject to adjustment, and each agreement
could be cancelled based on the result of an audit of the target company. The
Company intends to utilize the assets of these companies to expand its
manufacturing base and increase its retail operations in China.
ITEM
2. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward
Looking Statements
This
Quarterly Report on Form 10-Q contains "forward-looking" statements as such term
is defined in the Private Securities Litigation Reform Act of 1995 and
information relating to the Company that is based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and words or phrases
of similar import, as they relate to the Company or Company management, are
intended to identify forward-looking statements. Such statements reflect the
current risks, uncertainties and assumptions related to certain factors
including, without limitations, competitive factors, general economic
conditions, customer relations, relationships with vendors, the interest rate
environment, governmental regulation and supervision, seasonality, distribution
networks, product introductions and acceptance, technological change, changes in
industry practices, onetime events and other factors described herein and in
other filings made by the company with the Securities and Exchange Commission.
Based upon changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.
RESULTS
OF OPERATIONS
RESULTS
OF OPERATIONS
First
Quarter FY 2011 v First Quarter
FY 2010
Revenues. We had
revenues of $27,335
in the first three months of FY
2011 and
revenues of $5,670 for the first
three months
of FY 2010 as
the earlier protion
of FY 2010 was devoted to
product design and establishing a business model in Canada. The results in
the 2011 FY,
particularly in the first quarter, as
described below, reflect management’s decision to concentrate on the Company’s
efforts to enter the larger Chinese market rather than pursue further
development of the Canadian market. Management believes that the Chinese market,
which is much larger than the Canadian market will enable the Company to enjoy
greater revenues in the future. As reported on a Current Report on Form 8-K,
filed February 5, 2010, we have made several acquisitions to facilitate our
entry into the Chinese market. Although we reported those
acquisitions in February, principally due to the need for the completion of
government approval processes in China, the acquisitions could not be completed
until June 2010. We are in the early stages of developing the Chinese
market we expect that revenues and results will fluctuate from quarter to
quarter. We anticipate opening retail stress in China during calendar
2010. The costs of opening a Company operated store include inventory, real
estate costs, employee expense and promotional expenses such as advertising. The
costs to open a Company owned in China are anticipated to
be approximately $10,000 per retail store. The size and scope of each of
these programs will be governed by management’s assessment of the Company’s
capital resources and can not be specified at this time.
Cost of Sales; Gross
Profit. Our cost of sales in the first three months of FY
2011 was
$12,556,
yielding a gross profit of $14,779 or 54.1 of
sales. Our cost of sales in the first three months of FY
2010 was
$2,122,
yielding a gross profit of $3,548 or 62.6% of
sales. Both of these results and ratios are from an early stage operation
and management does not believe that significant conclusions should be drawn
from these limited results.
Operating
Expenses
Operating
expenses increased to $203,567 in the
first three
months of FY 2011 compared to
$84,362 in
the first three months
of FY 2010 as increases were incurred in
every category due to the large scale operations in China which are included for
a portion of the First Quarter of FY 2011. Again, as the operations are
in an early stage,
especially in China, management would caution against drawing any
significant conclusions from these limited results.
Net
Loss; Comprehensive Loss
Our net
loss and comprehensive loss consists of two parts: net operating
gain (loss) and foreign currency translation adjustments. Because all our
transactions are recorded in Canadian dollars or Chinese RMB, we
need to exchange them into US dollar using the exchange rate for different
period when we release the financial statements to the public. If the exchange
rate fluctuates and if we have a large balance of assets, liabilities
or equity, the foreign currency translation adjustment will be
large.
For the
three months
ended June 30,
2010, the net loss was $(195,370), and foreign
currency translation adjustment loss was $(86,854), so the
comprehensive loss
was $(202,224). (Because
we have substantial intangible assets the foreign transaction adjustment was large). For the
three months
ended June 30,
2010, the net loss was $(82,652) but foreign
currency translation adjustment gain was $110,087 so the
comprehensive income was $27,435 (Because we
have substantial intangible assets the foreign transaction adjustment was
large)
LIQUIDITY
AND CAPITAL RESOURCES
Net cash
flows provided by
operating activities for the three-month period
ended June 30,
2010 totaled $2,081,221.
Net Cash flows
used for
investing activities in the three months
ended
June 30, 2010
totaled $(2,221,
633).
Net cash
provided by financing activities, the sale of our stock, was $755,768 for the
three months
ended June 30,
2010.
The
Company has limited cash resources and intends to continue to raise
additional capital through the issuance of debt or equity in order to expand
operations. The Company has entered into a letter agreement with an investment
banking group to raise funds to allow the Company to expand its operations in
China. The availability of cash through such resources is not assured and
if the Company is not able to raise enough cash, the Company might be forced to
delay or limit the expansion of its Chinese operations.
ITEM
4. CONTROLS AND PRODCECURES
(a)
Evaluation of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our Principal Executive Officer and
Principal Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, as ours are designed to do, and
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
As of
December 31, 2009, we carried out an evaluation, under the supervision and with
the participation of our management, including our Principal Financial Officer
of the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934. Based upon that evaluation, our Principal
Financial Officer concluded that our disclosure controls and procedures are
effective in enabling us to record, process, summarize and report information
required to be included in our periodic SEC filings within the required time
period.
(b)
Changes in Internal Controls
There
were no changes in our internal controls and procedures in internal control over
financial reporting that occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting. We continue to rely on the members of
the Board of Directors to provide assurance that our entity-level controls
remain effective and we believe our process-level controls remain
effective.
PART
II
OTHER
INFORMATION
Item
1. Legal Proceedings
We are
not party to any material legal proceeding.
Item
2. Changes in Securities
None.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information
None.
Item
6. Exhibits and Reports on Form 8-K
a)
EXHIBITS
31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2
Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
b)
REPORTS ON FORM 8-K
Reports
on Form 8-K filed July 29, 2010 including items 3.02 and
9.01t.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
ANV
SECURITY GROUP, INC.
|
|
|
|
|
By:
|
/S/
Weixing Wang
|
|
|
Weixing Wang
|
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
|
|
|
By:
|
/S/
Yan Wang
|
|
|
Yan Wang
|
|
|
VP
and Chief Financial
|
|
|
Officer
(Principal Financial and Accounting
Officer)
|
August
16, 2010