CASE FINANCIAL INC - FORM 10-Q

Attached files

file	filename
EX-32 - CASE FINANCIAL INC	ex32.htm
EX-31.2 - CASE FINANCIAL INC	ex31_2.htm
EX-31.1 - CASE FINANCIAL INC	ex31_1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x 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 UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-27757
CASE FINANCIAL INC. (Exact Name of registrant as specified in its charter)
DELAWARE (State of other jurisdiction of incorporation or organization)	33-0529299 (I.R.S. Employer Identification Number)
7668 El Camino Real, Ste.104-106, Carlsbad, CA (Address of principal executive offices)	92009 (Zip code)
(760) 804-1449 (Issuer's telephone number, including area code)
(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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark 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):
Large accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company)	Accelerated filer o Smaller reporting company x
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
Number of shares of issuer's common stock outstanding as of August 16, 2010: 42,185,145

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION			4
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS			4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION			11
ITEM 3. QUANTATATIVE AND QUALITATIVE DISCLOSURES AND RISKS			13
ITEM 4. CONTROLS AND PROCEDURES			14
PART II - OTHER INFORMATION			17
ITEM 1. LEGAL PROCEEDINGS			17
ITEM 1A. RISK FACTORS			18
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES			19
ITEM 3. DEFAULTS IN SENIOR SECURITIES			19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			19
ITEM 5. OTHER INFORMATION			19
ITEM 6. EXHIBITS			20
SIGNATURES			20

PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CASE FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets


ASSETS

	Unaudited
	As of			As of
	June 30,			September 30,
	2010			2009


Current Assets
Cash & cash equivalents	$	2,220		$	1,900
Prepaid expense		1,479
Other receivable		5,000			-


Total Current Assets		8,700			1,900

Other Assets
Deposits		-			-


Total Other Assets		-			-


TOTAL ASSETS	$	8,700		$	1,900


CONDENSED LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable and accrued expenses	$	1,523,229		$	1,156,805
Loans payable - related parties		134,807			93,041
Loans payable		200,000			215,000
Note payable - short-term		270,000			190,000


Total Current Liabilities		2,128,036			1,654,846

TOTAL LIABILITIES		2,128,036			1,654,846

Stockholders' Equity (Deficit)

Preferred stock, ($.0001 par value, 20,000,000
shares authorized; none issued and outstanding.)		-			-
Common stock, (par value $.001 per share, 100,000,000
shares authorized: 42,185,145 and 29,185,145 shares issued
and outstanding as of June 30, 2010 & September 30, 2009
respectively)		42,185			29,185
Paid-in capital		10,756,693			10,614,693
Accumulated deficit		(12,918,214	)		(12,296,824	)


Total Stockholders' Equity (Deficit)		(2,119,337	)		(1,652,946	)

TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY (DEFICIT)	$	8,700		$	1,900

See Notes to the Condensed Consolidated Financial Statements

CASE FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)


	Nine Months			Nine Months			Three Months			Three Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009


Revenues
Service	$	-		$	-		$	-		$	-


Net Revenue		-			-			-			-

Operating Expenses
General and administrative		80,618			102,819			23,575			21,048
Salaries		126,000			126,000			42,000			42,000
Professional fees		389,650			404,698			249,620			146,935


Total Operating Expenses		596,267			633,516			315,195			210,925


Income (Loss) from operations		(596,267	)		(633,516	)		(315,195	)		(210,925	)

Other Income (Expenses)
Interest income		-			-			-			-
Interest expense		(25,122	)		(18,000	)		(6,000	)		(6,000	)
Gain on forgiveness of debt		-			-			-			-
Other income		-			-			-			-
Other expense		-			-			-			-


Total Other income		(25,122	)		(18,000	)		(6,000	)		(6,000	)


Net income (loss) before discontinued operations		(621,389	)		(651,516	)		(321,195	)		(216,925	)


Gain (Loss) from discontinued operations		-			4,687			-			4,687


Net Income (loss)	$	(621,389	)	$	(646,829	)	$	(321,195	)	$	(212,238	)


Net Income (Loss) per common share - basic and diluted:

From continuing operations	$	(0.02	)	$	(0.02	)	$	(0.01	)	$	(0.01	)


From discontinued operations	$	-		$	0.00		$	-		$	0.00


Weighted average number of
common shares - basic and diluted		39,969,028			29,101,812			42,174,156			39,639,357

See Notes to the Condensed Consolidated Financial Statements

CASE FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows


	Nine Months			Nine Months
	Ended			Ended
	June 30,			June 30,
	2010			2009


CASH FLOWS FROM OPERATING ACTIVITIES

Gain (Loss) from discontinued operations	$	-		$	4,687
Gain (Loss) from continuing operations		(621,389	)		(651,516	)
Net income (loss)		(621,389	)		(646,829	)

Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Common stock for services		45,000			5,000
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses		(1,479	)		40,423
(Increase) decrease in other receivable		(5,000	)		-
(Increase) decrease in deposit		-			1,453
Increase (decrease) in accounts payable and other liabilities		366,423			508,716


Net cash (used by) continuing operations		(216,445	)		(91,237	)
Net cash provided by continuing operations		-			-


Net cash (used by) provided by operating activities		(216,445	)		(91,237	)

CASH FLOWS FROM INVESTING ACTIVITIES

Increase (decrease) in loans payable		(15,000	)		15,000


Net cash provided by (used in) investing activities		(15,000	)		15,000

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from common stock		-			-
Proceeds from borrowings - related party		41,766			75,892
Proceeds from borrowings		80,000			-
Common stock		110,000			-


Net cash provided by (used in) financing activities		231,766			75,892



Net increase (decrease) in cash & cash equivalents		320			(346	)

Cash & cash equivalents at beginning of period		1,900			2,963


Cash & cash equivalents at end of period	$	2,220		$	2,617


SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:

Interest expense	$	25,122		$	18,000


Income taxes paid	$	-		$	-

See Notes to the Condensed Consolidated Financial Statements

CASE FINANCIAL, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2010

NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying June 30, 2010 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 June 30, 2010 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 June 30, 2010 are not necessarily indicative of the operating results for the full years.

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there were no such events that warrant disclosure or recognition in the 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’s 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.

CASE FINANCIAL, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2010

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 nine months ended June 30, 2010.

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.

CASE FINANCIAL, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2010

NOTE 3 − SIGNIFICANT EVENTS

LEGAL PROCEEDINGS

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 this individual 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. On November 7, 2007, Case Financial assumed the role of plaintiff in the derivative action commenced against Alden in March 2005 by CCWIPP. On June 22, 2010 through June 24, 2010, the trial for this matter was held. However, no ruling is expected until both parties submit a post trial brief later this year.

On April 25, 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 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.

CASE FINANCIAL, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2010

NOTE 3 − SIGNIFICANT EVENTS

LEGAL PROCEEDINGS

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.

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.

Case Financial v Old CFI

On July 3, 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. On April 10, 2010, the Arbitrator ruled in the Company’s favor and dismissed these claims brought by Old CFI, Inc. Old CFI, Inc. has appealed the Arbitrator’s ruling. The Company believes that this lawsuit is completely without merit and that it will prevail on both issues.

Case Financial v. CCWIPP

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. On August 2, 2010 through August 5, 2010, the arbitration for this matter was held. However, no ruling is expected until both parties submit a post trial brief later this year.

CASE FINANCIAL, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2010

NOTE 3 − SIGNIFICANT EVENTS

LEGAL PROCEEDINGS

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. On July 15, 2010, the trial for this matter was held and La Costa Tower, LLC was awarded only $9,757.48 as the Company was awarded certain offsets that it had been seeking from La Costa Tower, LLC.

NOTE 4 − COMMON STOCK

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.

In March 2010, the Company borrowed $10,000 from one of its shareholders as a non-recourse loan collateralized by the ongoing litigation in Delaware. The Company agreed to issue 500,000 shares of the Company’s common stock to the shareholder as consideration for agreeing to make this loan.

In April 2010, the Company borrowed $20,000 from a shareholder. The Company agreed to issue 1,000,000 shares of the Company’s common stock to the shareholder as consideration for agreeing to make the loan. These shares have not yet been issued.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION

The discussion contained herein is for the nine months June 30, 2010. 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 June 30, 2010.

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 June 30, 2010. The information contained in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010 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 June 30, 2010 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 who or which desire to seek the advantages of an issuer who 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.

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 discontinued Litigation Finance Business. General and administrative expenses were $80,618 for the nine months ended June 30, 2010 compared with $102,819 for the nine months ended June 30, 2009, a decrease of $22,201.

INTEREST EXPENSES

Interest expenses were $25,122 for the nine months ended June 30, 2010, compared with $18,000 for the nine months ended June 30, 2009, an increase of $7,122.

OPERATING ACTIVITIES

Our balance sheet at June 30, 2010 reflects cash of $2,220 compared to cash of $1,900 at September 30, 2009, a decrease of $320.

Net cash used in operating activities for the nine months ended June 30, 2010 was $(216,455) compared to net cash used in operating activities of $(91,237) at September 30, 2009, an increase of $(125,208).

INVESTMENT ACTIVITIES

Net cash used in investing activities for the nine months ended June 30, 2010 was $(15,000) compared to net cash used in investing activities of $15,000 for the nine months ended June 30, 2009, a decrease of $15,000.

FINANCING ACTIVITIES

Net cash used in financing activities for the nine months ended June 30, 2010 was $231,766 compared to net cash used in financing activities of $75,892 for the nine months ended June 30, 2009, an increase of $155,874.

OFF-BALANCE SHEET ARRANGEMENTS

At June 30, 2010, 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.

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

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures over financial reporting. 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 not 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. Additional information on this matter is discussed in Item 4T below.

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.

ITEM 4T. CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

-	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

-	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of the year ended September 30, 2009 management assessed the effectiveness of our internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

The matters involving internal controls and procedures that our management considered to be material weaknesses were:

(1)	The lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;

(2)	Inadequate segregation of duties consistent with control objectives; and

(3)	Ineffective controls over period end financial disclosure and reporting processes.

The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of the year ended September 30, 2009.

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

(1)	We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us.

(2)

We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

As a result of its assessment and the material weaknesses identified above, management has concluded that our internal controls for financial reporting as of the end of the period covered by this report were not effective. Additionally, due to the ineffectiveness of its internal controls for financial reporting, management has also concluded that its disclosure controls are not effective either.

Although, Management believes that these material weaknesses set forth in items (2) and (3) above did not result in any material misstatement in this report, the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

CHANGES IN CONTROLS OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting during the fiscal year ended September 30, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

·	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 7, 2007, the Company assumed the role of plaintiff in this derivative action against Mr. Alden. On June 22, 2010 through June 24, 2010, the trial for this matter was held. However, no ruling is expected until both parties submit a post trial brief later this year.

On April 25, 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.

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. On April 10, 2010, the arbitrator ruled in the Company’s favor and dismissed these claims brought by Old CFI, Inc. Old CFI, Inc. has appealed the arbitrators ruling. The Company believes that this lawsuit is completely without merit and that it will prevail on both issues.

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. On August 2, 2010 through August 5, 2010, the arbitration for this matter was held. However, no ruling is expected until both parties submit a post trial brief later this year.

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.

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.

ITEM 3. DEFAULTS IN SENIOR SECURITIES

As of June 30, 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

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: August 23, 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)

CASE FINANCIAL INC - FORM 10-Q - August 23, 2010

Attached files

CASE FINANCIAL INC Reports