10-Q 1 ipa10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ----------------- FORM 10Q ----------------- (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2010 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to ___________ Commission file number: 000-53464 INTERNATIONAL PAINTBALL ASSOCIATION, INC. ----------------------------------------- (Exact name of registrant as specified in its charter) Colorado 20-1207864 -------- ------------ (State of Incorporation) (IRS Employer ID Number) 501 Trophy Lake Drive, Suite 314, PMB 106, Trophy Club, TX 76262 ---------------------------------------------------------------- (Address of principal executive offices) 817-491-8611 ------------ (Registrant's Telephone number) 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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [ ] 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 (ss.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 [ ] No [] Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Indicate the number of share outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of June 14, 2010, there were 10,449,166 shares of the registrant's common stock outstanding.

PART I ITEM 1. FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4-G Paintball, Inc. was incorporated in the State of Texas on May 24, 2004, and on September 16, 2008 was redomiciled as a Colorado corporation through a one for one share exchange with its wholly owned subsidiary International Paintball Association, Inc., which was incorporated in the State of Colorado on June 19, 2008. 4-G Paintball, Inc. and International Paintball Association, Inc. are referred to hereinafter as (the "Company"). The Company was organized to further the interest and participation in the sport of paintball competition and to operate paintball competition arenas. Also, the Company may pursue any other lawful business opportunity as decided upon by the board of directors. The Company's fiscal year end is December 31st. Basis of presentation - development stage company ------------------------------------------------- The Company has not earned significant revenues from limited operations. Accordingly, the Company's activities have been accounted for as those of a Development Stage Enterprise. Among the disclosures are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity and cash flows disclose activity since the date of the Company's inception. Interim Accounting ------------------ The accompanying unaudited condensed financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the three months ended March 31, 2010 are not necessarily indicative of results that may be expected for the year ending December 31, 2010. The condensed financial statements are presented on the accrual basis. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect 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. Cash and cash equivalents ------------------------- The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. F-6 Accounts receivable ------------------- The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. At March 31, 2010 and December 31, 2009, the Company had no balance in its allowance for doubtful accounts. Property and equipment ---------------------- Property and equipment are recorded at cost and depreciated under straight line methods over each item's estimated useful life. The Company uses a five year life for furniture and fixtures, and three years for computer equipment. Revenue recognition ------------------- Revenue is recognized on an accrual basis after services have been performed or products sold under contract terms, the price to the client is fixed or determinable, and collectability is reasonably assured. Advertising costs ----------------- Advertising costs are expensed as incurred. The Company did not record any advertising costs during the three months ended March 31, 2010. Net income (loss) per share --------------------------- The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. Financial Instruments --------------------- The carrying value of the Company's financial instruments, as reported in the accompanying balance sheets, approximates fair value. Long-Lived Assets ----------------- In accordance with FASB ASC No.'s 350 and 360, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value. Segment information ------------------- The Company is structured to operate primarily in a single operating segment, namely the competition arena of paintball sports and the furthering of private and commercial interests in the activity. F-7 Stock based compensation ------------------------ The Company follows FASB Accounting Standards Codification No. 718 - Compensation - Stock Compensation for share based payments to employees. The Company follows FASB Accounting Standards Codification No. 505 for share based payments to Non-Employees, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Recent Accounting Pronouncements -------------------------------- In October 2009, the Financial Accounting Standards Board ("FASB") issued an Accounting Standard Update ("ASU") No. 2009-13, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. The ASU significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. The ASU will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Company does not expect the adoption of ASU No. 2009-13 to have any effect on its financial statements upon its required adoption on January 1, 2011. There were various other accounting standards and interpretations issued, none of which are expected to have a material impact on the Company's financial position, operations or cash flows. NOTE 2. GOING CONCERN The Company has suffered recurring losses from operations and has a working capital deficit and stockholders' deficit, and in all likelihood will be required to make significant future expenditures in connection with continuing marketing efforts along with general administrative expenses. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from individuals and financial institutions. By doing so, the Company hopes through increased marketing efforts to generate revenues from the operation of competition paintball arenas and sales of related products. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. F-8 NOTE 3. FIXED ASSETS Fixed asset values recorded at cost are as follows: March 31, December 31, 2010 2009 ---- ---- Computer equipment $ 4,622 $ 4,622 Furniture and fixtures 3,742 3,742 ----------- ------------ 8,364 8,364 Less accumulated depreciation (8,634) (8,634) ------------ ------------ Total $ - $ - ============ ============ During the year ended December 31, 2009, the Company fully depreciated its fixed assets. NOTE 4. NOTES PAYABLE At March 31, 2010 and December 31, 2009, the Company had $478,500 in outstanding notes payable to various individuals, unsecured, bearing interest at 6% - 9% per annum, due in full on term expiration, with all amounts at each date either presently due or due within one year. The Company incurred interest expense under the notes during the three months ended March 31, 2010 and 2009 of $9,472 and $9,472,respectively. NOTE 5. NOTES PAYABLE, CONVERTIBLE In April 2009, a related party owed $200,534 for accounts payable agreed to convert the amount owed to it into a Convertible Promissory Note. The Convertible Promissory note is unsecured, has an interest rate of 6% and a due date of April 10, 2010. The promissory note provides the holder with the right to convert part or all of the outstanding principal and/or interest into shares of the Company's common stock at a rate of $0.50 per share. At March 31, 2010 and December 31, 2009, $200,534 was outstanding. During the three months ended March 31, 2010 and year ended December 31 2009, interest of $11,703 and $8,736 had been accrued, respectively. NOTE 6. STOCKHOLDERS' EQUITY Common stock ------------ The Company has 100,000,000 shares of authorized common stock, no par value, with 10,449,166 shares issued and 10,249,166 shares outstanding as of March 31, 2010 and December 31, 2009 with 200,000 shares in treasury at each date. F-9 Stock options ------------- At March 31, 2010, the Company had stock options outstanding as described below. Non-employee stock options The Company accounts for non-employee stock options under FASB Accounting Standards Codification No. 505 whereby option costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Unless otherwise provided for, the Company covers option exercises by issuing new shares. The Company has no non-employee stock options outstanding. Employee stock options ---------------------- The Company accounts for employee stock options under FASB Accounting Standards Codification No. 718 - Compensation - Stock Compensation. Unless otherwise provided for, the Company covers option exercises by issuing new shares. At the beginning of 2010 the Company had 5,000 options outstanding and exercisable. During the three months ended March 31, 2010, no options were granted, exercised or cancelled, leaving a balance at March 31, 2010 of 5,000 outstanding employee stock options. NOTE 7. CONTINGENCIES A law firm which has represented the Company on various matters, has asserted that the Company owes the firm approximately $13,000 more in legal fees than the Company has recorded. The Company and the law firm are currently in discussions over what, if any additional fees are owed. A former director claims the Company owes her an additional $24,425 over what the Company has recorded. The Company disputes the assertion. NOTE 8. SUBSEQUENT EVENTS The Company evaluated events through June 6, 2010 for subsequent events to be included in its March 31, 2010 financial statements herein, and has determined that there are no subsequent events that require disclosure. F-10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our unaudited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements. The independent registered public accounting firm's report on the Company's financial statements as of December 31, 2009, and for each of the years in the two-year period then ended, includes a "going concern" explanatory paragraph, that describes substantial doubt about the Company's ability to continue as a going concern. OPERATIONS ---------- Business Overview International Paintball Association (the Company) was formed for the purpose of providing services and products in connection with paintball sport activities. Paintball sport activities are those activities by persons who are using paintball equipment and accessories for entertainment in various interactions with other paintball enthusiasts whether organized formally or in ad hoc activities. The Company's primary activities to date have consisted of organizing the company, designing a business plan and obtaining public reporting status with the Securities Exchange Commission (SEC). The Company has not engaged any vendors, at the time of this filing. The independent registered public accounting firm's report on the Company's financial statements as of December 31, 2009, and for each of the years in the two-year period then ended, includes a "going concern" explanatory paragraph, that describes substantial doubt about the Company's ability to continue as a going concern. The Company is dependent on raising additional equity and/or, debt to fund any negotiated settlements with its outstanding creditors and meet the Company's ongoing operating expenses. There is no assurance that International Paintball will be able to raise the necessary equity and/or debt that it will need to be able to negotiate acceptable settlements with its outstanding creditors or fund its ongoing operating expenses. International Paintball cannot make any assurances that it will be able to raise funds through such activities. 1 RESULTS OF OPERATIONS --------------------- For the Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009 During the three months ended March 31, 2010, we recognized revenue of $125 from operational activities. During the three months ended March 31, 2009, we did not recognize any revenues from our operations. During the three months ended March 31, 2010, we incurred an operational loss of $23,613 compared to $37,930 during the three months ended March 31, 2009. The decrease of $14,317 was a result of the decrease in general and administrative expenses as a result of the Company's limited operational activities over the period. During the three months ended March 31, 2010, we incurred a net loss of $36,052 compared to $47,402 during the three months ended March 31, 2009. The decrease of $10,900 is a direct result of the $14,317 decrease in operational expenses offset by a $2,967 increase in interest expense over the prior period. LIQUIDITY --------- At March 31, 2010, we had current assets of $147, consisting of cash $22 and accounts receivable of $125, we had total current liabilities of $1,028,605, consisting of accounts payable of $244,993, $104,578 in accrued expenses and liabilities, $478,500 in promissory notes and $200,534 in convertible promissory notes. Our current liabilities exceed our current assets by $1,028,458 and we will be reliant upon shareholder loans or private placements of equity to fund any kind of operations. We have secured no sources of loans or private placements at this time. During the three months ended March 31, 2010, we used $16 in operational activities. During the three months ended March 31, 2010, we recognized a net loss of $3,052, which was not adjusted for any non-cash expenses. During the three months ended March 31, 2009, we did not use or receive funds from our operational activities. During the three months ended March 31, 2009, we recognized a net loss of $47,402, which was adjusted for depreciation of $62. During the three months ended March 31, 2010 and 2009, we did not use or receive any funds from investment activities. During the three months ended March 31, 2010 and 2009, we did not receive or use any funds from our financing activities. At March 31, 2010 and December 31, 2009, the Company had $478,500 in outstanding notes payable to various individuals, unsecured, bearing interest at 6% - 9% per annum, due in full on term expiration, with all amounts at each date either presently due or due within one year. The Company incurred interest expense under the notes during the three months ended March 31, 2010 and 2009 of $9,472 and $9,472,respectively. In April 2009, a related party owed $200,534 for accounts payable agreed to convert the amount owed to it into a Convertible Promissory Note. The Convertible Promissory note is unsecured, has an interest rate of 6% and a due date of April 10, 2010. The promissory note provides the holder with the right to convert part or all of the outstanding principal and/or interest into shares of the Company's common stock at a rate of $0.50 per share. At March 31, 2010 and December 31, 2009, $200,534 was outstanding. During the three months ended March 31, 2010 and year ended December 31 2009, interest of $11,703 and $8,736 had been accrued, respectively. 2 Short Term. On a short-term basis, we do not generate any revenue or revenues sufficient to cover operations. Based on prior history, we will continue to have insufficient revenue to satisfy current and recurring liabilities. For short term needs we will be dependent on receipt, if any, of offering proceeds. Capital Resources We have only common stock as our capital resource. We have no material commitments for capital expenditures within the next year, however if operations are commenced, substantial capital will be needed to pay for participation, investigation, exploration, acquisition and working capital. Need for Additional Financing We do not have capital sufficient to meet our cash needs. We will have to seek loans or equity placements to cover such cash needs. No commitments to provide additional funds have been made by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable ITEM 4. CONTROLS AND PROCEDURES Disclosures Controls and Procedures We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b), our Chief Executive Officer carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer, has concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of the deficiency in our internal control over financial reporting discussed below. 3 ITEM 4T. CONTROLS AND PROCEDURES Management's Quarterly Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made on in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 assessment of the effectiveness of the registrant's internal control over financial reporting is as of the quarter ended March 31, 2010. In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control--Integrated Framework. Management believes that internal control over financial reporting is effective. The Company has not identified any, current material weaknesses, considering the nature and extent of the Company's current operations and any risks or errors in financial reporting under current operations. This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report. There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 4 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS NONE. ITEM 1A. RISK FACTORS Not Applicable to Smaller Reporting Companies. 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 Exhibits. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Exhibit 32.1 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act 5 SIGNATURES Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERNATIONAL PAINTBALL ASSOCIATION, INC. (Registrant) Dated: June 15, 2010 By: /s/ Brenda Webb --------------- Brenda Webb (Acting Chief Executive Officer and Acting Principal Accounting Officer) 6

International Paintball Association, Inc. 10-Q