Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Pivotal Group Inc. | Financial_Report.xls |
| EX-31.1 - CERTIFICATION - Pivotal Group Inc. | pivotal_10q-ex3101.htm |
| EX-32.1 - CERTIFICATION - Pivotal Group Inc. | pivotal_10q-ex3201.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| S | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended September 30, 2012 | |
| OR | |
| £ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from __________ to __________ |
Commission file number 000-54426
PIVOTAL GROUP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 45-1876246 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
53 Cahaba Lily Way
Helena, Al 35080
(Address of principal executive offices) (zip code)
205-977-7755
(Registrant's telephone number, including area code)
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 S No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer", "non-accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large Accelerated filer ¨ | Accelerated filer ¨ |
| Non-accelerated filer ¨ | Smaller reporting company x |
| (do not check if smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date.
| Class | Outstanding as of November 7, 2012 |
| Common Stock, par value $0.0001 | 11,950,000 shares |
| Documents incorporated by reference: None |
Table of Contents
| Part I. Financial Information | 2 |
| Item 1. Financial Statements | 2 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 12 |
| Item 4. Controls and Procedures | 12 |
| Part II. Other Information | 13 |
| Item 1. Legal Proceedings | 13 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
| Item 3. Defaults Upon Senior Securities | 13 |
| Item 4. Mine Safety Disclosures | 13 |
| Item 5. Other Information | 14 |
| Item 6. Exhibits | 14 |
| Signatures | 15 |
| 1 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Pivotal Group, Inc.
(formerly known as Driftwood Acquisition Corporation)
(a Development Stage Company)
Condensed Consolidated Balance Sheets (unaudited)
| September 30, 2012 | December 31, 2011 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 4,081 | $ | – | ||||
| Escrowed cash deposits | 45,000 | – | ||||||
| Prepaid assets | 41,250 | 125,000 | ||||||
| TOTAL ASSETS | $ | 90,331 | $ | 125,000 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Due to related party | $ | 183,902 | $ | 125,000 | ||||
| Total liabilities | 183,902 | 125,000 | ||||||
| Stockholders' deficit: | ||||||||
| Preferred stock, $.0001 par value: 20,000,000 shares authorized; no shares issued | – | – | ||||||
| Common stock, $.0001 par value: 500,000,000 shares authorized; 11,950,000 and 5,000,000 shares issued and outstanding, respectively | 1,195 | 500 | ||||||
| Additional paid-in capital (1) | (72 | ) | (500 | ) | ||||
| Deficit accumulated during the development stage | (94,694 | ) | – | |||||
| Total stockholders' deficit | (93,571 | ) | – | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 90,331 | $ | 125,000 | ||||
(1) The December 31, 2011 capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the merger transaction. See Note 2.
The accompanying notes are an integral part of these financial statements
| 2 |
Pivotal Group, Inc.
(formerly known as Driftwood Acquisition Corporation)
(a Development Stage Company)
Condensed Consolidated Statements of Operations (Unaudited)
| For the Three Months Ended September 30, 2012 | For the Three Months Ended September 30, 2011 | For the Nine Months Ended September 30, 2012 | For the Nine Months Ended September 30, 2011 | Cumulative From Inception of Development on December 19, 2011 to September 30, 2012 | ||||||||||||||||
| Revenues | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||
| Operating expenses | $ | 86,888 | $ | – | $ | 94,694 | $ | – | $ | 94,694 | ||||||||||
| Net loss | $ | (86,888 | ) | $ | – | $ | (94,694 | ) | $ | – | $ | (94,694 | ) | |||||||
| Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | – | $ | (0.02 | ) | $ | – | ||||||||||
| Weighted average common shares outstanding - basic and diluted (2) | 7,825,824 | – | 5,938,504 | – | ||||||||||||||||
(2) The capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the merger transaction in determining the basic and diluted weighted average shares. See Note 2.
The accompanying notes are an integral part of these financial statements
| 3 |
Pivotal Group, Inc.
(formerly known as Driftwood Acquisition Corporation)
(a Development Stage Company)
Condensed Consolidated Statement of Stockholders' Deficit (Unaudited)
For the Nine Months Ended September 30, 2012
| Common Stock | Additional paid-in | Deficit accumulated during the development | Total stockholders' | |||||||||||||||||
| Shares | Amount | capital | stage | deficit | ||||||||||||||||
| Balance, December 31, 2011 (3) | 5,000,000 | $ | 500 | $ | (500 | ) | $ | – | $ | – | ||||||||||
| Capital contribution | – | – | 200 | – | 200 | |||||||||||||||
| Recapitalization due to reverse merger | 6,950,000 | 695 | 228 | – | 923 | |||||||||||||||
| Net loss | – | – | – | (94,694 | ) | (94,694 | ) | |||||||||||||
| Balance, September 30, 2012 | 11,950,000 | $ | 1,195 | $ | (72 | ) | $ | (94,694 | ) | $ | (93,571 | ) | ||||||||
(3) The December 31, 2011 capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the merger transaction. See Note 2.
The accompanying notes are an integral part of these financial statements
| 4 |
Pivotal Group, Inc.
(formerly known as Driftwood Acquisition Corporation)
(a Development Stage Company)
Condensed Consolidated Statements of Cash Flows (Unaudited)
| For the Nine Months Ended September 30, 2012 | For the Nine Months Ended September 30, 2011 | Cumulative From Inception of Development on December 19, 2011 to September 30, 2012 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (94,694 | ) | $ | – | $ | (94,694 | ) | ||||
| Changes in operating assets and liabilities | ||||||||||||
| Net change in prepaid expenses | 83,750 | – | (41,250 | ) | ||||||||
| Net cash used in operating activities | (10,944 | ) | – | (135,944 | ) | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Increase in escrowed cash deposits | (45,000 | ) | – | (45,000 | ) | |||||||
| Net cash used in investing activities | (45,000 | ) | – | (45,000 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Net cash received in reverse merger | 923 | – | 923 | |||||||||
| Capital contribution | 200 | – | 200 | |||||||||
| Borrowings from related party | 58,902 | – | 183,902 | |||||||||
| Net cash provided by financing activities | 60,025 | – | 185,025 | |||||||||
| Net increase in cash | 4,081 | – | 4,081 | |||||||||
| Cash at beginning of period | – | – | – | |||||||||
| Cash at end of period | $ | 4,081 | $ | – | $ | 4,081 | ||||||
The accompanying notes are an integral part of these financial statements
| 5 |
Pivotal Group, Inc.
(formerly known as Driftwood Acquisition Corporation)
(a Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 – Description of business and nature of operations
Pivotal Group, Inc. (a Delaware Corporation) (“Pivotal”), formerly known as Driftwood Acquisition Corporation (“Driftwood”), was incorporated on April 20, 2011 and was formed to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. As described in Note 2 below, Pivotal completed a merger transaction with PKCCR, LLC (a Florida limited liability company) (“PKCCR”) on August 24, 2012. As discussed in Note 2, the merger transaction is treated as a reverse acquisition with PKCCR as the accounting acquirer. The “Company” hereafter refers to the legal parent, Pivotal, and its wholly owned subsidiary, PKCCR. The Company has not commenced operations and, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities, is considered a development stage company.
The Company has entered into a contract to acquire land for the Company's planned development of Perdido Key conference center and resort and intends to manage all goods and services pertaining to this project. Pivotal plans to partner with travel agencies to help promote and schedule tour groups, align with local convention and visitors bureaus to assist in targeting new and existing business travel opportunities and work closely with meeting and event planners to attract conferences, tradeshows, association meetings, tournaments and special events.
No assurances can be given that Pivotal will be successful in developing the Perdido Key conference center and resort.
Note 2 – Agreement and plan for merger
On August 24, 2012, Pivotal entered into a Stock Exchange Agreement with PKCCR to acquire PKCCR in a stock-for-stock transaction (the “Acquisition”). The Acquisition was effected by Pivotal through the exchange of all of the outstanding membership interests of PKCCR for 5,000,000 shares of common stock of Pivotal. All of the outstanding membership interests of PKCCR were formerly owned by its sole member Lanny Smartt, who also serves as an officer and director of Pivotal. Upon completion of the transaction, the primary shareholder of PKCCR became the controlling shareholder of Pivotal, thus the acquisition was accounted for as a reverse merger for accounting purposes. As a result of the Acquisition, the PKCCR has become a wholly owned subsidiary of Pivotal and Pivotal (as the sole current member of PKCCR) has taken over the operations and business plan of PKCCR. The December 31, 2011 capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the merger transaction.
Note 3 – Significant accounting policies
These unaudited interim financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting solely of normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included.
The preparation of financial statements in accordance with US GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s condensed consolidated financial statements; accordingly, actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company’s consolidated financial position and results of operations. Operating results for the three and nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012.
| 6 |
| a) | Principles of Consolidation |
The consolidated financial statements include the accounts and operations of Pivotal from the date of the reverse merger, August 24, 2012, through September 30, 2012 and the accounts of PKCCR from January 1, 2012 to September 30, 2012. All significant intercompany balances and transactions have been eliminated in consolidation.
| b) | Concentration of Risk |
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have any cash balances in excess of the Federal Deposit Insurance Corporation limit as of September 30, 2012 and December 31, 2011.
| c) | Income Taxes |
Under ASC 740, "Income Taxes", deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2012 and December 31, 2011, there were no deferred taxes.
| d) | Loss Per Common Share |
Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of September 30, 2012, there are no outstanding dilutive securities.
| e) | Fair Value of Financial Instruments |
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
| · | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
| · | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
| · | Level 3 inputs are unobservable inputs for the asset or liability. |
The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
| 7 |
Pivotal Group, Inc.
(formerly known as Driftwood Acquisition Corporation)
(a Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
Management believes it is not practical to estimate the fair value of advances to stockholder because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
Note 4 – Going Concern
The Company does not have positive cash flow from operating activities and its ability to continue as a going concern is dependent on obtaining additional financing or the continuing financial support of its stockholders and other related parties. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. The Company plans to obtain additional financing through the sale of equity or debt securities in order to finance operations until it can generate positive cash flows from operating activities. There can be no assurance that the Company will be successful in its efforts to obtain financing through sale of equity or debt securities. If the Company is not able to obtain additional financing, it will be unable to construct the Perdido Key conference center and resort and bring it to an operational state and will be required to cease operations.
Note 5 – Recent Accounting Pronouncements
Adopted
In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS) of Fair Value Measurement – Topic 820.” ASU 2011-04 is intended to provide a consistent definition of fair value and improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments include those that clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements, as well as those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This update is effective for annual and interim periods beginning after December 15, 2011.The adoption of this ASU did not have a material impact on our financial statements.
Note 6 – Escrowed Cash Deposits
On June 22, 2012, MLD, LLC, a company controlled by Lanny Smartt, who also serves as an officer and director of the Company, entered into a contract to acquire land for the Company's planned development of Perdido Key conference center and resort. On June 30, 2012, MLD, LLC, assigned its rights in the contract to PKCCR. In July 2012, PKCCR paid a $45,000 earnest money deposit towards purchasing the land. The funds for the deposit were obtained through an advance made to the Company by the Company's controlling shareholder.
Note 7 – Prepaid Expenses
In December 2011, the Company prepaid $125,000 to Tiber Creek Corporation for professional services to assist the Company with merging PKCCR into Pivotal Group Inc., a public reporting company. The merger was completed August 24, 2012 and is more fully described in Note 6. As of September 30, 2012, the company has expensed $87,750 for completed services.
| 8 |
Pivotal Group, Inc.
(formerly known as Driftwood Acquisition Corporation)
(a Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
Note 8 – Related Party Transactions
The Company borrowed from PK Smartt, its Secretary, Treasurer and Director, $183,902 which was used to make the prepayment for professional services related to the merger, make an earnest money deposit towards purchasing he land as indicated above in Note 4, and fund continuing operations. This related party payable is non-interest bearing, has no specified repayment date, and is due on demand.
Note 9 – Common Stock
On July 27, 2012, the Board of Directors of the Company approved to increase the authorized number of shares of common stock from 100,000,000 to 500,000,000 shares.
Note 10 – Subsequent Events
The Company has entered into certain negotiations with Escambia County Florida to procure the necessary development permits and authorizations to proceed with construction. Additionally, Escambia County has consented to secure a municipal bond up to $25,000,000 to fund the conference center portion of the project. The Company has also started the application process for a grant administered by the State of Florida for $12,500,000. These events are not finalized, but the Company does expect a significant portion of the available funds to be awarded and administered in the first and second quarters of 2013.
| 9 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011, and with the unaudited condensed consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include the information concerning our current and future operations, business strategies, need for financing, competitive position, ability to retain and recruit personnel, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.
Overview
On August 24, 2012, Pivotal entered into a Stock Exchange Agreement with PKCCR to acquire PKCCR in a stock-for-stock transaction (the “Acquisition”). The Acquisition was effected by Pivotal through the exchange of all of the outstanding membership interests of PKCCR for 5,000,000 shares of common stock of Pivotal. All of the outstanding membership interests of PKCCR were formerly owned by its sole member Lanny Smartt, who also serves as an officer and director of Pivotal. Upon completion of the transaction, the primary shareholder of PKCCR became the controlling shareholder of Pivotal, thus the acquisition was accounted for as a reverse merger for accounting purposes. As a result of the Acquisition, the Company has become a wholly owned subsidiary of Pivotal and Pivotal (as the sole current member of the Company) has taken over the operations and business plan of PKCCR.
As of September 30, 2012, Pivotal Group Inc. (formerly Driftwood Acquisition Corporation ("Pivotal" or the "Company") had not generated revenues and had no income or cash flows from operations since inception and had accumulated a deficit of $94,694 and a net loss of $94,694 for the nine months ended September 30, 2012.
The Company has entered into a contract to acquire land for the Company's planned development of Perdido Key conference center and resort and intends to manage all goods and services pertaining to this project. Pivotal plans to partner with travel agencies to help promote and schedule tour groups, align with local convention and visitors bureaus to assist in targeting new and existing business travel opportunities and work closely with meeting and event planners to attract conferences, tradeshows, association meetings, tournaments and special events.
Pivotal has no operations nor does it currently engage in any business activities generating revenues. The Company's independent auditors have issued a report raising substantial doubt about the Company's ability to continue as a going concern. At present, the Company has no operations and the continuation of the Company as a going concern is dependent upon financial support from its stockholders, its ability to obtain necessary equity financing to continue operations and/or to successfully locate and negotiate with a business entity for the combination with a target company.
| 10 |
Management plans to use their personal funds to pay all expenses incurred by the Company in 2012. There is no assurance that the Company will ever be profitable. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Background
Pivotal was incorporated on April 20, 2011 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions.
Pivotal has been in the developmental stage since inception and its operations to date have been limited to filing a registration statement and issuing shares of its common stock to the original shareholders and to the subsequent shareholders to whom control of the Company was transferred. Pivotal has been formed to provide a method for a foreign or domestic private company to become a reporting company with a class of securities registered under the Securities Exchange Act of 1934.
The Company registered its common stock on a Form 10 registration statement filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 12(g) thereof. The Company files with the Securities and Exchange Commission periodic and current reports under Rule 13(a) of the Exchange Act, including quarterly reports on Form 10-Q and annual reports Form 10-K.
The Company has also filed a Form S-1 registration statement pursuant to the Securities Exchange Act of 1934 to register 950,000 shares of the Company’s common stock to be sold at $1.00 per share. The shares being offered are currently held by officers and directors of the Company as well as 45 individual investors.
Going forward, the Company estimates that it will need to raise approximately $20,000,000 in capital to complete its development of the Perdido Key conference center. It is anticipated that any securities issued in connection with raising these funds will be from a combination of both public and private placement equity offerings as well as through potential debt financing. Any private placement equity offering would be made in reliance upon exemption from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of its transaction, the Company may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. The issuance of additional securities and their potential sale into any trading market which may develop in the Company's securities may depress the market value of the Company's securities in the future if such a market develops, of which there is no assurance.
Results of Operations
As of September 30, 2012, the Company had not generated revenues and had no income or cash flows from operations since inception and had accumulated a deficit of $94,694. The Company has no operations nor does it currently engage in any business activities generating revenues. Expenses incurred by the Company related to Delaware state fees and legal and accounting fees as required in connection with completing the reverse merger between Pivotal and PKCCR and for preparing the necessary financial statements and other information for the Company’s public filings with the Securities and Exchange Commission.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is deemed by our management to be material to investors.
| 11 |
Recent Accounting Policies
The recent material accounting policies that may be the most critical to understanding of the financial results and conditions are discussed in the unaudited financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information not required to be filed by Smaller Reporting Companies.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), the Company's management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2012, the end of the period covered by this Quarterly Report on Form 10-Q.
Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2012, the disclosure controls and procedures were not effective. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
The Company's management has identified material weaknesses in its internal control over financial reporting related to the following matters:
A lack of sufficient segregation of duties. Specifically, this material weakness is such that the design over these areas relies primarily on defective controls and could be strengthened by adding preventative controls to properly safeguard company assets.
A lack of sufficient personnel in the accounting function due to the Company's limited resources with appropriate skills, training and experience to perform certain tasks as it relates to financial reporting. The Company has recently engaged consultants to help them with their accounting and SEC reporting to help address this weakness.
The Company's plan to remediate those material weaknesses remaining is as follows:
Improve the effectiveness of the accounting group by continuing to augment existing resources with additional consultants or employees to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions. The Company plans to mitigate the segregation of duties issues by hiring additional personnel in the accounting department once it generates significantly more revenue, or raises significant additional working capital. The Company has recently engaged a consulting firm to help them with their accounting and SEC reporting.
Improve segregation procedures by strengthening cross approval of various functions including quarterly internal audit procedures where appropriate.
Changes in Internal Control Over Financial Reporting
Notwithstanding the change in control there was no change in the Company's internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
| 12 |
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending, threatened or actual legal proceedings in which the Company or any subsidiary is a party.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
All shares of common stock issued by the Company have been issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering.
During the past three years, the Company has issued the following common shares:
| DATE | NAME | SHARES | CONSIDERATION | |||||||
| April 25, 2011 | Tiber Creek Corporation (1) | 10,000,000 | $ | 1,000 | ||||||
| (9,750,000 of which redeemed) | ||||||||||
| April 25, 2011 | MB Americus LLC (2) | 10,000,000 | $ | 1,000 | ||||||
| (9,750,000 of which redeemed) | ||||||||||
| February 2, 2012 | M. Duane Lewis | 1,500,000 | $ | 150 | ||||||
| February 2, 2012 | Tom Moore | 1,500,000 | $ | 150 | ||||||
| February 2, 2012 | Robert Ritch | 1,500,000 | $ | 150 | ||||||
| February 2, 2012 | P. K. Smartt | 1,500,000 | $ | 150 | ||||||
| March 12, 2012 | Various investors | 450,000 | $ | 4,500 | ||||||
| February 2, 2012 | P. K. Smartt | 5,000,000 | Sale of PKCCR, LLC | |||||||
(1) James M. Cassidy is the sole shareholder and director of Tiber Creek Corporation, a Delaware corporation, and Mr. Cassidy may be deemed to be the beneficial owner of the shares of stock owned by Tiber Creek Corporation.
(2) James McKillop is the sole principal of MB Americus LLC, a California limited liability corporation. Mr. McKillop is deemed to be the beneficial owner of the shares of stock owned by MB Americus LLC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
| 13 |
ITEM 5. OTHER INFORMATION
(a) Robert Ritch, a member of the Company's Board of Directors, resigned his position as a director of the Company. Mr. Ritch resigned for personal reasons and there was no disagreement with the Company. No replacement has been named for Mr. Ritch.
(b) Item 407(c)(3) of Regulation S-K:
During the quarter covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.
ITEM 6. EXHIBITS
| (a) | Exhibits |
| 31.1 | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Schema Document |
| 101.CAL | XBRL Calculation Linkbase Document |
| 101.DEF | XBRL Definition Linkbase Document |
| 101.LAB | XBRL Label Linkbase Document |
| 101.PRE | XBRL Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PIVOTAL GROUP, INC. | |
| By: /s/ Mr. P.K. Smartt | |
| Principal Executive Officer | |
| Dated: November 19, 2012 |
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