Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended June 30, 2013
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Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from _______ to _______
000-54732
(Commission file number)
PRIVILEGED WORLD TRAVEL CLUB, INC.
(Exact name of registrant as specified in its charter)
Delaware
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45-5312769
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1 Blackfield Drive
Tiburon, California
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94920
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(Address of principal executive offices)
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(Zip Code)
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(415) 888-2478
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(Registrant’s telephone number, including area code)
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N/A
(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.
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 x 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting companyx
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
On August 8, 2013, 26,036,525 shares of the registrant's common stock were outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION | Page | |
Item 1 | Financial Statements | 3 |
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 15 |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 20 |
Item 4 | Controls and Procedures | 21 |
PART II - OTHER INFORMATION | 21 | |
Item 1 | Legal Proceedings | 21 |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
Item 6 | Exhibits | 23 |
SIGNATURES | 24 |
2
PRIVILEGED WORLD TRAVEL CLUB, INC.
(formerly known as APEX 4 Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MAY 18, 2012 (DATE OF INCEPTION) TO JUNE 30, 2013
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
June 30,
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December 31,
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|||||||
2013
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2012
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(unaudited)
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||||||||
ASSETS
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||||||||
CURRENT ASSETS:
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||||||||
Cash
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$ | 509,249 | $ | 100 | ||||
Prepaid consulting
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572,917 | - | ||||||
Total current assets
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1,082,166 | 100 | ||||||
INTANGIBLE ASSET
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26,095 | 29,165 | ||||||
TOTAL ASSETS
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$ | 1,108,261 | $ | 29,265 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
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||||||||
CURRENT LIABILITIES:
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||||||||
Accounts payable
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$ | 213,931 | $ | 124,268 | ||||
Due to related party
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60,249 | 70,098 | ||||||
TOTAL CURRENT LIABILITIES
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$ | 274,180 | $ | 194,366 | ||||
COMMITMENTS AND CONTINGENCIES
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||||||||
STOCKHOLDERS' DEFICIT:
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||||||||
Preferred stock, $0.0001 par value, 5,000,000 authorized shares, none shares issued and outstanding
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||||||||
Common stock, $0.0001 par value, 100,000,000 authorized shares, 21,536,525 and 18,451,125 shares issued and outstanding
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2,154 | 1,845 | ||||||
Additional paid-in capital
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1,238,468 | 48,777 | ||||||
Deficit accumulated during development stage
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$ | (406,541 | ) | $ | (215,723 | ) | ||
Total stockholders' deficit
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834,081 | (165,101 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$ | 1,108,261 | $ | 29,265 |
The accompanying notes are an integral part of these financial statements.
3
PRIVILEGED WORLD TRAVEL CLUB, INC.
(formerly known as APEX 4 Inc.)
(A Development Stage Company)
(unaudited)
Cumulative
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||||||||||||||||
Three
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From May 18, 2012
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Six
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From May 18, 2012
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|||||||||||||
Months
Ended
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(Date of
Inception)
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Months
Ended
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(Date of
Inception)
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|||||||||||||
June 30,
2013
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To June 30,
2012
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June 30,
2013
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To June 30,
2013
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Revenue
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$ | - | $ | - | $ | - | $ | - | ||||||||
Operating expenses
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||||||||||||||||
General and administrative
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133,822 | - | 190,818 | 405,541 | ||||||||||||
Organization and related
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- | 2,000 | - | 2,000 | ||||||||||||
Total Operating expenses
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133,822 | 2,000 | 190,818 | 407,541 | ||||||||||||
Loss from operations
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(133,822 | ) | (2,000 | ) | (190,818 | ) | (407,541 | ) | ||||||||
Other income
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- | - | - | 1,000 | ||||||||||||
Net Loss
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$ | (133,822 | ) | $ | (2,000 | ) | $ | (190,818 | ) | $ | (406,541 | ) | ||||
Basic and diluted loss per share
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$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||
Weighted average common shares outstanding
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$ | 19,322,644 | $ | 10,000,000 | $ | 18,936,253 | $ | 16,560,642 |
The accompanying notes are an integral part of these financial statements.
4
PRIVILEGED WORLD TRAVEL CLUB, INC.
STATEMENTS OF STOCKHOLDER’S EQUITY
(formerly known as APEX 4 Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MAY 18, 2012 (DATE OF INCEPTION) TO JUNE 30, 2013
Deficit
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Accumulated
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Additional
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During
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Total
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Common Stock
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Paid-in
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Development
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Stockholders'
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Shares
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Amount
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Captial
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Stage
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Deficit
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Balance, May 18, 2012 (Date of Inception)
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- | $ | - | $ | - | $ | - | $ | - | |||||||||||
Shares issued for services in May 2012
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10,000,000 | 1,000 | - | 1,000 | ||||||||||||||||
Cancelation of shares
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(1,875,000 | ) | (188 | ) | 188 | - | ||||||||||||||
Shares issued for services in July 2012
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4,730,625 | 473 | 18,449 | 18,922 | ||||||||||||||||
Shares issued for exchange of debt of related party in September 2012
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5,595,500 | 560 | 5,594,940 | 5,595,500 | ||||||||||||||||
Loss on extinguishment transaction with Trition Distribution Systems, Inc.
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(5,564,800 | ) | (5,564,800 | ) | ||||||||||||||||
Net loss
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- | - | - | (215,723 | ) | (215,723 | ) | |||||||||||||
Balance, December 31, 2012
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18,451,125 | 1,845 | 48,777 | (215,723 | ) | (165,101 | ) | |||||||||||||
Shares issued for cash in March 2013
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500,000 | 50 | 499,950 | - | 500,000 | |||||||||||||||
Shares issued for cash in June 2013
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1,960,400 | 196 | 64,804 | 65,000 | ||||||||||||||||
Shares issued for consulting services in June 2013
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625,000 | 63 | 624,937 | 625,000 | ||||||||||||||||
Net loss
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- | - | - | (190,818 | ) | (190,818 | ) | |||||||||||||
Balance, June 30, 2013 (unaudited)
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21,536,525 | $ | 2,154 | $ | 1,238,468 | $ | (406,541 | ) | $ | 834,081 |
The accompanying notes are an integral part of these financial statements.
5
PRIVILEGED WORLD TRAVEL CLUB, INC.
(formerly known as APEX 4 Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(unaudited)
Cumulative
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Six
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From May 18,
2012
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From May 18,
2012
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||||||||||
Months
Ended
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(Date of
Inception)
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(Date of
Inception)
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June 30,
2013
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To June 30,
2012
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To June 30,
2013
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Cash flows from operating activities:
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Net loss
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$ | (190,818 | ) | $ | (2,000 | ) | $ | (406,541 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities:
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Shares issued for services
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52,083 | - | 72,005 | |||||||||
Amortization
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3,070 | - | 4,605 | |||||||||
Change in working capital components
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- | |||||||||||
Due to related party
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(9,849 | ) | - | 60,249 | ||||||||
Accounts payable
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89,663 | 1,000 | 213,931 | |||||||||
Net cash used in operating activities
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(55,851 | ) | (1,000 | ) | (55,751 | ) | ||||||
Cash flows from investing activities:
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Net cash provided by investing activities
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- | - | - | |||||||||
Cash flows from financing activities:
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Advances from officer, net
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- | 1,000 | - | |||||||||
Proceeds from the sale of common stock
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565,000 | - | 565,000 | |||||||||
Net cash provided by financing activities
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565,000 | 1,000 | 565,000 | |||||||||
Net increase in cash and cash equivalents
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509,149 | - | 509,249 | |||||||||
Cash and cash equivalents at beginning of period
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100 | - | - | |||||||||
Cash and cash equivalents at end of period
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$ | 509,249 | $ | - | $ | 509,249 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Interest paid
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$ | - | $ | - | $ | - | ||||||
Income taxes paid
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$ | - | $ | - | $ | - | ||||||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
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Shares issued for exchange of debt of related party
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$ | - | $ | - | $ | 5,595,500 |
The accompanying notes are an integral part of these financial statements.
6
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
Note 1 - Organization and Description of Business
Privileged World Travel Club, Inc., formerly APEX 4 Inc., (the “Company”) was incorporated under the laws of the State of Delaware on May 18, 2012.
On July 17, 2012, Richard Chiang, the sole director and stockholder of APEX 4, appointed Gregory Lykiardopoulos as a director of APEX 4. Subsequently, on July18, 2012, Mr. Chiang and Mr. Lykiardopoulos entered into a Stock Purchase Agreement whereby Mr. Lykiardopoulos purchased from Mr. Chiang 10,000,000 shares of common stock of APEX 4 for a purchase price of $40,000, which constituted 100% of the issued and outstanding shares of APEX 4 common stock. Mr. Chiang then resigned from all positions with APEX 4.
Mr. Lykiardopoulos, as the sole director and stockholder of APEX 4, then appointed himself as President, Chief Executive Officer, and Chairman of the Board of APEX 4, and adopted an amendment to the Certificate of Incorporation, changing the name of the Company to Privileged World Travel Club, Inc., on July 19, 2012.
The unaudited consolidated financial statements were prepared by Privileged World Travel Club, Inc., pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations. The results for the period ended June 30, 2013, are not necessarily indicative of the results to be expected for the year ending December 31, 2013.
Basis of Presentation - Development Stage Company
As of the date of this Report, the Company had not earned any revenue from operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Company” as set forth in Financial Accounting Standards Board Statement (“FASB”) ASC 915. Among the disclosures required by ASC 915 are that the Company’s financial statements be identified as those of a development stage company, and that the statements of operations, stockholders’ equity and cash flows disclose activity since the date of the Company’s inception.
Accounting Method
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a fiscal year ending on December 31.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.
7
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
Income Taxes
Income taxes are provided in accordance with Accounting Standards Codification (“ASC”) No. 740 (ASC 740), Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. There were no current or deferred income tax expenses or benefits due to the Company not having any material operations for period ended June 30, 2013.
Basic Earnings (Loss) per Share
In February 1997, the FASB issued ASC 260, “Earnings per Share,” which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. ASC 260 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of ASC 260.
Basic net loss per share amounts is computed by dividing the net income by the weighted average number of common shares outstanding. Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.
Intangible Assets
The Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible and other long-lived assets is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. As of June 30, 2013 and December 31, 2012, the Company performed the required impairment review and no impairment adjustment was required.
Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-04 which was issued to provide a consistent definition of fair value (“FV”) and ensure that the FV measurement and disclosure requirements are similar between accounting principles generally accepted in the United States of America (“US GAAP”) and IFRS. ASU 2011-04 changes certain FV measurement principles and enhances the disclosure requirements particularly for Level 3 FV measurements. This guidance was effective for us beginning May 18, 2012. The adoption of ASU 2011-04 did not have a significant impact on the Company’s financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income . ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (“ASC”) 220, Comprehensive Income , and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. In December 2011, the FASB issued ASU 2011-12 which defers the requirement in ASU 2011-05 that companies present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. ASU 2011-05 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05, as amended by ASU 2011-12, did not have a significant impact the Company’s financial statements.
8
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the FV of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard was effective for us for our annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of ASU 2011-08 did not have a significant impact on the Company’s financial statements.
In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment. The ASU provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the FV of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this pronouncement will not have a material impact on the Company’s financial statements.
In February 2013, the FASB issued ASU No. 2013-02, which amends the authoritative accounting guidance under ASC Topic 220 “Comprehensive Income”. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under generally accepted accounting principles in the United States of America (“GAAP”) to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, and entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The amendments in this update are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted. Adoption of this update is not expected to have a material effect on the Company’s consolidated results of operations or financial condition.
The Company’s financial statements are prepared using US GAAP applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established any source of revenue to cover its operating costs. The Company will engage in limited activities without incurring any liabilities that must be satisfied in cash until a source of funding is secured. The Company will offer noncash consideration and seek equity or debt investment as a means of financing its operations. If the Company is unable to obtain revenue producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.
9
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
Note 4 – Related Party Transactions
An officer and director of the Company performed services for the Company during the period the value of which was $1,000, in exchange for 10,000,000 shares of common stock. An officer and director of the Company loaned $1,000 to the Company during the quarter ended June 30, 2012. This loan was subsequently forgiven by the officer and director.
On August 21, 2012, the Company entered into a license agreement with Triton Distribution Services, Inc. (“Triton”). Pursuant to the agreement, the Company obtained a non-exclusive right and license to use Triton’s Reservation Expert, for the purpose of providing services to the Company’s Members. The Company agreed to pay to Triton a license fee $150,000, not later than fifteen (15) days following the execution of the Triton Agreement, subsequently extended to January 31, 2013, as a one-time license fee for the software. The Company also agreed to pay to Triton an annual royalty payment $2,000,000, payable annually on the anniversaries of the effective date of the agreement.
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On July 19, 2012, Mr. Lykiardopoulos was issued a total of 750,000 shares of Common Stock as partial compensation for certain services provided to the Company and Privileged, Inc., a Nevada corporation (“Privileged Nevada”).
In September 2012, the Company issued shares of common stock to certain of Triton’s creditors in exchange for their right to receive payment under obligations owed by Triton. The aggregate amount of shares of common stock issued to former Triton creditors was 5,595,500, and the amount of obligations given to the Company in exchange for the shares was $5,595,500. As discussed in Note 5, on October 10, 2012, the Company entered into a Prospective Member List Purchase Agreement (the “List Purchase Agreement”) that memorialized a prior verbal agreement with Triton, pursuant to which Triton sold a list of potential members to the Company, and the Company agreed to the cancellation and return to Triton of $5,595,000 in promissory notes which the Company had acquired from prior holders of the Notes. The Notes had previously been issued by Triton to certain individuals and investors in Triton, who had exchanged their Notes, either directly with the Company for the issuance of shares of the Company’s common stock, or with the UCST Trust, which had exchanged the Notes with the Company for the issuance of shares of the Company’s restricted common stock. The fair value of the potential member list is $30,700, which is the price paid by Triton to acquire the member lists. As the Company and Triton are considered related parties, the Company has followed the guidance in ASC 470-50-40 and has recorded the loss on extinguishment as a capital transaction. A loss in the amount of $5,564,800 has been recorded as a reduction in additional paid in capital.
Also see Note 5 below for additional related party transactions.
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Note 5 – Intangible Asset
As noted above, on October 10, 2012, the Company entered into the List Purchase Agreement with Triton that memorialized a prior verbal agreement with Triton. Prior to and in anticipation of the commencement of the Company’s operations, Triton had acquired a list of names and contact information for approximately 9 million individuals (the “Potential Member List”) that the Company anticipates using as its initial marketing base to offer memberships in the Company’s Privileged World Travel Club. Following the commencement of the Company’s business, the Company and Triton had verbally agreed to the terms of the sale of the Potential Member List to the Company, in exchange for the cancellation of certain debts of Triton acquired or to be acquired by the Company. The Company and Triton entered into the List Purchase Agreement, pursuant to which Triton sold the Potential Member List to the Company, and the Company agreed to the cancellation and return to Triton of $5,595,000 in promissory notes which the Company had acquired from prior holders of the Notes. The Notes had previously been issued by Triton to certain individuals and investors in Triton, who had exchanged their notes, either directly with the Company for the issuance of shares of the Company’s common stock, or with the UCST Trust, which had exchanged the Notes with the Company for the issuance of shares of the Company’s restricted common stock.
10
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
Intangible asset at June 30, 2013, and December 31, 2012, consisted of the following:
June 30
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December 31,
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|||||||
2013
|
2012
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|||||||
Customer list
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$ | 30,700 | $ | 30,700 | ||||
30,700 | 30,700 | |||||||
Less: Accumulated amortization
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(4,605 | ) | (1,535 | ) | ||||
Intangible asset, net
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$ | 26,095 | $ | 29,165 |
Note 6 – Stockholders’ Equity
Common Stock
Upon formation, the Board of Directors issued 10,000,000 shares of common stock for $1,000 in services to the founding stockholder of the Company.
As noted above, on July 18, 2012, Mr. Lykiardopoulos purchased the shares from the founding stockholder. Mr. Lykiardopoulos subsequently assigned and sold the 10,000,000 shares to Triton, which agreed to the cancellation of 1,875,000 shares. As a result of these transactions, Triton became the sole stockholder of the Company, owning 8,125,000 shares of the Company’s common stock.
During July 2012, the Company issued 4,730,625 shares of common stock to certain individuals and entities that have provided services to the Company or its affiliates. The Company entered into several consulting agreements relating to the provision of services to the Company including initial design and development of the Company's website and website content; sales and marketing of the Company's products and services; technical and financial advice concerning the handling of the Triton note holders and beneficiaries of the UCST Business Trust; creation of travel packages and website content; introductions to other parties in the financial and travel industry; and software implementation and adaptation.
Also in September 2012, the Company issued shares of common stock to certain of Triton’s creditors in exchange for their right to receive payment under obligations owed by Triton. The aggregate amount of shares of common stock issued to former Triton creditors was 5,595,500, and the amount of obligations given to the Company in exchange for the shares was $5,595,500.
In June 2013, the Company entered into stock purchase agreements with existing stockholders, pursuant to which the Company issued an aggregate of 1,960,400 shares of its common stock for consideration totaling $65,000. The purchasers were accredited investors.
In June 2013, the Company entered into a consulting agreement with Mr. SaoMarcos, pursuant to which he will provide services including corporate development, financial strategy and development, and use of capital, in addition to other services. In exchange for his agreement to provide these services, Mr. SaoMarcos received 625,000 additional shares of the Company’s common stock. The shares were valued at $1.00 per share which was the most recent trading price for the Company’s common stock. The terms of the agreement are for one year and the value of the shares issued are being amortized to expense over the term of the agreement. The unamortized balance is shown as prepaid consulting in the accompanying balance sheet.
11
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
Common Stock Purchase Agreement
On October 5, 2012, the Company entered into an agreement to sell and issue 5,000,000 shares of its restricted common stock in exchange for a purchase price of Five Million Dollars ($5,000,000).
Pursuant to the agreement, the purchase price, minus any prior advances to the Company, will be paid to the Company within ten (10) days of the date of effectiveness of the Company’s Registration Statement on Form S-1. On January 18, 2013, the Company’s registration statement on Form S-1 was declared effective. The purchaser is committed to purchasing the shares and as of June 30, 2013, the purchaser had paid $500,000 toward the purchase of these shares. The Company has issued 500,000 shares in connection with the initial payment, and recognizes its obligation to issue the remaining 4,500,000 shares upon payment of the proceeds.
China International Group Travel
On October 8, 2012, the Company entered into a Travel Services Agreement (the “Travel Agreement”) with China International Group Travel (“CIGT”), a division of China International Travel Service Limited, a Republic of China Government Enterprise (“CITS”), relating to the provision of travel services by the Company.
Pursuant to the Travel Agreement, the Company agreed to build a develop a travel-related website (the “Privileged Website”), using proprietary reservation software, that will permit the preparation of consolidated itineraries for travel within China, through a link to an external Chinese GDS to be provided by CIGT, and for international travel and travel within the US, including travel relating to the following cities: San Francisco, California; Los Angeles, California; Las Vegas, Nevada; Chicago, Illinois; Miami, Florida; Boston, Massachusetts; New York, New York; New Orleans, Louisiana; and Orlando, Florida (collectively, the “Travel Cities”). Additionally, through the Privileged Website, the Company agreed to provide consolidated itineraries for both the Chinese domestic travel and international travel to and among the Travel Cities by Chinese Citizens traveling to any one or more of the Travel Cities (collectively, the “Covered Travelers”). Finally, the Company agreed to work with CIGT to arrange package tours to the Travel Cities, and will provide tour guide and assistance for such tours, pursuant to agreements, the terms and conditions of which will be determined by the Parties.
In exchange for these services to be provided by the Company, pursuant to the Travel Agreement, CIGT agreed to book all travel for the Covered Travelers through the Privileged Website. CIGT further agreed that it would provide to the Company a functional link (together with all necessary technical support for functionality) to a TravelSky Technology Limited (“TravelSky”), a Chinese State-owned enterprise and dominant provider of IT solutions to China's air travel and tourism industries, and to obtain all necessary and proper permission and approval from TravelSky for use of the link on the Privileged Website. CIGT further agreed to use the Privileged Website to book all domestic travel for the Covered Travelers in connection with their travel to the Travel Cities, using the link to TravelSky on the Privileged Website. Finally, CIGT agreed to pay for all booked travel pursuant to the terms to be provided by the Company in connection with applicable tour packages for the Travel Cities.
Both the Company and CIGT agreed to maintain the confidentiality of each others’ confidential and trade secret information and documentation. Moreover, the Company and CIGT agreed that each would be responsible for payment of their respective taxes in connection with the operation of their businesses.
12
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
The term of the Travel Agreement runs from October 8, 2012, through December 31, 2015, and may be renewed for additional one-year terms on the written agreement of the Company and CITG.
SCLC Partnership Agreement
On May 13, 2013, the Company announced that it had entered into an exclusive partnership agreement (the “SCLC Preliminary Agreement”) with the Southern Christian Leadership Conference, a nonprofit African-American civil rights organization.
Pursuant to the SCLC Preliminary Agreement, the Company will be branded as the official "Travel Club" Partner of the SCLC, and will be entitled to several benefits to represent the close partnership relationship between SCLC and Privileged.
As of the date of this Quarterly Report, the Company was working to prepare a definitive version of the SCLC Preliminary Agreement.
Travel Marvelz Letter of Intent
On May 23, 2013, the Company announced that it had signed a non-binding Letter of Intent (“LOI”) to acquire controlling interest in Travel Marvelz (“Marvelz”) of San Diego, California. Pursuant to the LOI, the Company plans to purchase a 60% ownership interest in the outstanding equity of Marvelz. The Company’s management believes that Marvelz is well-suited to help the Company establish a well-organized and efficient fulfillment center that can supply all of the Company’s members and clients with the required travel support necessary to successfully attend to their needs.
Additionally, management believes that the Company will benefit from Marvelz’s proprietary technology and advanced state-of-the-art travel solutions, such as its Internet Booking Engine, that provides access to the Airlines Global Distribution System inventory and that of low cost carriers, as well as Direct-Connect airline content. Other technology includes Lower Fare Finder, Credit Card fraud protection program, Sabre Car Rental Engine, and FareGenius, among other products.
Pursuant to the non-binding LOI, the Company and Marvelz anticipate that the management and staff of Marvelz will remain in their current positions with Marvelz, and have the same or similar responsibilities. Additionally, management of the Company and Marvelz anticipate that the Management of Travel Marvelz will hire additional personnel as needed to meet increased projected demand in both the California and Utah offices of Marvelz.
As of the date of this Quarterly Report, the Company was working to prepare definitive agreements for the transaction with Marvelz.
Regency Travel Letter of Intent
On June 3, 2012, the Company announced that it signed a non-binding Letter of Intent to acquire controlling interest in Regency Travel (“Regency”) of San Diego, California. Pursuant to the LOI, the Company plans to purchase 60% of the common stock of Regency. Regency specializes in arranging travel plans and vacations, and has been in business since 1979. Regency is known throughout the industry for its reliability and personal service provided by its staff to all its clients.
Regency works regularly with custom groups of all sizes, and is well known in the industry as an elite group-organizing travel company with superior service and well planned vacations of tours, and cruises. Regency is well suited to help Privileged provide its members all facets of travel vacations worldwide. Regency is a fully accredited member of the following organizations: American Society of Travel Agents (ASTA), Cruise Line International Association (CLIA), Airline Reporting Corporation (ARC), and International Air Transport Association (IATA).
13
PRIVILEGED WORLD TRAVEL CLUB, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
(unaudited)
Pursuant to the non-binding LOI, the Company and Regency anticipate agreed that the management and staff of Regency will remain in their current positions with Regency, and have the same or similar responsibilities.
As of the date of this Quarterly Report, the Company was working to prepare definitive agreements for the transaction with Regency.
Note 8 – Commitment and Contingency
Note 9 – Subsequent Events
Management has evaluated subsequent events up to and including August 8, 2013, which is the date the statements were available for issuance and determined there are no reportable subsequent events.
14
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events, and they are applicable on as of the dates of such statement. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “forecast,” “expect,” “plan,” anticipate,” believe,” estimate,” continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our other SEC filings. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available on our website or otherwise, and we undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report. Throughout this Quarterly Report on Form 10-Q we will refer to Privileged World Travel Club, Inc., together with its subsidiaries, as “Privileged,” the “Company,” “we,” “us,” and “our.”
Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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We were incorporated in Delaware on May 18, 2012, as APEX 4, Inc., and on June 6, 2012, we filed a registration statement on Form 10 to register with the U.S. Securities and Exchange Commission as a public company.
On July 17, 2012, Richard Chiang, then our sole director and shareholder, appointed Gregory Lykiardopoulos, Chairman and CEO of Triton Distribution Systems, Inc. as a director. Subsequently, on July18, 2012, Mr. Chiang and Mr. Lykiardopoulos entered into a Stock Purchase Agreement whereby Mr. Lykiardopoulos purchased 10,000,000 shares of our common stock, for a purchase price of $40,000, from Mr. Chiang, which constituted 100% of our issued and outstanding shares of common stock. Mr. Chiang then resigned from all positions. Mr Lykiardopoulos subsequently changed the name of the Company from APEX 4, Inc., to Privileged World Travel Club, Inc.
Pursuant to a License Agreement with Triton Distribution Systems, Inc. (“Triton”), we obtained from Triton a non-exclusive right and license to use Triton’s ReservationExpert Software (the “Software”), for the purpose of providing services to our Members. Through our use of the License, once our websites are operational, our Members will be able to make travel reservations, book airline seats, issue airline tickets, purchase tour and entertainment tickets and amusement park admissions, as well as book hotels, cars, cruises and other holiday destination packages worldwide from the Privileged website. We believe that with our automated, web-based technology and low-fee structure, we will be positioned to capture market share in large addressable markets. We will aggregate inventory from major airline carriers, small- to mid-sized airlines, local specialty airlines, intra-regional airlines, island-based carriers and airlines that do not have access to any significant markets; U.S. domestic specialty airlines and international carriers affiliated with the International Air Transportation Association; and air consolidators that purchase bulk seats on major carriers and resell air travel at reduced pricing. Also, we will work directly with property management vendors and suppliers, including all types of hotel chains, independent hotels, resorts, vacation lodgings and bed & breakfasts; car rental agencies; tour operators including bus tours, expeditions, walking tours, adventure packages; all destination-based tour offerings; major cruise lines providing global sailing trips, regional cruise companies providing scenic or specialty cruises within a region, and special custom cruises such as sailing trips or river cruises; and local service providers such as limousines, shuttles, ferries and other local modes of transportation typically needed by travelers.
15
Privileged will have three principal sources of revenue, all discussed in more detail below. We will charge the consumers an annual membership fee to be Members of the Privileged Travel Club. Additionally, we will collect a commission fee from the travel suppliers (cruise companies, hotels, etc.) that wish to aggregate their inventory to the consumers directly, bypassing any travel agent. Finally, we will receive fees for special services provided to companies and business partners, such as CIGT.
Initially, we anticipate that a large majority of our revenues will come from the purchase of Memberships in the Travel Club, as our Membership base builds. However, over time, we anticipate that the sale of Memberships, which will remain a constant marketing focus, will lessen compared to the other anticipated sources of revenues. Management projects that our revenues eventually will be generated approximately 30% from the purchase of Memberships, 50% from the purchase of travel and travel related services, and 20% from the sale of special services provided to companies and business partners. However, there can be no guarantee that our revenues will be apportioned as listed.
Membership Fees
Travelers wishing to buy travel directly from Privileged through our website will first need to sign up and become a Member of the Privileged Travel Club, once our websites become operational. We will be introducing 9 different membership packages at prices ranging from $20.00 to $150.00 for an annual membership. All membership packages will allow access to our discounted travel products, such as airline tickets, hotels, motels, resorts, rental car companies, tour packages, cruises and domestic and international traveling organized tours. All these travel products will be only specially and exclusively offered to Travel Club Members. As discussed in more detail below, we have acquired lists of over nine million potential members. We plan to contact these potential members directly, initially through e-mail, and then through personal contacts, to describe the Privileged Travel Club, and to offer introductory discount rates on Memberships.
Commissions
With respect to commissions, it is customary in the travel industry for the travel vendors to pay a commission to travel sellers that are selling their products to the consumers without a written contract. These commissions range in percentage, although 10% is fairly standard. As we begin to generate travel purchases through our Members, and as we work with various travel sellers, we anticipate that we will receive these standard commissions.
If we are able to build the Travel Club Membership base to a large size, and are able to purchase travel on a large scale, we may be able to enter into agreements with certain of the travel sellers for either discounted travel or higher commissions. Anything that includes deep discounts, higher volume commissions, advertising dollars or additional override commissions out of the norm would need to be accompanied by an agreement or contract between the Company and travel seller. As of the date of this Report, we did not have any such agreements.
Therefore at the present time we do not anticipate and we do not need any formal agreements or contracts with the travel suppliers. If the Company starts producing extensive bookings, then we may be able to put in place contracts with the different travel suppliers for higher commissions and remunerations.
CIGT Travel Services Agreement
On October 8, 2012, the Company entered into a Travel Services Agreement (the “Travel Agreement”) with China International Group Travel (“CIGT”), a division of China International Travel Service Limited, a Republic of China Government Enterprise (“CITS”), relating to the provision of travel services by the Company. Pursuant to the Travel Agreement, the Company agreed to build and develop a travel-related website (the “Privileged Website”), using proprietary reservation software, that will permit the preparation of consolidated itineraries for travel within China, through a link to an external Chinese GDS to be provided by CIGT, and for international travel and travel within the US, including travel relating to the following cities: San Francisco, California; Los Angeles, California; Las Vegas, Nevada; Chicago, Illinois; Miami, Florida; Boston, Massachusetts; New York, New York; New Orleans, Louisiana; and Orlando, Florida (collectively, the “Travel Cities”). Additionally, through the Privileged Website, the Company agreed to provide consolidated itineraries for both the Chinese domestic travel and international travel to and among the Travel Cities by Chinese Citizens traveling to any one or more of the Travel Cities (collectively, the “Covered Travelers”). Finally, the Company agreed to work with CIGT to arrange package tours to the Travel Cities, and will provide tour guide and assistance for such tours, pursuant to agreements, the terms and conditions of which will be determined by the Parties.
16
In exchange for these services to be provided by the Company, pursuant to the Travel Agreement, CIGT agreed to book all travel for the Covered Travelers through the Privileged Website. CIGT further agreed to use the Privileged Website to book all domestic travel for the Covered Travelers in connection with their travel to the Travel Cities, using the link to TravelSky (a Chinese State-owned enterprise and dominant provider of IT solutions to China's air travel and tourism industries) on the Privileged Website. Moreover, CIGT agreed to pay a fee to Privileged for all booked travel pursuant to the terms to be provided by the Company in connection with applicable tour packages for the Travel Cities once the Privileged Website is operational and CIGT can begin booking travel. Finally, the Company anticipates that it will work with CIGT in connection with the arrangement of packaged tours and the fees to be paid to the Company for arranging and managing the tours.
In general, the Covered Travelers who purchase travel through CIGT will not be required to become Members of the Privileged Travel Club, principally because of the difficulty of accessing and purchasing travel through a means other than through CIGT. CIGT, as a division of CITS, a Republic of China Government Enterprise, is able to arrange for the necessary international travel visas and other required government travel documentation for the Covered Travelers, which are not available directly through Privileged. Should any Covered Traveler choose to purchase travel directly from Privileged, rather than through CIGT, such traveler would be required to become a Member of the Privileged Travel Club.
List Purchase Agreement – Potential Members
In September 2012, we issued shares of common stock to certain of Triton’s creditors in exchange for their right to receive payment under obligations owed by Triton. The aggregate amount of shares of common stock issued to former Triton creditors was 5,595,500, and the amount of obligations given to us in exchange for the shares was $5,595,500 which was recorded by us as promissory notes. These notes were all past due, and bore interest at rates ranging from 10% to 18%. On October 10, 2012, the Company entered into a Prospective Member List Purchase Agreement (the “List Purchase Agreement”) that memorialized a prior verbal agreement with Triton that was agreed to prior to September 30, 2012, pursuant to which Triton sold a list of potential members to us, and we agreed to the cancellation and return to Triton of $5,595,500 in promissory notes which we had acquired. The notes had previously been issued by Triton to certain individuals and investors in Triton, who subsequently had exchanged their notes, either directly with us for the issuance of shares of our restricted common stock, or with the UCST Trust, which had exchanged the notes with us for the issuance of shares of our restricted common stock. The fair value of the potential member list is $30,700, which is the price paid by Triton to acquire the member lists. As we and Triton are considered related parties, we have followed the guidance in ASC 470-50-40 and have recorded the loss on extinguishment as a capital transaction. A loss in the amount of $5,564,800 has been recorded as a reduction in additional paid in capital which reduced the carrying value of the note receivable to $30,700.
As we are just commencing our planned operations, we plan to fund our operations from loans from Triton and our chairman, and we plan to raise equity capital by offering shares of our common stock to investors. On October 5, 2012, we entered into a stock purchase agreement with an investor who agreed to purchase 5,000,000 shares of our restricted common stock for an aggregate purchase price of $5,000,000, to be paid within 10 days of the effectiveness of the Company’s Registration Statement’s being declared effective. As of the date of this Report, $500,000 of the purchase price has been paid. For the next twelve months, we anticipate we will need approximately $1,500,000 to cover our operating expenses plus an additional $2,200,000 for our license fee and royalty payment due to Triton at the end of the next twelve month period. Our operational milestones over the next 12 months include the following: we anticipate that our domestic website will be operational by the end of calendar 2012, which will permit us to begin accepting applications for Membership; during the second or third quarter of 2013, we anticipate that the domestic travel website and the two Chinese travel websites will become operational, which will permit us to begin booking travel both domestically and internationally. We anticipate that we will begin generating revenues during the second or third quarters of 2013. The costs of these milestones are included in the table below.
17
The detail of our operation expenses over the next twelve months is as follows:
Salaries and benefits
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$ | 500,000 | ||
Marketing
|
400,000 | |||
General overhead
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200,000 | |||
Website development and maintenance
|
100,000 | |||
Professional fees
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150,000 | |||
Royalty payments to Triton
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2,150,000 | |||
$ | 3,500,000 |
We believe we will be able to raise the necessary capital to carry out our business plan, but there no assurance that we will be able to do so.
As of the date of this Report, we continued to develop our business, our websites, and to implement our business and operating strategy, and our websites were not yet operational for purchase of Memberships or travel. For our website to be operational to the point that a potential Member may purchase a Membership, additional development work will need to be undertaken, and we will need to engage one or more merchant banks to assist us with credit card processing. In furtherance of these efforts, we have entered into a merchant credit card agreement with Pay By Web, Inc. (a registered ISO/MSP of Wells Fargo Bank, N.A.), to enable Members and travelers to use different credit cards, such as VISA, MasterCard, Carte Blanche, Discover, and others to purchase Memberships and pay for travel and related services once the Company’s websites are fully operational. (We had entered into a previous agreement with World Financial National Bank, which agreement was subsequently terminated.) We may enter into further merchant account agreements as necessary. Management anticipates that the integration of the services provided by these accounts will be ready during the third or fourth quarter of 2013, although there can be no guarantee.
Critical Accounting Policies
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we have the option to delay adoption of new or revised accounting standards until those standards would otherwise apply to private companies, until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period for complying with such new or revised accounting standards. We have elected to opt out of this extended transition period. As noted, this election is irrevocable.
To date, we have not earned any revenue from operations. Accordingly, our activities have been accounted for as those of a “Development Stage Company” as set forth in Financial Accounting Standards Board ASC 915. Among the disclosures required by ASC 915 are that the our financial statements be identified as those of a development stage company, and that the statements of operations, stockholders’ equity and cash flows disclose activity since the date of our inception.
In September 2012, we issued shares of common stock to certain of Triton’s creditors in exchange for their right to receive payment under promissory note obligations (the “Notes”) owed by Triton. (The Notes bore interest at rates ranging from 10% to 18%, were originally issued between February 2008 and January 2009, had terms ranging from two weeks to 14 months, were due between January 2008 and December 2009, and were all in default at the time of the issuance of the shares in exchange for the Notes.) The aggregate amount of shares of common stock issued to former Triton creditors was 5,595,500, and the amount of Notes given to us in exchange for the shares was $5,595,500. As discussed in Note 4 to the financial statements included elsewhere in this Report, on October 10, 2012, we entered into a Prospective Member List Purchase Agreement (the “List Purchase Agreement”) that memorialized a prior verbal agreement with Triton, pursuant to which Triton sold a list of potential members to us, and we agreed to the cancellation and return to Triton of $5,595,500 in promissory Notes which we had acquired from prior holders of the Notes. The Notes had previously been issued by Triton to certain individuals and investors in Triton, who had exchanged their Notes, either directly with us for the issuance of shares of our common stock, or with the UCST Trust, which had exchanged the Notes with us for the issuance of shares of our restricted common stock. The fair value of the potential member list is $30,700, which is the price paid by Triton to acquire the member lists. As we and Triton are considered related parties, we have followed the guidance in ASC 470-50-40 and have recorded the loss on extinguishment as a capital transaction. A loss in the amount of $5,564,800 has been recorded as a reduction in additional paid in capital.
18
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, which was issued to provide a consistent definition of fair value (“FV”) and ensure that the FV measurement and disclosure requirements are similar between US GAAP and International Financial Reporting Standards (“IFRS”). ASU 2011-04 changes certain FV measurement principles and enhances the disclosure requirements particularly for Level 3 FV measurements. This guidance is effective for us beginning on January 1, 2012. The adoption of ASU 2011-04 did not have a significant impact our financial statements.
19
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (ASC) 220, Comprehensive Income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. In December 2011, the FASB issued ASU 2011-12 which defers the requirement in ASU 2011-05 that companies present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. ASU 2011-05 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05, as amended by ASU 2011-12, did not have a significant impact our financial statements.
In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the FV of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for us for our annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of ASU 2011-08 did not have a significant impact our financial statements.
In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment. The ASU provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the FV of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this pronouncement will not have a material impact on our financial statements.
In February 2013, the FASB issued ASU No. 2013-02, which amends the authoritative accounting guidance under ASC Topic 220 “Comprehensive Income”. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under US GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under US GAAP to be reclassified in their entirety to net income, and entity is required to cross-reference to other disclosures required under US GAAP that provide additional detail about those amounts. The amendments in this update are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted. Adoption of this update is not expected to have a material effect on the Company’s consolidated results of operations or financial condition.
Off-Balance Sheet Arrangements
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer/principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer/principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
In light of the material weaknesses described below, management performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that as of June 30, 2013 our disclosure controls and procedures were not effective at the reasonable assurance level:
1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ended June 30, 2013. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 1. Legal Proceedings
We know of no pending legal proceedings to which we are a party which are material or potentially material, either individually or in the aggregate. We are from time to time, during the normal course of our business operations, subject to various litigation claims and legal disputes. We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our consolidated financial position, results of operations or liquidity.
21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In June 2013, the Company entered into stock purchase agreements with three of its existing stockholders (including one married couple), pursuant to which the Company issued an aggregate of 1,960,400 shares of its common stock for consideration totaling $65,000. The Company had an existing relationship with the purchasers, and they were accredited investors.
Additionally, in June 2013, the Company entered into a consulting agreement with David SaoMarcos, pursuant to which he will provide services including corporate development, financial strategy and development, and use of capital, in addition to other services. In exchange for his agreement to provide these services, Mr. SaoMarcos received 625,000 additional shares of the Company’s common stock. The shares were valued at $1.00 per shares which wasis the most recent trading price for the Company’s common stock.
The offer and sale of these securities was made without registration under the Securities Act in reliance upon exemptions from registration, including, without limitation, the exemption provided under Section 4(2) of the Securities Act for private and limited offers and sales of securities made solely to accredited investors.
We did not have any repurchases of our common stock from January 1, 2013, through June 30, 2013.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit
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Description
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10.1
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License Agreement between Privileged World Travel Club, Inc., and Triton Distribution Systems, Inc. (previously filed as an exhibit to a Current Report on Form 8-K, filed with the Commission on August 28, 2012)
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10.2
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Consulting Agreement – Legacy Opportunity Fund (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on September 6, 2012)
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10.3
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Consulting Agreement – Adam Himmelman (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on September 6, 2012)
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10.4
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Consulting Agreement – Alexander Lykiardopoulos (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on September 6, 2012)
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10.5
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Consulting Agreement – Charles Wagner (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on September 6, 2012)
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10.6
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Consulting Agreement – David Sao Marcos (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on September 6, 2012)
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10.7
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Consulting Agreement – Michelle Lu (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on September 6, 2012)
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10.8
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Travel Services Agreement (previously filed as an exhibit to a Current Report on Form 8-K, filed with the Commission on October 11, 2012)
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10.9
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Prospective Member List Purchase Agreement (previously filed as an exhibit to a Current Report on Form 8-K, filed with the Commission on October 11, 2012)
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10.10
|
Credit Card Processing Agreement (Previously filed, and subsequently canceled)
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10.11
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Merchant Credit Card Agreement (previously filed as an exhibit to a Registration Statement on Form S-1/A, filed with the Commission on November 8, 2012)
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10.12
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Project Design and Administration Agreement (previously filed as an exhibit to a Current Report on Form 8-K filed on December 7, 2012)
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10.13
|
Consulting Agreement – David SaoMarcos (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on July 23, 2013)
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10.14
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Second Amendment to Software Supply and License Agreement (previously filed as an exhibit to a Registration Statement on Form S-1, filed with the Commission on July 23, 2013)
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31
|
Certification of Principal Executive Officer, Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
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32
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer, Chief Financial Officer).
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101.INS
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XBRL Instance Document**
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101.SCH
|
XBRL Taxonomy Extension Schema Document**
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101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document**
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101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document**
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101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document**
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101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document**
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** To be filed by amendment per Rule 201 of Regulation S-T.
23
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 8, 2013
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|
Privileged World Travel Club, Inc.
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By:
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/s/ Gregory Lykiardopoulos
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Gregory Lykiardopoulos
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Chief Executive Officer, Chief Financial
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Officer (Principal Executive Officer and | |
Principal Financial Officer) |
24