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EXCEL - IDEA: XBRL DOCUMENT - HPIL HoldingFinancial_Report.xls

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q/A

(Amendment No. 3)

 

(Mark One)

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2012

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File Number: 333-121787

 

HPIL HOLDING

 (Exact name of registrant as specified in its charter)

 

Nevada

 

20-0937461

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

7075 Gratiot Road, Suite One, Saginaw, MI 48609


 

(Address of principal executive offices)

 

(248) 750-1015


 

(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 Exchange Act 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 ¨ 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 x  No ¨ 

 

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer                    ¨ 

 

Accelerated Filer                    ¨ 

 

 

 

Non-accelerated Filer     ¨ 

 

Smaller Reporting Company

 

Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨    No  

 

As of November 19, 2012, there were 106,055,000 shares of common stock, par value $0.0001, issued and outstanding.

 


 

 

Explanatory Note

 

HPIL Holding is filing this Amendment No. 3 (the “Amendment”) to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed with the Securities and Exchange Commission (the “SEC”) on November 19, 2012, initially amended on Form 10-Q/A, filed with the SEC on December 10, 2012 (the “Original Filing”), and subsequently amended on Form 10-Q/A, filed with the SEC on May 10, 2013, for the purpose of restating our consolidated balance sheet as of September 30, 2012, and our consolidated statements of operations for the three and nine months ended September 30, 2012, and inception to date, to correct the value of Patents acquired, amortization expense recognized on these patents, the amount of common stock issued for these patents, and its effect on our net loss per share calculation (the “Second Amended Filing”).  The purposes of this Amendment are furnishing Exhibit 101 (Interactive Data Files) in accordance with Rule 405 of Regulation S-T and amending the following Items contained in the Second Amended Filing: Part 1, Item 1. Financial Statements.

 

Except as stated in this Explanatory Note, no other information contained in any Item of the Original Filing is being amended, updated or otherwise revised.  This Amendment speaks as of the filing date of the Original Filing and, except where expressly noted, does not reflect any events that may have occurred subsequent to such date.

 

 


 

 

HPIL HOLDING

FORM 10-Q/A

INDEX

 

 

 

 

 

  

Page

PART I – FINANCIAL INFORMATION

  

 

 

 

Item 1 Financial Statements

  

3

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations  

  

12

Item 3 Quantitative and Qualitative Disclosures About Market Risk

  

13

Item 4 Controls and Procedures

  

13

 

 

PART II – OTHER INFORMATION

  

 

 

 

Item 1 Legal Proceedings

  

14

Item 1A Risk Factors

  

14

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

  

14

Item 3 Defaults Upon Senior Securities

  

14

Item 4 Mine Safety Disclosures

  

14

Item 5 Other Information

  

14

Item 6 Exhibits

  

15

SIGNATURES

  

16

 

 

 

 

 


 

 

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

HPIL HOLDING AND SUBSIDIARIES

(formerly Trim Holding Group)

(A Development Stage Company)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

         

September 30,

 

December 31,

         

2012

(Restated)

 

2011

               

ASSETS

               

Current Assets:

     
 

Cash

$

56,643

$

-

 

Prepaid expense

 

25,472

 

-

Total Current Assets

 

82,115

 

-

               

Total Assets

$

82,115

$

-

               

LIABILITIES AND STOCKHOLDERS' DEFICIT

               

Current Liabilities:

       
 

Accounts payable

$

11,968

$

93,781

 

Advances from stockholder

 

-

 

450,844

Total Current Liabilities

 

11,968

 

544,625

               

Commitments and Contingencies

       
               

Stockholders' Equity

       
 

Preferred stock, series 1, class P-1 par value $8.75;

       
   

25,000,000 shares authorized; 22,000 issued and

       
   

outstanding on September 30, 2012 and December 31, 2011

$

192,500

$

192,500

 

Preferred stock, series 2, class P-2 par value $7.00;

       
   

75,000,000 shares authorized; Nil issued and

       
   

outstanding on September 30, 2012 and December 31, 2011,

 

-

 

-

 

Common stock par value $0.0001; 400,000,000 shares

       
   

authorized; 55,755,000 and 2,255,000 issued and outstanding on

       
   

September 30, 2012 and December 31, 2011, respectively

 

5,576

 

226

 

Additional paid-in capital

 

883,832

 

139,182

 

Deficit accumulated during the development stage

 

(1,011,761)

 

(876,533)

Total Stockholders' Equity

 

70,147

 

(544,625)

               

Total Liabilities and Stockholders' Deficit

$

82,115

$

-


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


HPIL HOLDING AND SUBSIDIARIES

(formerly Trim Holding Group)

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

                       

For the Period

       

For the Three

 

For the Three

 

For the Nine

 

For the Nine

 

(February 17,

       

Months Ended

 

Months Ended

 

Months Ended

 

Months Ended

 

2004) to

       

September 30,

 

September 30,

 

September 30,

 

September 30,

 

September 30,

       

2012

(Restated)

 

2011

 

2012

(Restated)

 

2011

 

2012

(Restated)

                       

Sales

$

-

$

-

$

-

$

-

$

42,021

Cost of Goods Sold

 

-

 

-

 

-

 

-

 

36,419

Gross Profit

 

-

 

-

 

-

 

-

 

5,602

                         

Operating Expenses:

                   
 

General and administrative

 

71,235

 

4,963

 

135,228

 

86,957

 

798,416

 

Patent Amortization Expense

 

-

 

-

 

-

 

-

 

-

Total Operating Expenses

 

71,235

 

4,963

 

135,228

 

86,957

 

798,416

                         

Loss from Continuing Operations

 

(71,235)

 

(4,963)

 

(135,228)

 

(86,957)

 

(792,814)

                         

Loss from Discontinued Operations

 

-

 

-

 

-

 

-

 

(218,947)

                         

Net Loss

$

(71,235)

$

(4,963)

$

(135,228)

$

(86,957)

$

(1,011,761)

                         

Loss per Weighted Number of Shares

                 

Outstanding - Basic and Diluted

$

(0.00)

$

(0.00)

$

(0.01)

$

(0.04)

$

(0.25)

                         

Weighted Average Number of Shares

                   

Outstanding - Basic and Diluted

 

55,363,696

 

2,255,000

 

20,671,058

 

2,255,000

 

4,102,085


 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


HPIL HOLDING AND SUBSIDIARIES

   

(formerly Trim Holding Group)

   

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   

(Unaudited)

   
                     

For the Period

 
             

For the Nine

 

For the Nine

 

From Inception

 
             

Months

 

Months

 

(February 17,

 
             

Ended

 

Ended

 

2004) to

 
             

September 30,

 

September 30,

 

September 30,

 
             

2012

(Restated)

 

2011

 

2012

(Restated)

 
                         

OPERATING ACTIVITIES:

             
 

Net loss

 

$

(135,228)

$

(86,957)

$

(1,011,761)

   
 

Adjustment for non-cash item:

               
   

Common stock issued for services

 

-

 

-

 

10,000

   
   

Amortization

 

-

 

-

 

-

   
 

Adjustments for changes in working capital:

               
   

Deferred stock offering amortization

         

32,842

   
   

Prepaid expenses

 

(25,472)

 

(7,167)

 

(25,472)

   
   

Accounts payable and accrued expenses

 

(81,813)

 

4,240

 

11,968

   

CASH USED IN OPERATING ACTIVITIES

 

(242,513)

 

(89,884)

 

(982,423)

   
                         

FINANCING ACTIVITIES:

               
 

Proceeds from issuance of common stock

 

250,000

 

-

 

269,450

   
 

Advances from stockholder

 

49,156

 

72,662

 

500,000

   
 

Deferred stock offering expenses

 

-

 

-

 

(32,842)

   
 

Advances from officers forgiven

 

-

 

-

 

109,958

   
 

Stock issued in settlement of debt

 

-

 

-

 

192,500

   
 

Proceeds from notes payable

 

-

 

11,435

 

-

   

CASH PROVIDED BY FINANCING ACTIVITIES

 

299,156

 

84,097

 

1,039,066

   
                         

NET INCREASE (DECREASE) IN CASH

 

56,643

 

(5,787)

 

56,643

   
                         

CASH - BEGINNING OF PERIOD

 

-

 

5,736

 

-

   
                         

CASH - END OF PERIOD

$

56,643

$

(51)

$

56,643

   
                                         
                                                         

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


HPIL HOLDING AND SUBSIDIARIES

(formerly Trim Holding Group)

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

 

Nature of Operations

 

HPIL HOLDING and Subsidiaries (or the “Company”) (formerly Trim Holding Group) was incorporated on February 17, 2004 in the state of Delaware under the name TNT Designs, Inc. A substantial part of the Company’s activities were involved in developing a business plan to market and distribute fashion products.

 

On June 16, 2009, the majority interest in the Company was purchased in a private agreement by Louis Bertoli, an individual, with the objective to acquire and/or merge with other businesses.

 

On October 7, 2009, the Company merged with and into Trim Nevada, Inc., which became the surviving corporation. The merger did not result in any change in the Company’s management, assets, liabilities, net worth or location of principal executive offices. However, this merger changed the legal domicile of the Company from Delaware to Nevada where Trim Nevada, Inc. was incorporated. Each outstanding share of TNT Designs, Inc. was automatically converted into one share of the common stock of Trim Nevada, Inc. Pursuant to the merger, the Company changed its name from TNT Designs, Inc. to Trim Holding Group and announced the change in the Company’s business focus to health care and environmental quality sectors. Afterwards the Company determined it no longer needed its inactive subsidiaries, and as such, all three subsidiaries were dissolved.

 

On May 21, 2012, the Company changed its name to HPIL HOLDING.

 

As of September 30, 2012, the Company has yet commenced operations. Expenses incurred from February 17, 2004 (date of inception) through June 30, 2012 relate to the Company’s formation and general administrative activities.

HPIL HOLDING’s intends that its main activity will be in the business of investing in differing business sectors.

 

To begin the implementation of the business plan on September 10, 2012, Company organized six new subsidiary companies. Each of these subsidiary companies is wholly (100%) owned by the Company. The names of the new subsidiary companies were HPIL HEALTHCARE Inc., HPIL ENERGYTECH Inc., HPIL WORLDFOOD Inc., HPIL REAL ESTATE Inc., HPIL GLOBALCOM Inc. and HPIL ART&CULTURE Inc. These companies have been organized to implement the various growth strategies of the Company. HPIL HEALTHCARE Inc. has been organized to facilitate investments in the health care sector. HPIL ENERGYTECH Inc. has been organized to facilitate investments in the energy sector. HPIL WORLDFOOD Inc. has been organized to facilitate investments in the food sector. HPIL REAL ESTATE Inc. has been organized to facilitate investments in the real estate sector. HPIL GLOBALCOM Inc. has been organized to facilitate investments in the communication sector and HPIL ART&CULTURE Inc. has been organized to facilitate investments in the art and culture sector. We intend to make such investments in the United States and worldwide if adequate candidates can be identified.


 

 

Basis of Presentation

 

The accompanying Unaudited Condensed Consolidated Financial Statements (“Financial Statements”) have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered for fair presentation have been included. These Financial Statements should be read in conjunction with the Company’s audited financial statements and accompanying notes for the year end December 31, 2011 included in our Annual Report on Form 10-K/A filed with SEC on April 24, 2012. Additionally, our operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that can be expected for the 12 months ending December 31, 2012 or for any other period. As of September 30, 2012 none of the above subsidiaries have begun operations.

 

6


NOTE 2 – GOING CONCERN  

 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. In the course of its start-up activities, the Company has sustained operating losses and expects to incur an operating loss in 2012 and for the foreseeable future. The Company has generated a limited amount of revenue and has not achieved profitable operations or positive cash flows from operations. The Company has positive working capital of $70,147 at September 30, 2012. The Company’s majority stockholder has provided funding in recent periods and has indicated his intent to provide financial support to the Company at least through September 30, 2013.

 

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

 

Development Stage Company

 

The Company is a development stage company. The Company is still devoting substantially all of its efforts to developing its business and its planned principal operations. Operations have not yet commenced, but are planned to commence in the next twelve months.

 

Use of Estimates

 

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from these estimates.

 

Income Taxes

 

The Company accounts for income taxes whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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 necessary to reduce deferred tax assets to the amount expected to be realized. The Company adopted guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements and applies to all federal or state income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement.  


 

7


As of September 30, 2012 and December 31, 2011 there were no amounts that had been accrued in respect to uncertain tax positions.

 

The Company’s tax returns are not currently under examination by the Internal Revenue Service (“IRS”) or state authorities. However, fiscal years 2008 and later remain subject to examination by the IRS and respective states.

 

Net Loss per Share

 

Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period and the number of shares of common stock issuable upon assumed exercise of preferred stock and warrants.

For the Quarters ended September 30, 2012 and 2011 and for the period from inception (February 17, 2004) to September 30, 2012, there were no outstanding instruments having a dilutive effect, due to the recurring losses

 

Supplemental Cash Flow Information Regarding Non-Cash Transactions

 

During the three and nine months ended September 30, 2012 and 2011, the Company had the following non-cash transaction:

     

Three Months Ended

 

Nine Months Ended

     

Sept 30

 

Sept 30

     

2012

2011

 

2012

 

2011

2,500,000 shares of common stock issued for repayment of advances from stockholder

$0

$0

 

$500,000

 

$0

 

Recently Issued Accounting Pronouncements

 

Management has reviewed recently issued accounting pronouncements and determined that none of the recent pronouncements significantly affect the Company.

 

NOTE 4 – INTANGIBLE ASSETS - PATENTS

 

On June 28, 2012, we entered into a Stock Purchase Agreement with GIOTOS Limited and, on April 12, 2013, we entered into a related Amendment to the Assignment of Patents with GIOTOS Limited, through which we acquired  a portfolio of healthcare sector patent rights related to a “Massage Vibrator for the Relief of Aches and Pain” and other business processes and know-how related (collectively, the “IFLOR Business”), from GIOTOS Limited in exchange for 100,000,000 shares of common stock, initially valued at $25,000,000, based on the fair value tentatively assigned to the IFLOR Business based on the best information available to us at the time of the transaction.  In accordance with the terms of the Stock Purchase Agreement and the Amendment to the Assignment of Patents, the initial valuations were subject to adjustment by independent third-party valuations. We subsequently obtained the expected third-party valuations of the IFLOR Business and of the shares (the “Valuations”).  Based on the Valuations, the Company exercised its right to adjust the amount of shares pursuant to the terms of the Stock Purchase Agreement.  On April 12, 2013, we executed a Closing Agreement with GIOTOS Limited to reduce the purchase price to $12,500,000 and to effect the share adjustment and return 50,000,000 shares of common stock to the Company’s treasury. As both entities are majority owned and controlled by Mr. Bertoli, assets acquired in transactions between entities under common control should be recorded at the current carrying value of the seller. Increasing the carrying value of the assets acquired to estimated fair value is not permitted under these circumstances. Based on the foregoing, the Company has not recorded any carrying value for the acquired patents rights related to the IFLOR device. Accordingly, the difference between the transaction price and the value of the assets recorded has been recorded in equity as a capital transaction whereby the 50,000,000 shares issued as consideration were recorded to common stock at par value with the offset recorded to additional paid-in capital.


 

 

NOTE 5 – NOTE PAYABLE

 

During the year ended December 31, 2010 the Company entered into an agreement with a financing company to finance the cost of D&O executive and organization liability insurance premium. The insurance policy was effective until July 30, 2011 and the unexpended portion of the premium was $8,578 as of December 31, 2010 which is included in prepaid expenses as of that date. The balance payable under the financing arrangement was $13,000 at December 31, 2011 and was paid in full during the period ended June 30, 2012.

8


NOTE 6 – CAPITAL STOCK  

 

On October 7, 2009, the Company approved increasing the number of authorized shares of common stock from 30,000,000 to 400,000,000 with no change in par value of $0.0001 per share.

 

On October 7, 2009, the Company approved the designation of two classes of preferred stock totaling 100,000,000 shares. The first class is called Series 1, Class P-1 consisting of 25,000,000 authorized shares with a par value of $8.75 per share; each share will have voting rights equal to 100 shares of common stock; each share will be convertible into 1.25 shares of common stock at the discretion of the shareholder. The second class is called Series 2, Class P-2 consisting of 75,000,000 authorized shares with a par value of $7.00 per share; each share will have the voting rights equal to 1 share of common stock; each share will be convertible into one share of common stock at shareholder's discretion.

 

On December 4, 2009, we issued 22,000 shares of Series 1, Class P-1 preferred stock to Mr. Louis Bertoli in consideration for satisfaction of an outstanding debt incurred from a cash loan of $192,500 provided to the Company by Mr. Bertoli.

 

On June 27, 2012, we issued 2,500,000 shares of common stock to Mr. Louis Bertoli in consideration for satisfaction of $500,000 of advances from stockholder.

 

On June 28, 2012, pursuant to the terms of a Patent Purchase Agreement made by and between the Company and GIOTOS, we issued 100,000,000 shares of common stock to GIOTOS, a company owned and controlled by Mr. Louis Bertoli. The number of shares issued and the purchase price are subject to a fairness opinion and a valuation of the patents and may be adjusted based upon the fairness opinion and the valuation of the patents. This entry was adjusted as reflected in Note 10 below.

 

On August 6, 2012, the Company issued 1,000,000 shares of its common stock at a price of $0.25 per share for a total purchase price of $250,000, pursuant to the exemption from registration provided by Regulation 4(2) of the Securities Act. The sale was made pursuant to a Stock Purchase Agreement made by and between the Company and an investor, dated July 30, 2012.

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

The Company had advances payable to its current majority shareholder totaling $450,844 as of December 31, 2011, which were repaid and converted into common stock during the nine months ended September 30, 2012. All transactions with Mr. Louis Bertoli or his affiliated companies are considered to be related party transactions. These advances were made to be used for working capital.

 

On July 20, 2009, the Company entered into a two-year consulting agreement with Amersey Investments LLC, a company controlled by a director (“Amersey”). Amersey will provide office space, office identity and assist the Company with corporate, financial, administrative and management records. For the nine months ended September 30, 2012 and 2011, the Company incurred expenses of $30,000 and $35,000, respectively, in relation to these services.

 


 

The Company uses Bay City Transfer Agency & Registrar Inc. (“BCTAR”) to do its stock transfers. BCTAR is a company controlled by Amersey. For the nine months ended September 30, 2012 and 2011, the Company incurred expenses of $5,345. and $3,375, respectively, in relation to these services.

 

The Company uses the services of Freeland Venture Resources LLC, a company controlled by Amersey. For the nine months ended September 30, 2012 and 2011, the Company incurred expenses of $5,878 and $850, respectively, in relation to these services.

 

The Company has prepaid Amersey Investments LLC $10,000, Freeland Venture Resources $6,188, and Cheerful Services $1,750. These charges will be reflected in 4th quarter, 2012.

 

9


NOTE 8 – DISCONTINUED OPERATIONS

 

The gains and losses from the disposition of certain assets, and associated liabilities, operating results, and cash flows are reflected as discontinued operations in the unaudited condensed consolidated financial statements for all periods presented.

Summarized financial information for discontinued operations for the nine-months ended September 30, 2012 and 2011 and from inception to date are as follows:

 

   

2012

 

2011

 

Inception to date

Sales

$

-

$

-

$

-

Cost of Sales

 

-

 

-

 

-

Gross Profit

 

-

 

-

 

-

Operating Expenses

           

General & Administrative

 

-

 

-

 

218,947

Total Operating Expense

 

-

 

-

 

218,947

Net Loss From Discontinued Operations

$

-

$

-

$

(218,947)

 

NOTE 9 – SUBSEQUENT EVENTS

 

On October 1, 2012, the Company canceled the award of 22,000 shares of preferred stock made to Mr. Bertoli on December 4, 2009. In exchange, the Company issued an unsecured note, non-interest bearing and due on demand, to Mr. Bertoli in the amount of $192,500.

 

On October 8, 2012, the Company issued 300,000 shares of its common stock at a price of $0.85 per share for a total purchase price of $255,000, pursuant to the exemption from registration provided by Regulation 4(2) of the Securities Act. The sale was made pursuant to the stock purchase agreement made by and between the Company and an investor, dated October 1, 2012.

 

On October 26, 2012, with we entered in a certain quota purchase agreement in cooperation with our wholly owned subsidiary HPIL Real Estate Inc. for the acquisition of 32% of Haesler Real Estate Management, a real estate management Swiss company operating in Europe, in exchange for 350,000 shares of common stock of the Company.

 

 

10


 

NOTE 10 – RESTATEMENT

 


 

On June 28, 2012, we executed a certain Stock Purchase Agreement with GIOTOS Limited and, on April 10, 2013, we executed a certain Amendment to the Assignment of Patents with GIOTOS Limited, through which we acquired the IFLOR Business, which consists of a portfolio of healthcare sector patent rights related to a “Massage Vibrator for the Relief of Aches and Pain” and other business processes and know-how, from GIOTOS Limited in exchange for 100,000,000 shares of common stock, valued at $25,000,000, based on the fair value tentatively assigned to the IFLOR Business based on the best information available to us at the time of the transaction. In accordance with the terms of the Stock Purchase Agreement and the Amendment to the Assignment of Patents, the initial valuations were subject to adjustment by independent third-party valuations. We subsequently obtained the expected third-party valuations of the IFLOR Business and of the shares (the “Valuations”). Based on the Valuations, the Company exercised its right to adjust the amount of shares pursuant to the terms of the Stock Purchase Agreement. On April 12, 2013, we executed a Closing Agreement with GIOTOS Limited to reduce the purchase price to $12,500,000 and to effect the share adjustment and return 50,000,000 shares of common stock to the Company’s treasury. GIOTOS Limited is a company owned and controlled by Mr. Louis Bertoli, our President, CEO, and Chairman of the Board of Directors.

In accordance with generally accepted accounting principles in the United States of America (“GAAP”), assets acquired in transactions between entities under common control, as is the case with the Company and GIOTOS Limited, should be recorded at the current carrying value of the seller. Increasing the carrying value of the assets acquired to estimated fair value is not permitted under these circumstances. Based on the foregoing, at December 31, 2012, the Company has not recorded any carrying value for the acquired patents rights related to the IFLOR device as the carrying value by the seller was not material. Accordingly, the difference between the initial preliminary transaction price of $25,000,000 and the final value of the assets recorded of zero has been recorded in equity as a capital transaction whereby the 50,000,000 shares issued as consideration were recorded to common stock at par value with the offset recorded to additional paid-in capital.

The Company initially filed its quarterly reports on Form 10-Q for the quarters ended June 30, 2012, and September 30, 2012, as though the transaction with GIOTOS Limited, and between GIOTOS Limited and the patent holders, was an arm’s length transaction and not a transaction between entities under common control. As a result, the Company has amended its quarterly report on Form 10-Q for the quarters ended June 30, 2012, and September 30, 2012, to adjust previously reported financial statements. These adjustments, including to shares outstanding at June 30, 2012, have been reflected retrospectively in this amended report on Form 10-Q/A.

 

We have restated our balance sheet as of September 30, 2012 and our statements of operations for the three and nine months ended September 30, 2012 and inception to date, to restate the value of Patents acquired, amortization expense recognized on these patents, the amount of common stock issued for these patents, and its effect on our net loss per share calculation. The table below sets forth the effect of the restatement for the three and nine months ended September 30, 2012:

 

 

 

 

As of September 30,

 

 

 

 

2012

 

 

 

2012

 

 

 

 

 

 

 

 

Previously Reported

 

Adjustments

 

As Restated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patents

 

$

24,218,750

 

 

$

(24,218,750)

 

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

24,300,865

 

 

$

(24,218,750) 

 

 

$

82,115

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

$

10,576

 

 

$

(5000)

 

 

$

5,576

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Stockholders’ equity

 

24,288,897

 

 

(24,218,750) 

 

 

70,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2012

 

 

 

2012

 

2012

 

 

 

2012

 

 

Previously Reported

 

Adjustments

 

As Restated

 

Previously Reported

 

Adjustments

 

As Restated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share – Basic and Diluted

 

$

(0.01)

 

 

$

0.01 

 

 

$

(0.00)

 

 

$

(0.02)

 

 

$

 

 

 

$

(0.01)

 

Weighted average shares outstanding – Basic and Diluted

 

 

105,363,696

 

 

 

(50,000,000) 

 

 

 

55,363,696

 

 

 

38,006,825

 

 

 

 

 

 

 

20.671,058

 


 

  

 

 

Inception to date

 

 

 

 

 

 

 

 

 

 

 

Previously Reported

 

Adjustments

 

As Restated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share – Basic and Diluted

 

$

(0.32)

 

 

$

0.07

 

 

$

(0.25)

 

 

Weighted average shares outstanding – Basic and Diluted

 

 

5,623,546

 

 

 

1,521,461 

 

 

 

4,102,085,

 

 

11


 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Forward Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These forward-looking statements generally are identified by the words “believes”, “project”, “expects”, “anticipates”, “estimates”, “intends”, “strategy”, “plan”, “may”, “will”, “would”, “will be”, “will continue”, “will likely result”, and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.  Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles.  These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Overview

 

(a)

Business Background.

 

HPIL HOLDING and Subsidiaries ( or “we”, “us”, “our”, or the “Company”) is a development stage company originally incorporated on February 17, 2004 in the state of Delaware under the name TNT Designs, Inc. (“ TNT”). On October 7, 2009, we merged with and into Trim Nevada, Inc., a Nevada corporation, for the purpose of changing our domicile from Delaware to Nevada. As part of the merger, we changed our name to Trim Holding Group.

 

On May 22, 2012, we changed our name to HPIL HOLDING to more fully reflect our current business operations.

 

Most recently on July 18, 2012, we changed our business plan. Our current intention is to focus on making investments in companies, whether they are public or private enterprises in differing business sectors. The Company will not restrict the target companies to any specific business, industry or geographical location and thus seeks to acquire a variety of businesses. Further the Company will evaluate the acquisition of intellectual properties and technologies for investment, with a particular interest in the healthcare and environmental quality sectors.


 

 

On September 10, 2012, Company organized six new subsidiary companies. Each of these subsidiary companies is wholly (100%) owned by the Company. The names of the new subsidiary companies were HPIL HEALTHCARE Inc., HPIL ENERGYTECH Inc., HPIL WORLDFOOD Inc., HPIL REAL ESTATE Inc., HPIL GLOBALCOM Inc. and HPIL ART&CULTURE Inc. These companies have been organized in order to satisfy the various growth strategies of the Company.

 

HPIL HEALTHCARE Inc. has been organized to facilitate investments in the health care sector. HPIL ENERGYTECH Inc. has been organized to facilitate investments in the energy sector. HPIL WORLDFOOD Inc. has been organized to facilitate investments in the food sector. HPIL REAL ESTATE Inc.. has been organized to facilitate investments in the real estate sector. HPIL GLOBALCOM Inc. has been organized to facilitate investments in the communication sector and HPIL ART&CULTURE Inc. has been organized to facilitate investments in the art and culture sector.

 

Such investments may be made in the United States and worldwide.

 

(b)

Material Transactions.

 

On June 28, 2012, we entered into a Stock Purchase Agreement with GIOTOS Limited and, on April 10, 2013, we executed a certain Amendment to the Assignment of Patents with GIOTOS Limited, through which we acquired a portfolio of patent rights related to a “Massage Vibrator for the Relief of Aches and Pain” and other related business processes and know-how (collectively, the “IFLOR Business”) in exchange for 100,000,000 shares of common stock.  The 100,000,000 shares of common stock were valued at $25,000,000, based on the fair value tentatively assigned to the IFLOR Business based on the best information available to us at the time of the Stock Purchase Agreement.  In accordance with the terms of the Stock Purchase Agreement and the Amendment to the Assignment of Patents, the initial valuations were subject to adjustment by independent third-party valuations.  We subsequently obtained the expected third-party valuations of the IFLOR Business and of the shares (the “Valuations”).  Based on the Valuations, the Company exercised its right to adjust the amount of shares pursuant to the terms of the Stock Purchase Agreement.  On April 12, 2013, we executed a Closing Agreement with GIOTOS Limited to reduce the purchase price to $12,500,000 and to effect the share adjustment and return 50,000,000 shares of common stock to the Company’s treasury.  GIOTOS Limited is a company owned and controlled by Mr. Louis Bertoli, our majority stockholder, President, CEO, and Chairman of the Board of Directors.

 

In accordance with generally accepted accounting principles in the United States of America (“GAAP”), assets acquired in transactions between entities under common control, as is the case with the Company and GIOTOS Limited, should be recorded at the current carrying value of the seller.  Increasing the carrying value of the assets acquired to estimated fair value is not permitted under these circumstances. Based on the foregoing, at December 31, 2012, the Company has not recorded any carrying value for the acquired patents rights related to the IFLOR device as the carrying value by the seller was not material.  Accordingly, the difference between the initial preliminary transaction price of $25,000,000 and the final value of the assets recorded of zero has been recorded in equity as a capital transaction whereby the 50,000,000 shares issued as consideration were recorded to common stock at par value with the offset recorded to additional paid-in capital.

 

The Company initially filed its quarterly reports on Form 10-Q for the quarter ended September 30, 2012, as though the transaction with GIOTOS Limited, and between GIOTOS Limited and the patent holders, was an arm’s length transaction and not a transaction between entities under common control.  As a result, the Company is filing this amended quarterly report on Form 10-Q/A for the quarter ended September 30, 2012, to adjust previously reported financial statements.  These adjustments, including to shares outstanding at December 31, 2012, have been reflected retrospectively in our annual report for December 31, 2012, on Form 10-K.  A copy of the Stock Purchase Agreement was filed with our Form 10-Q for the quarter ended June 30, 2012, which was originally filed on August 20, 2012 and subsequently amended by filings made on September 13, 2012, and on May 10, 2013.  The Closing Agreement and Amendment to the Assignment of Patents were included as exhibits with our 10-K for December 31, 2012, which was filed April 16, 2013.


 

 

(c)

Business of Issuer.

 

As a result of our change in business activity we plan to now evaluate investments in companies, whether they be public or private enterprises in various business sectors. We will not restrict our target companies to a specific business, industry or geographic location and thus we seek to acquire various types of businesses. The Company will also continue evaluate the acquisition of intellectual properties and technologies, with particular interest in the healthcare and environmental quality sectors.

 

Liquidity and Capital Resources

 

We are a development stage company focused on developing our business by making investments in companies, whether they be public or private enterprises in a differing business sectors. Also we will continue to evaluate at the acquisition of intellectual properties and technologies, with a particular interest in the healthcare and environmental quality sectors. Our principal business objective for the next twelve (12) months is to continue to develop our business plan in these sectors. As we have not commenced material operations, we have not earned any revenues.

 

As of September 30, 2012, we had cash on hand of $56,643 and current liabilities of $21,908. As of November 19, 2012, we had cash on hand of $106,960 and current liabilities of $85,000, totally owed to the Company’s majority stockholder.

 

The Company’s majority stockholder has provided funding in recent periods and has indicated his continued intent and ability to provide financial support to the Company at least through September 30, 2013

 

Results of Operations

 

As a development stage company, we have not started operations; therefore, we do not have results or operations to report at this time. To date our focus has been on the development of our business plan. All expenses to date are related to the development of our business plan and other expenses related to the daily operations of a public company.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or 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 and would be considered material to investors.

 

Inflation

 

We do not believe that inflation has had in the past or will have in the future any significant negative impact on our operations.

12


ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As we are a smaller reporting company, we are not required to provide the information required by this item.

 

ITEM 4. Controls and Procedures.

 

(a)

Evaluation of disclosure controls and procedures.  

 

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures and concluded that our disclosure controls and procedures are ineffective as of the date of filing this Form 10-Q due to limited accounting and reporting personnel and a lack of segregation of duties due to limited financial resources and the size of our company. We will need to adopt additional disclosure controls and procedures prior to commencement of material operations. Consistent therewith, on an on-going basis we will evaluate the adequacy of our controls and procedures.


 

 

(b)

Changes in internal control over financial reporting.  

 

There were no changes in our internal control over financial reporting during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

13


PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.

 

The Company does not believe it is currently involved in any claim or action the ultimate disposition of which would have a material adverse effect on the company’s financial condition.

 

ITEM 1A. Risk Factors.

 

As we are a smaller reporting Company, we are not required to provide the information required by this item.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

(a) Unregistered Sales of Equity Securities.  

 

On June 27, 2012, Mr. Louis Bertoli, converted $500,000 of a loan to the Company into 2,500,000 shares of common stock.

 

On June 28, 2012, we issued 100,000,000 shares of common stock to GIOTOS Limited, a company controlled by Mr. Louis Bertoli, in exchange for a portfolio of patent rights. This issuance is subject to adjustment as specified in the Stock Purchase Agreement filed as an exhibit to this Form 10-Q.

 

On August 6, 2012, the Company issued 1,000,000 shares of its common stock at a price of $0.25 per share for a total purchase price of $250,000, pursuant to the exemption from registration provided by Regulation 4(2) of the Securities Act. The sale was made pursuant to the stock purchase agreement made by and between the Company and an investor, dated July 30, 2012.

 

(b) Use of Proceeds.  

 

Not Applicable.

 

(c) Affiliated Purchases of Common Stock.  

 

On June 27, 2012, Mr. Louis Bertoli converted $500,000 of a loan to the Company into 2,500,000 shares of common stock.

 

On June 28, 2012, we issued 100,000,000 shares of common stock to GIOTOS Limited, a company controlled by Mr. Louis Bertoli, in exchange for a portfolio of patent rights. This issuance was subject to adjustment and, as discussed in Item 2 of Part 1, the issuance was adjusted in April of 2013 by the return of 50,000,000 shares to the Company.

 

ITEM 3. Defaults Upon Senior Securities.

 


 

None.

 

ITEM 4. Mine Safety Disclosures.

 

Not applicable.

 

ITEM 5. Other Information.

 

None.

14


Item 6. Exhibits.

                                            

INDEX TO EXHIBITS

 

 

Exhibit

 

Description

 

 

 

*3.1

 

Articles of Incorporation

 

 

 

*3.2

 

By-laws

 

 

 

*10.1

 

Patents Assignment Agreement, by and between Trim Holding Group and Allkey, Ltd., entered into on December 31, 2009

 

 

 

*10.2

 

Purchase Agreement, by and between Trim Holding Group and Allkey, Ltd., entered into on August 6, 2010

 

 

 

*10.3

 

Registration Rights Agreement, by and between Trim Holding Group and Allkey, Ltd., entered into on August 6, 2010

 

 

 

*10.4

 

Rescission Agreement, by and between Trim Holding Group and Allkey, Ltd., entered into on December 7, 2010

 

 

 

*10.5

 

Redemption and Assignment Agreement, by and between Trim Holding Group and Allkey, Ltd., entered into on December 9, 2010

 

 

 

*10.6

 

Purchase Agreement made by and between HPIL HOLDING and GIOTOS Limited dated June 28, 2012

 

 

 

*10.7

 

Amendment to the Assignment of Patents, by and between HPIL Holding and GIOTOS Limited, entered into on April 10, 2013

 

 

 

*10.8

 

Closing Agreement, by and between HPIL Holding and GIOTOS Limited, entered into on April 12, 2013

 

 

 

*10.9

 

Quota Purchase Agreement made by and between an investor and HPIL Holding

 

 

 

31.1

 

Certification of our Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

 

 

 

31.2

 

Certification of our Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

 

 

 

32.1

 

Certification of our Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

 

 

 

32.2

 

Certification of our Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

 

 

 

**101.INS

 

XBRL Instance Document

 

 

 

**101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

**101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

**101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

**101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

**101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

         

 

 

 

* Included in previously filed reporting documents.

 

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

15


 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

HPIL Holding

 

 

 

Dated: June 19, 2013

By:

/s/  Louis Bertoli

 

 

Louis Bertoli

 

 

Chief Executive Officer (Principal Executive Officer),

President and Chairman of the Board of Directors

 

 

 

 

Dated: June 19, 2013

By:

 

/s/ Nitin Amersey

Nitin Amersey

Director, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), Corporate Secretary and Treasurer

16