Attached files
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EX-31.2 - CASE FINANCIAL INC | ex31_2.htm |
EX-31.1 - CASE FINANCIAL INC | ex31_1.htm |
EX-32 - CASE FINANCIAL INC | ex32.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
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x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31,
2009
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OR
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o
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGEACT
OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
____________
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COMMISSION
FILE NUMBER 0-27757
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CASE
FINANCIAL INC.
(Exact
Name of registrant as specified in its charter)
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DELAWARE
(State
of other jurisdiction of
incorporation
or organization)
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33-0529299
(I.R.S.
Employer
Identification
Number)
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7668
El Camino Real, Ste.104-106, Carlsbad, CA
(Address
of principal executive offices)
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92009
(Zip
code)
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(760)
804-1449
(Issuer's
telephone number, including area code)
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(Former
name, former address and former fiscal year, if changed since last
report)
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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 x No o
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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
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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 definition of "large accelerated filer", "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer o
Non-accelerated
filer o
(Do
not check if a smaller reporting company)
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Accelerated
filer o
Smaller
reporting company x
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No x
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Number
of shares of issuer's common stock outstanding as of January 4, 2010:
40,685,145
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TABLE
OF CONTENTS
PART
I – FINANCIAL INFORMATION
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3 | |||
ITEM
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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3 | |||
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATION
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11 | |||
ITEM
3. QUANTATATIVE AND QUALITATIVE DISCLOSURES AND RISKS
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13 | |||
ITEM
4. CONTROLS AND PROCEDURES
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14 | |||
PART
II - OTHER INFORMATION
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15 | |||
ITEM
1. LEGAL PROCEEDINGS
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15 | |||
ITEM
1A. RISK FACTORS
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16 | |||
ITEM
2. UNREGISTERED SALE OF EQUITY SECURITIES
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17 | |||
ITEM
3. DEFAULTS IN SENIOR SECURITIES
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17 | |||
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
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17 | |||
ITEM
5. OTHER INFORMATION
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17 | |||
ITEM
6. EXHIBITS
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17 | |||
SIGNATURES
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18 |
PART
I – FINANCIAL INFORMATION
ITEM
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CASE
FINANCIAL, INC. AND SUBSIDIARIES
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||||||||
Condensed
Consolidated Balance Sheets
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||||||||
ASSETS
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||||||||
Unaudited
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||||||||
As
of
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As
of
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|||||||
December
31,
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September
30,
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|||||||
2009
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2009
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|||||||
Current
Assets
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||||||||
Cash
& cash equivalents
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$ | 5,214 | $ | 1,900 | ||||
Prepaid
expense
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- | - | ||||||
Total
Current Assets
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5,214 | 1,900 | ||||||
Other
Assets
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||||||||
Deposits
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- | - | ||||||
Total
Other Assets
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- | - | ||||||
TOTAL
ASSETS
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$ | 5,214 | $ | 1,900 | ||||
LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
Current
Liabilities
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||||||||
Accounts
payable and accrued expenses
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$ | 1,185,703 | $ | 1,156,805 | ||||
Loans
payable - related parties
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79,307 | 93,041 | ||||||
Note
payable
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443,424 | 405,000 | ||||||
Total
Current Liabilities
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1,708,435 | 1,654,846 | ||||||
Stockholders'
Equity (Deficit)
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||||||||
Preferred
stock, ($.0001 par value, 20,000,000
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||||||||
shares
authorized; none issued and outstanding.)
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- | - | ||||||
Common
stock, (par value $.001 per share, 100,000,000
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||||||||
shares
authorized: 40,685,145 and 29,185,145 shares issued
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||||||||
and
outstanding as of December 31, 2009 and September 30, 2009
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||||||||
respectively)
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40,685 | 29,185 | ||||||
Paid-in
capital
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10,758,193 | 10,614,693 | ||||||
Accumulated
deficit
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(12,502,099 | ) | (12,296,824 | ) | ||||
Total
Stockholders' Equity (Deficit)
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(1,703,221 | ) | (1,652,946 | ) | ||||
TOTAL
LIABILITIES &
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||||||||
STOCKHOLDERS'
EQUITY (DEFICIT)
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$ | 5,214 | $ | 1,900 | ||||
3
CASE
FINANCIAL, INC. AND SUBSIDIARIES
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Condensed
Consolidated Statements of Operations (Unaudited)
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||||||||
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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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|||||||
December
31,
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December
31,
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|||||||
2009
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2008
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|||||||
Revenues
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||||||||
Contract
fees
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- | - | ||||||
Service
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$ | - | $ | - | ||||
Net
Revenue
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- | - | ||||||
Operating
Expenses
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||||||||
General
and administrative
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49,762 | 65,221 | ||||||
Salaries
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42,000 | 42,000 | ||||||
Professional
fees
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97,396 | 207,368 | ||||||
Total
Operating Expenses
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189,159 | 314,589 | ||||||
Total
Other Income & (Expenses)
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||||||||
Income
(Loss) from operations
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(189,159 | ) | (314,589 | ) | ||||
Other
Income (Expenses)
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||||||||
Interest
expense
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(16,115 | ) | (6,000 | ) | ||||
Total
Other income
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(16,115 | ) | (6,000 | ) | ||||
Net
income (loss) before discontinued operations
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(205,274 | ) | (320,589 | ) | ||||
Gain
(Loss) from discontinued operations
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- | - | ||||||
Net
Income (loss)
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$ | (205,274 | ) | $ | (320,589 | ) | ||
Extraordinary
Item:
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||||||||
Net
Income (Loss)
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$ | (205,274 | $ | (320,589 | ) | |||
Net
Income (Loss) per common share - basic and diluted:
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||||||||
From
continuing operations
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$ | (0.01 | ) | $ | (0.01 | ) | ||
From
discontinued operations
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$ | - | $ | - | ||||
Weighted
average number of
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||||||||
common
shares - basic and diluted
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36,359,058 | 28,937,862 |
4
CASE
FINANCIAL, INC. AND SUBSIDIARIES
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||||||||
Condensed
Consolidated Statements of Cash Flows
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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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|||||||
December
31,
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December
31,
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|||||||
2009
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2008
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CASH FLOWS FROM OPERATING
ACTIVITIES
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Gain
(Loss) from discontinued operations
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$ | - | $ | - | ||||
Gain
(Loss) from continuing operations
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(205,274 | ) | (320,589 | ) | ||||
Net
income (loss)
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(205,274 | ) | (320,589 | ) | ||||
Adjustments
to reconcile net loss to net cash
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||||||||
provided
by (used in) operating activities:
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Common
stock for services
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80,000 | 5,000 | ||||||
Common
stock for debt conversion
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75,000 | - | ||||||
Amortization
of prepaid royalty
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- | 28,065 | ||||||
Changes
in operating assets and liabilities:
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||||||||
(Increase)
decrease in prepaid expenses
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- | 4,400 | ||||||
Increase
(decrease) in accounts payable and other liabilities
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28,898 | 212,315 | ||||||
Increase
(decrease) in accounts payable other
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- | 1,551 | ||||||
Net
cash (used by) continuing operations
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(21,375 | ) | (69,258 | ) | ||||
Net
cash provided by continuing operations
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- | - | ||||||
Net
cash (used by) provided by operating activities
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(21,375 | ) | (69,258 | ) | ||||
CASH FLOWS FROM INVESTING
ACTIVITIES
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||||||||
Proceeds
from common stock
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- | - | ||||||
Proceeds
from borrowings
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- | |||||||
Net
cash provided by (used in) investing activities
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- | - | ||||||
CASH FLOWS FROM FINANCING
ACTIVITIES
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||||||||
Proceeds
from common stock
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- | - | ||||||
Proceeds
from borrowings - related party
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(13,734 | ) | 51,500 | |||||
Proceeds
from borrowings
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38,423 | 15,000 | ||||||
Net
cash provided by (used in) financing activities
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24,690 | 66,500 | ||||||
Net
increase (decrease) in cash & cash equivalents
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3,314 | (2,758 | ) | |||||
Cash
& cash equivalents at beginning of period
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1,900 | 2,963 | ||||||
Cash
& cash equivalents at end of period
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$ | 5,214 | $ | 205 | ||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW
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||||||||
INFORMATION:
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||||||||
Interest
expense
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$ | 16,115 | $ | 6,000 | ||||
Income
taxes paid
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$ | - | $ | - | ||||
SUPPLEMENTAL
DISCLOSURES OF NON CASH ACTIVITIES:
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Common
stock issued for prepaid expense
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- | $ | 72,500 |
5
CASE
FINANCIAL, INC. AND SUBSIDIARIES
Notes
to the Condensed Consolidated Financial Statements
As
of December 31, 2009
NOTE
1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
UNAUDITED
The
accompanying December 31, 2009 condensed consolidated financial statements have
been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at December 31, 2009 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company’s September 30, 2009 audited consolidated financial
statements. The results of operations for periods ended December 31,
2009 are not necessarily indicative of the operating results for the full
years.
The
Company has evaluated subsequent events through February 22, 2010, the date
which the condensed consolidated financial statements were available to be
issued. The Company has determined that there were no such events that warrant
disclosure or recognition in the condenced consolidated financial
statements.
NOTE
2 - GOING CONCERN
The
Company’s condensed consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The accompanying condensed consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might result from the
outcome of this uncertainty. It is management intention to seek
additional operating funds through operations, and debt or equity
offerings. Management has yet to decide what type of offering the
Company will use or how much capital the Company will raise. There is
no guarantee that the Company will be able to raise any capital through any type
of offerings.
6
NOTE
3 − SIGNIFICANT EVENTS
DISCONTINUED
OPERATIONS
The
Company has discontinued its Litigation Finance Business. In
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", we have determined that we have complied with the provisions
of SFAS No. 144 at September 30, 2009 with respect to the classification of the
operations of the Litigation Finance Business as a discontinued
operation. All remaining assets have either been assigned to
the third party investors to collect directly from the attorneys that they
advanced funds to, or were part of a settlement. The Company will
continue to account for all Litigation Finance Business as a discontinued
operation at September 30, 2009, and the assets and liabilities of the
Litigation Finance Business have been classified accordingly. All
revenues and expenses associated with the Litigation Finance Business have been
reclassified and the net amount reported on its Condensed Consolidated Statement
of Operations as Loss from Discontinued Operations. There was no gain
from discontinued operation for the three months ended December 31,
2009.
NOTE
3 − SIGNIFICANT EVENTS
LEGAL
PROCEEDINGS
Case Financial v. Eric
Alden
On March
25, 2005 a derivative lawsuit was filed by the Canadian Commercial Workers
Industry Pension Plan ("CCWIPP"), a major stockholder of the Company. The
lawsuit was filed in the Court of Chancery of the State of Delaware against
former officers and directors of the Company, specifically Eric Alden, a former
CEO and CFO and Chairman of the Board, Harvey Bibicoff, a former interim CEO and
CFO and director, Lorne Pollock, former Vice President of Underwriting,
Secretary and director and Gordon Gregory, a former director alleging that these
officers and directors had damaged the Company by (a) engaging in self dealing
transactions in breach of their fiduciary duty of loyalty; (b) mismanaging the
Company in violation of their oversight duties and duty of care; (c) wasting
corporate assets; and (d) making fraudulent misrepresentations which induced the
corporate entity to issue shares to these individuals. The Company's Board of
Directors has elected to consent to the filing of this complaint. The Company
was named as a nominal defendant in this complaint.
On
October 5, 2005, Mr. Gregory, Mr. Pollock, and the Company executed a Settlement
and Release Agreement regarding this action pursuant to which:
·
|
Mr.
Gregory returned to the Company 750,000 shares of common stock owned or
controlled by him and cancelled two promissory notes of the Company
totaling $100,000.
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·
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Mr.
Pollock returned to the Company 100,000 shares of common stock owned or
controlled by him and repaid in cash to the Company
$15,160.
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7
·
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Mr.
Pollock and Mr. Gregory were released from further action by the majority
stockholder and the Company with respect to the claims made in the
derivative lawsuit.
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·
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Mr.
Pollock and Mr. Gregory agreed to waive any and all further claims against
the Company and the major
stockholder.
|
The
foregoing agreement was approved by the Court of Chancery in the State of
Delaware and was consummated in February 2006. .
On
September 1, 2006, the Company reached a settlement agreement with Mr. Bibicoff
resolving all current litigation between the Company and this individual. The
key terms to this settlement agreement were:
·
|
The
cancellation of promissory notes and accrued interest together totaling
approximately $875,000 held by this
individual.
|
·
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The
dismissal of this individual from the derivative lawsuit filed in the
Delaware Court of Chancery on March 16,
2005.
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·
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The
release of each party from any and all claims that could have been
asserted by the other party in any of the actions dismissed as a result of
this settlement agreement.
|
NOTE
3 − SIGNIFICANT EVENTS
LEGAL
PROCEEDINGS
The
foregoing agreement was approved by the Court of Chancery in the State of
Delaware and was consummated in November 2007.
Mr. Alden
remains the sole defendant in this action, on November 7th 2007, Case Financial
assumed the role of plaintiff in the derivative action commenced against Alden
in March 2005 by CCWIPP.
On April
25th 2005, Mr. Alden filed a breach of contract lawsuit against the Company in
the Superior Court of the State of Californian for the County of Los Angeles,
Case Number BC 332373. This lawsuit had been stayed by the court pending the
outcome of the derivative action filed against Mr. Alden.
On April
12, 2006, Mr. Alden filed another lawsuit against Landmark American Insurance
Company and Case Financial, Inc. in the Superior Court of the State of
Californian for the County of Los Angeles, Case Number BC 336747 demanding
indemnification for costs associated with this derivative action. This lawsuit
is ongoing.
On April
19, 2006 Mr. Alden filed a wrongful termination lawsuit against the Company in
the Superior Court of the State of California, Case Number BC 350929. This
lawsuit had been stayed by the court pending the outcome of the derivative
action filed against Mr. Alden.
8
Mr. Alden
has been directed by the court not to file any additional lawsuits against the
Company until the derivative action has been resolved.
Case Financial v. Squire
Sanders
On March
6, 2006 a lawsuit was filed in the Circuit Court of the 11th Judicial Circuit
for Miami-Dade County Florida, case number 07-06488CA 02 against the Company by
a law firm, for unpaid legal bills in the amount of $94,036. On February 14,
2008 the Company entered into a settlement with the above law firm. The
settlement states that the Company shall pay the total sum of $72,500 in equal
monthly installments of $5,000. In the event of default the Company agreed that
the entire amount of $94,036 plus all accrued interest shall be due the law
firm. Because of its financial condition, the Company defaulted on this
agreement and a judgment against the Company in the amount of $82,802.72 was
entered on June 2, 2009.
NOTE
3 − SIGNIFICANT EVENTS
LEGAL
PROCEEDINGS
Case Financial v.
CCWIPP
On
November 5, 2007 the Company entered into a settlement agreement with the
Canadian Commercial Workers Industry Pension Plan ("CCWIPP"), resolving a
dispute concerning the disposition of funds collected and held in escrow
totaling $812,000 and another $160,000 in receivables collected on behalf of
CCWIPP and the Company pursuant to a previously entered settlement agreement.
The Company and CCWIPP each received $250,000 of these funds. However $50,000 of
the Company's funds are to remain in escrow for one year to address potential
future costs that may be incurred by CCWIPP in the derivative lawsuit discussed
above. In December 2008 the Company received $35,000 of the $50,000
that remained in escrow.
On
February 17, 2009, the Canadian Commercial Workers Industry Pension Plan
("CCWIPP") filed a Complaint in Arbitration, asserting that the Company breached
the non-disparagement clause of the November 7, 2007 settlement agreement
between CCWIPP and the Company. The Company has counter-claimed based on CWIPP’s
breach of the same agreement. The Company believes that it will prevail in
arbitration.
Case Financial v Old
CFI
9
On July
3rd, 2008, the company was served with a lawsuit that was filed in the Superior
Court of the State of California for the County of Los Angeles, Case Number BC
391485, against the Company by Old CFI, Inc relating to (a) its performance
under the service agreement between the Company and Old CFI, Inc and (b) the
transfer of the Company's common stock from Old CFI, Inc to the secured
creditors of Old CFI, Inc by the CEO of Old CFI, Inc. Pursuant to the service
agreement, the Company demanded and the Court granted that issue (a) be resolved
through arbitration. The arbitration is ongoing. The Company believes that this
lawsuit is completely without merit.
Case Financial v La Costa
Tower
On
September 21, 2009, a lawsuit was filed in the Superior Court of the State of
California for the County of San Diego, North County, Case Number
37-2009-00038119-CL-UD-NC against the Company by a La Costa Tower, LLC to seek
recovery of $11,625.64, the remaining amount due under the lease at
its previous office location.
10
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF
OPERATION
The
discussion contained herein is for the three months December 31, 2009. The
following discussion should be read in conjunction with the Company's condensed
consolidated financial statements and the notes to the condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 2009.
FORWARD
LOOKING STATEMENTS
The
following discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including statements that include
words such as "anticipates", "expects", "intends", "plans", "believes", "may",
"will" or similar expressions that are intended to identify forward-looking
statements. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. Such statements include,
but are not limited to, statements regarding our intent, belief or current
expectations regarding our strategies, plans and objectives, our product release
schedules, our ability to design, develop, manufacture and market products, our
intentions with respect to strategic acquisitions, the ability of our products
to achieve or maintain commercial acceptance and our ability to obtain financing
for our obligations. Such statements are not guarantees of future performance
and are subject to risks, uncertainties and assumptions that are difficult to
predict. Therefore, the Company's actual results could differ materially and
adversely from those expressed in any forward-looking statements as a result of
various factors. Factors that could cause or contribute to the differences are
discussed in "Factors That May Affect Future Results" in the Company's Form
10KSB filed on January 13, 2010 with the Securities and Exchange Commission.
Except as required by applicable law or regulation, the Company undertakes no
obligation to revise or update any forward-looking statements contained in this
Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2009.
The information contained in this Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 2009 is not a complete description of the
Company's business or the risks associated with an investment in the Company's
common stock. Each reader should carefully review and consider the various
disclosures made by the Company in its Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 2009 and in the Company's other filings with
the Securities and Exchange Commission.
OVERVIEW
The
Company’s business was to provide pre-settlement and post-settlement litigation
funding services to attorneys and plaintiffs involved in personal injury and
other contingency litigation, conducted primarily within the California courts
(the "Litigation Finance Business"). The Company’s funding services were
non-recourse, meaning that the investment principal, success fees and interest
are repaid only when the case is settled or favorably adjudicated in court. On
September 30, 2005, the Company's Board of Directors approved a resolution
declaring that the Company discontinued its Litigation Finance
Business.
The
Company intends to seek, investigate and, if such investigation warrants,
acquire an interest in business opportunities which desire to seek the
advantages of an issuer that has complied with the Securities Act of 1934 ("1934
act"). In any transaction, we will be the surviving entity, and our stockholders
will retain a percentage ownership interest in the post-transaction company. We
will not restrict our search to any specific business, industry, or geographical
location, and may participate in a business venture of virtually any kind or
nature. This discussion of the proposed business is purposefully general and is
not meant to be restrictive of our virtually unlimited discretion to search for
and enter into potential business opportunities. We may seek a business
opportunity with entities which have recently commenced operations, or which
wish to utilize the public marketplace in order to raise additional capital in
order to expand into new products or markets, to develop a new product or
service, or for other corporate purposes. We may acquire assets and establish
wholly owned subsidiaries in various businesses or acquire existing businesses
as subsidiaries. We anticipate that the selection of a business opportunity in
which to participate will be complex and extremely risky.
11
In
analyzing prospective business opportunities, we will consider such matters as
the available technical, financial and managerial resources; working capital and
other financial requirements; history of operations, if any; prospects for the
future; nature of present and expected competition; the quality and experience
of management services which may be available and the depth of that management;
the potential for further research, development or exploration; specific risk
ors not now foreseeable but which then may be anticipated to impact our proposed
activities; the potential for growth or expansion; the potential for profit; the
public recognition of acceptance of products, services or trades; name
identification; and other relevant factors.
At this
time, Management believes that the Company's operations should be focused on the
successful prosecution of the derivative action against its former Chief
Executive Officer Eric Alden and defending against related actions initiated by
Mr. Alden against the Company.
The
Company believes that its current cash resources will be inadequate to fund its
operations through its fiscal year ended September 30, 2010. In order to
continue its operations, the Company anticipates that some form of equity
financing and/or a formal or informal restructuring or reorganization will be
required.
OUR
CRITICAL ACCOUNTING POLICIES
The
discussion and analysis of the Company's financial condition and results of
operations is based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, the Company evaluates
its estimates, including those related to bad debts, intangible assets, income
taxes, and contingencies and litigation, among others. The Company bases its
estimates on historical experience and on various other assumptions 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
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The Company believes
that the following critical accounting policies affect its more significant
judgments and estimates used in the preparation of its consolidated financial
statements: discontinued operations, use of estimates and impairment of
long-lived assets. These accounting policies are discussed in "ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" contained in the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
2009, as well as in the notes to the September 30, 2009 consolidated financial
statements. There have not been any significant changes to these accounting
policies since they were previously reported at September 30, 2009.
GENERAL
AND ADMINISTRATIVE EXPENSES
General
and administrative expenses consist of costs not directly associated with our
Litigation Finance Business. General and administrative expenses were $49,762
for the three months ended December 31, 2009 compared with $65,221 for the three
months ended December 31, 2008, a decrease of $15,459.
INTEREST
EXPENSES
Interest
expenses sere $16,115 for the three months ended December 31, 2009, compared
with $6,000 for the three months ended December 31, 2008, an increase of
$10,115.
12
OPERATING
ACTIVITIES
Our
balance sheet at December 31, 2009 reflects cash of $5,214 compared to cash
of $1,900 at September 30, 2009, an increase of $3,314.
Net cash
provided by operating activities was ($21,375) for the three months ended
December 31, 2009 compared to ($69,258) for the three months ended December 31,
2008, a decrease of $47,883
INVESTMENT
ACTIVITIES
Net cash
used in investing activities for the three months ended December 31, 2009 and
2008, was zero.
FINANCING
ACTIVITIES
Net cash
used in financing activities for the three months ended December 31, 2009 was
$24,690 compared to net cash used in financing activities was $66,500 for the
three months ended December 31, 2008, a decrease of $41,810.
OFF-BALANCE
SHEET ARRANGEMENTS
At
December 31, 2009, we did not have any transactions, obligations or
relationships that could be considered off-balance sheet
arrangements.
ITEM
3. QUANTATATIVE AND QUALITATIVE DISCLOSURES AND RISKS
Factors
That May Affect Future Results
We are
dependent upon our current management.
We will
be heavily dependent upon the skills, talents, and abilities of our management
to implement our business plan. Our management may devote limited time to our
affairs, which may be inadequate for our business, and may delay the acquisition
of any business opportunity considered. Furthermore, management has limited
experience in seeking, investigating, and acquiring businesses and will depend
upon its limited business knowledge in making decisions regarding our
acquisition of a business opportunity. Because investors will not be able to
evaluate the merits of possible business acquisitions by us, they should
critically assess the information concerning the management.
We will
need additional financing.
In all
likelihood we will need additional funds to take advantage of any available
acquisition business opportunity. Even if we were to obtain sufficient funds to
acquire an interest in a business opportunity, we may not have sufficient
capital to fully exploit the opportunity. Our ultimate success will depend upon
our ability to raise additional capital at the time of the acquisition and
thereafter. When additional capital may be needed, there can be no assurance
that funds will be available from any source or, if available, that they can be
obtained on acceptable terms.
We do not
pay dividends.
We do not
intend to pay any dividends. We do not foresee making any cash distributions in
the manner of a dividend or otherwise.
The
effects of an acquisition or merger transaction could be dilutive.
In any
reverse merger transaction, for tax reasons and management reasons, the owners
of the target company will be issued a large number of shares of common stock,
which will dilute the ownership interest of our current stockholders. In
addition, at the time of the reverse merger, it will be likely that there will
-be additional authorized but unissued shares that may be later issued by the
then new management for any purpose without the consent or vote of the
stockholders. The acquisition issuance and additional issuances that may occur
will dilute the interests of our stockholders after the reverse merger
transaction.
13
Company
common stock is listed on the Over-The-Counter (OTC) Bulletin
Board.
Because
the Company's common stock is listed on the OTC Bulletin Board, the liquidity of
the common stock is impaired, not only in the number of shares that are bought
and sold, but also through delays in the timing of transactions, and limited
coverage by security analysts and the news media, if any, of the Company. As a
result, prices for shares of the Company's common stock may be lower than might
otherwise prevail if the Company's common stock was traded on NASDAQ or a
national securities exchange, like the American Stock Exchange.
ITEM
4. CONTROLS AND PROCEDURES
Disclosure
controls and procedures are designed to ensure that information required to be
disclosed in the reports filed or submitted under the Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in the reports
filed under the Exchange Act of 1934 is accumulated and communicated to
management, including its principal executive and financial officers, as
appropriate, to allow timely decisions regarding required disclosure. The
Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including its principal executive and
financial officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based upon and as of the date of that evaluation, the Company's
principal executive and financial officer concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports the Company files and submits under the
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
CHANGES
IN INTERNAL CONTROLS
There
were no changes in the Company's internal controls or in other factors that
could have significantly affected those controls subsequent to the date of the
Company's most recent evaluation.
14
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
On March
25, 2005, a derivative lawsuit was filed by the Canadian Commercial Workers
Industry Pension Plan ("CCWIP"), who at the time was a major stockholder of the
Company. The lawsuit was filed in the Court of Chancery of the State of Delaware
against former officers and directors of the Company, specifically Eric Alden, a
former CEO and CFO and Chairman of the Board, Harvey Bibicoff, a former interim
CEO and CFO and director, Lorne Pollock, former Vice President of Underwriting,
Secretary and director and Gordon Gregory, a former director alleging that these
officers and directors had damaged the Company by (a) engaging in self dealing
transactions in breach of their fiduciary duty of loyalty; (b) mismanaging the
Company in violation of their oversight duties and duty of care; (c) wasting
corporate assets; and (d) making fraudulent misrepresentations which induced the
corporate entity to issue shares to these individuals. The Company's Board of
Directors has elected to consent to the filing of this complaint. The Company
was named as a nominal defendant in this complaint.
On
October 5, 2005, Mr. Gregory, Mr. Pollock, and the Company executed a Settlement
and Release Agreement regarding this action pursuant to which:
·
|
Mr.
Gregory returned to the Company 750,000 shares of common stock owned or
controlled by him and cancelled two promissory notes of the Company
totaling $100,000.
|
·
|
Mr.
Pollock returned to the Company 100,000 shares of common stock owned or
controlled by him and repaid in cash to the Company
$15,160.
|
·
|
Mr.
Pollock and Mr. Gregory were released from further action by the majority
stockholder and the Company with respect to the claims made in the
derivative lawsuit.
|
·
|
Mr.
Pollock and Mr. Gregory agreed to waive any and all further claims against
the Company and the major
stockholder.
|
The
foregoing agreement was approved by the Court of Chancery in the State of
Delaware and was consummated in February 2006.
On
September 1, 2006, the Company reached a settlement agreement with Mr. Bibicoff
resolving all current litigation between the Company and this individual. The
key terms to this settlement agreement were:
·
|
The
cancellation of promissory notes and accrued interest together totaling
approximately $875,000 held by this
individual.
|
·
|
The
dismissal of Mr. Bibicoff from the derivative lawsuit filed in the
Delaware Court of Chancery on March 16,
2005.
|
·
|
The
release of each party from any and all claims that could have been
asserted by the other party in any of the actions dismissed as a result of
this settlement agreement.
|
The
foregoing agreement was approved by the Court of Chancery in the State of
Delaware and was consummated in November 2007.
Mr. Alden
remains the sole defendant in this action and, on November 7th 2007, the Company
assumed the role of plaintiff in this derivative action against Mr.
Alden.
On April
25th 2005, Mr. Alden filed a breach of contract lawsuit against the Company in
the Superior Court of the State of California for the County of Los Angeles,
Case Number BC 332373. This lawsuit had been stayed by the court pending the
outcome of the derivative action filed against Mr. Alden.
15
On April
12, 2006, Mr. Alden filed another lawsuit against Landmark American Insurance
Company and Case Financial, Inc. in the Superior Court of the State of
California for the County of Los Angeles, Case Number BC 336747 demanding
indemnification for costs associated with this derivative action. This lawsuit
had been stayed by the court pending the outcome of the derivative action filed
against Mr. Alden.
On April
19, 2006 Mr. Alden filed a wrongful termination lawsuit against the Company in
the Superior Court of the State of California, Case Number BC 350929. This
lawsuit had been stayed by the court pending the outcome of the derivative
action filed against Mr. Alden.
Mr. Alden
has been directed by the court not to file any additional lawsuits against the
Company until the derivative action has been resolved.
On March
6, 2006 a lawsuit was filed in the Circuit Court of the 11th Judicial Circuit
for Miami-Dade County Florida, case number 07-06488CA 02 against the Company by
a law firm, for unpaid legal bills in the amount of $94,036. On February 14,
2008 the Company entered into a settlement with the above law firm. The
settlement states that the Company shall pay the total sum of $72,500 in equal
monthly installments of $5,000. In the event of default the Company agreed that
the entire amount of $94,036 plus all accrued interest shall be due the law
firm. Because of its financial condition, the Company defaulted on this
agreement and a judgment against the Company in the amount of $82,802.72 was
entered on June 2, 2009.
On July
3rd, 2008, the company was served with a lawsuit that was filed in the Superior
Court of the State of California for the County of Los Angeles, Case Number BC
391485, against the Company by Old CFI, Inc relating to (a) its performance
under the service agreement between the Company and Old CFI, Inc and (b) the
transfer of the Company's common stock from Old CFI, Inc to the secured
creditors of Old CFI, Inc by the CEO of Old CFI, Inc. Pursuant to the service
agreement, the Company demanded and the Court granted that issue (a) be resolved
through arbitration. The Company believes that this lawsuit is completely
without merit.
On
February 17, 2009, the Canadian Commercial Workers Industry Pension Plan
("CCWIP") filed a Complaint in Arbitration, asserting that the Company breached
the non-disparagement clause of the November 7, 2007 settlement agreement
between CCWIPP and the Company. The Company believes that it will prevail in
arbitration.
On
September 21, 2009, a lawsuit was filed in the Superior Court of the State of
California for the County of San Diego, North County, Case Number
37-2009-00038119-CL-UD-NC against the Company by a La Costa Tower, LLC to seek
recovery of $11,625.64, the remaining amount due under the lease at
its previous office location.
ITEM
1A. RISK FACTORS
We
currently have no operating business.
We
currently have no relevant operating business, revenues from operations or
assets. Our business plan is to seek a merger or business combination with an
operating business. We face all of the risks inherent in the investigation,
acquisition, or involvement in a new business opportunity. An investor's
purchase of any of our securities must be regarded as placing funds at a high
risk in a new or "start-up" venture with all of the unforeseen costs, expenses,
problems, and difficulties to which such ventures are subject.
16
ITEM
2. UNREGISTERED SALE OF EQUITY SECURITIES
On
October 5, 2009, the Company issues 2,000,000 shares of its common stock as a
retainer for legal services.
In
October 2009, the Company also settled additional outstanding loans from two of
its shareholders totaling $15,000 by allowing them to purchase 1,500,000 shares
of the Company’s common stock at a price of $.01 per share.
In
October 2009, the Company borrowed $50,000 from two shareholders ($25,000 from
each shareholder). The Company issued 1,000,000 shares of the Company’s common
stock to each of the shareholders as consideration for agreeing to make those
loans.
On
November 18, 2009, the Company reduced its outstanding loans with Lawrence
Schaffer by allowing Mr. Schaffer to purchase 2,500,000 shares of the Company’s
common stock at a price of $.01 per share.
On
November 18, 2009, the Company reduced its outstanding loans with Michael
Schaffer by allowing Mr. Schaffer to purchase 2,500,000 shares of the Company’s
common stock at a price of $.01 per share.
On
November 18, 2009, the Company settled its outstanding loans with Waddy
Stephenson by allowing Mr. Stephenson to purchase 1,000,000 shares of the
Company’s common stock at a price of $.01 per share.
ITEM
3. DEFAULTS IN SENIOR SECURITIES
As of
December 31, 2010, the Company is in default on the following
notes:
1.
|
Notes
payable, uncollateralized, interest payable $150,000 monthly at 12.0% per
annum, due January 1, 2007. The Company is in default on this
note.
|
2.
|
Note
payable, uncollateralized, interest payable $50,000 monthly at 12.0% per
annum, due January 1, 2007. The Company is in default on this
note.
|
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
The
following documents are filed as part of this report:
Exhibit
No.
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley
Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley
Act of 2002
|
32
|
Certification
Pursuant to Section 906 of the Sarbanes Oxley Act of
2002
|
17
SIGNATURES
In
accordance with the requirements of the Exchange Act the Registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated:
February 22, 2010
|
Case
Financial, Inc
|
|
/s/
Michael Schaffer
|
||
By:
Michael Schaffer
Its:
Chief Executive Officer
(Principal
Executive Officer)
|
||
/s/
Lawrence Schaffer
|
||
By:
Lawrence Schaffer
Its:
Chief Financial Officer
(Principal
Accounting Officer)
|
18