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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

COMMISSION FILE NUMBER: 333-170715

FAL EXPLORATION CORP.
 (Name of Registrant as specified in its charter)

 NEVADA
 
 27-1517938
(State or other jurisdiction of  
incorporation of organization)
 
 (I.R.S. Employer
Identification No.)
 
431 Fairway Drive – Suite 260
Deerfield Beach, FL 33441
(Address of principal executive office)

(732) 530-1267
 (Registrant’s telephone number)
 
 (Former Name, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes 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
Accelerated filer
o
Non-accelerated filer
(Do not check if smaller reporting company)
o
Smaller reporting company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  There are 31,546,738 shares of common stock, par value $0.001 per share, issued and outstanding as of November 13, 2013.
 


 
 

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
FORM 10-Q
September 30, 2013

TABLE OF CONTENTS
 
   
Page No.  
 
PART I. - FINANCIAL INFORMATION
Item 1.
Financial Statements.
3
 
Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012
 3
 
Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)
 4
 
Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (Unaudited)
 5
 
Statements of Changes in Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2013 (Unaudited)
6
 
Notes to Unaudited Financial Statements.
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
15
Item 3
Quantitative and Qualitative Disclosures About Market Risk.
19
Item 4
Controls and Procedures.
20
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings.
20
Item 1A.
Risk Factors.
20
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
20
Item 3.
Defaults Upon Senior Securities.
20
Item 4.
Mine Safety Disclosures.
20
Item 5.
Other Information.
20
Item 6.
Exhibits.
20
 
FORWARD LOOKING STATEMENTS
 
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
 
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC.   You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
 
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
 
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
BALANCE SHEETS
 
   
September 30,
   
December 31,
 
   
2013
   
2012
 
   
(Unaudited)
       
ASSETS
           
             
CURRENT ASSETS:
           
    Cash
  $ 47,068     $ 77,716  
    Assets of discontinued operations
    -       815  
                 
        Total Current Assets
    47,068       78,531  
                 
PROPERTY AND EQUIPMENT, net
    1,947       3,057  
                 
        Total Assets
  $ 49,015     $ 81,588  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
               
                 
CURRENT LIABILITIES:
               
    Accounts payable and accrued expenses
  $ 67,043     $ 43,933  
    Accounts payable - related party
    40,550       9,000  
    Accrued salaries
    42,500       10,000  
 
               
        Total Current Liabilities
    150,093       62,933  
                 
STOCKHOLDERS' (DEFICIT) EQUITY:
               
   Preferred stock ($0.001 par value; 20,000,000 shares authorized; No shares issued or outstanding at September 30, 2013 and December 31, 2012)
    -       -  
   Common stock ($0.001 par value; 100,000,000 shares authorized; 31,146,738 and 36,448 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively)
    31,147       37  
   Additional paid-in capital
    2,610,001       2,555,518  
   Accumulated deficit
    (2,742,226 )     (2,536,900 )
                 
        Total Stockholders' (Deficit) Equity
    (101,078 )     18,655  
                 
        Total Liabilities and Stockholders' (Deficit) Equity
  $ 49,015     $ 81,588  
 
See notes to unaudited financial statements
 
 
3

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
STATEMENTS OF OPERATIONS
 
   
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
   
2013
   
2012
   
2013
   
2012
 
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
                         
REVENUES
  $ -     $ -     $ -     $ -  
                                 
OPERATING EXPENSES:
                               
     Administrative compensation
    30,000       47,000       114,000       106,000  
     Professional fees
    10,567       274,479       56,298       649,478  
     Other selling, general and administrative
    5,119       12,948       19,712       63,562  
                                 
        Total Operating Expenses
    45,686       334,427       190,010       819,040  
                                 
OPERATION LOSS FROM CONTINUING OPERATIONS
    (45,686 )     (334,427 )     (190,010 )     (819,040 )
                                 
OTHER INCOME (EXPENSE):
                               
     Interest expense
    -       -       (4 )     (560 )
     Interest expense - related party
    -       -       -       (79 )
     Loss on disposal of property and equipment
    -       -       (115 )     -  
     Interest income
    -       192       8       554  
                                 
        Total Other Income (Expense)
    -       192       (111 )     (85 )
                                 
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES
    (45,686 )     (334,235 )     (190,121 )     (819,125 )
                                 
Provision for income taxes
    -       -       -       -  
                                 
LOSS FROM CONTINUING OPERATIONS
    (45,686 )     (334,235 )     (190,121 )     (819,125 )
                                 
DISCONTINUED OPERATIONS:
                               
   Income (loss) from discontinued operations, net of tax
    121       (110,927 )     (15,205 )     (409,457 )
                                 
NET LOSS
  $ (45,565 )   $ (445,162 )   $ (205,326 )   $ (1,228,582 )
                                 
LOSS PER COMMON SHARE, BASIC AND DILUTED:
                               
   Loss from continuing operations
  $ (0.01 )   $ (9.79 )   $ (0.07 )   $ (25.31 )
   Loss from discontinued operations
    -       (3.25 )     (0.01 )     (12.65 )
    $ (0.01 )   $ (13.04 )   $ (0.08 )   $ (37.96 )
                                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
                               
    Basic and diluted
    8,197,617       34,157       2,756,933       32,360  
 
See notes to unaudited financial statements

 
4

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
STATEMENTS OF CASH FLOWS

   
For the Nine Months Ended
September 30,
 
   
2013
   
2012
 
   
(Unaudited)
   
(Unaudited)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (205,326 )   $ (1,228,582 )
Adjustments to reconcile net loss from operations to net cash used in operating activities:
               
Stock-based compensation and fees
    4,683       652,897  
Loss on disposal of property and equipment
    115       -  
Depreciation
    995       1,010  
Changes in assets and liabilities:
               
Assets of discontinued operations
    815       50,764  
Accounts payable and accrued expenses
    23,110       (10,879 )
Accrued salaries
    52,500       10,000  
Accounts payable - related party
    31,550       (9,000 )
Due to related parties
    -       (1,871 )
                 
NET CASH USED IN OPERATING ACTIVITIES
    (91,558 )     (535,661 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from notes payable
    -       7,500  
Payment of notes payable
    -       (108,650 )
Payment of notes payable - related party
    -       (10,000 )
Payment of insurance premium finance payable
    -       (5,859 )
Proceeds from sale of common stock
    60,910       1,000,000  
Payment of placement costs and fees
    -       (161,850 )
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES
    60,910       721,141  
                 
NET (DECREASE) INCREASE IN CASH
    (30,648 )     185,480  
                 
CASH  - beginning of year
    77,716       7,728  
                 
CASH - end of period
  $ 47,068     $ 193,208  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
               
Cash paid for:
               
Interest
  $ -     $ 2,637  
Income taxes
  $ -     $ -  
                 
Non-cash investing and financing activities:
               
Issuance of common stock and warrants for services charged to prepaid expenses
  $ -     $ 396,471  
Common stock issued for accounts payable- related party
  $ -     $ 12,000  
Reclassification of insurance premiums payable and prepaid expenses to other receivable
  $ -     $ 3,078  
Common stock issued for accrued salaries
  $ 20,000     $ -  
 
See notes to unaudited financial statements.
 
 
5

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For the Nine Months Ended September 30, 2013
(Unaudited)
 
   
Preferred Stock
   
Common Stock
   
Additional
         
Total
 
   
Number of
         
Number of
         
Paid-in
   
Accumulated
   
Stockholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Equity (Deficit)
 
                                           
Balance, December 31, 2012
    -     $ -       36,448     $ 37     $ 2,555,518     $ (2,536,900 )   $ 18,655  
                                                         
Sale of common stock
    -       -       11,110,000       11,110       49,800       -       60,910  
                                                         
Issuance on warrants and options for services
    -       -       -       -       783       -       783  
                                                         
Issuance of common stock for services
    -       -       20,000,290       20,000       3,900       -       23,900  
                                                         
Net loss, For the nine months ended September 30, 2013
    -       -       -       -       -       (205,326 )     (205,326 )
                                                         
Balance, September 30, 2013
    -       -       31,146,738       31,147       2,610,001       (2,742,226 )     (101,078 )
 
See notes to unaudited financial statements
 
 
6

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

FAL Exploration Corp. (the “Company”), formerly named Apps Genius Corp., was incorporated in the State of Nevada on December 17, 2009.  On July 9, 2013, the Company changed its name to FAL Exploration Corp. The Company’s business was in the field of creating innovative social games and mobile applications and operated a crowdfunding platform. In September 2013, the Company decided to discontinue its social games and mobile applications and crowdfunding business. Prior periods have been restated in the Company’s financial statements and related footnotes to conform to this presentation.

On July 22, 2013, the Company received approval from the Financial Industry Regulatory Authority (“FINRA”) to effectuate a reverse split of 1000 to 1 (the “Reverse Split”) in which each shareholder will be issued 1 share of common stock in exchange for 1000 shares of their currently issued common stock, which became effective as of July 22, 2013.  The Reverse Split had been previously approved and authorized by the board of directors and majority holders of the Company. All share and per share values for all periods presented in the accompanying unaudited financial statements are retroactively restated for the effect of the Reverse Split.

Effective October 7, 2013 the Company entered into a Securities Purchase Agreement (the “Agreement”) with FAL Minerals LLC (“FAL”). Pursuant to the Agreement, the Company agreed to purchase from FAL newly issued membership interests of FAL representing twenty percent (20%) of the issued and outstanding membership interests of FAL (the “Interests”). The purchase price for the Interests is $100,000 payable in common stock at a per share price of $0.25 or a total issuance of 400,000 shares of the Company’s common stock. Pursuant to the Agreement the Company will receive twenty (20%) percent of the gross proceeds from all royalty payments made to FAL. Such royalty payments are payable quarterly. Following the purchase of Interests, the Company intends to focus its efforts on mineral exploration and has taken a 20% ownership in FAL. As a result of the Company’s ownership interest of 20% of FAL, the Company is considered to be an equity method investor which is accounted for under equity method of accounting. Under ASC 323-10-35 “Investments – Equity Method”, the investment is originally recorded at the price paid to acquire the investment and subsequently adjusted by the Company’s share of FAL’s net income/loss and recorded to the Company’s income statement as Equity in investee’s income/loss.

Basis of presentation and going concern

Management acknowledges its responsibility for the preparation of the accompanying interim financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the interim period presented. These financial statements should be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Form 10-K annual report for the year ended December 31, 2012.  The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

As reflected in the accompanying unaudited financial statements, the Company had a net loss and net cash used in operations of $205,326 and $91,558, respectively, for the nine months ended September 30, 2013 and working capital deficit, stockholder’s deficit and an accumulated deficit of $103,025, $101,078 and $2,742,226, respectively, at September 30, 2013 and historically had minimal revenues all of which have been accounted for in discontinued operations. These matters raise substantial doubt about the company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise additional capital, and generate more revenues. Management intends to attempt to raise additional funds by way of a public or private offering.  While the Company believes in the viability of its strategy to raise additional funds, there can be no assurances to that effect.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Use of estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the nine months ended September 30, 2013 and 2012 include the useful life of property and equipment, allowance for doubtful accounts receivable, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets, and the value of stock-based compensation and fees.

Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.
 
 
7

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentrations of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. The Company has not experienced any losses in such accounts through September 30, 2013. There were no balances in excess of FDIC insured levels as of September 30, 2013.

Accounts receivable in discontinued operations

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At September 30, 2013 and December 31, 2012, the Company does not, based on a review of its outstanding balances, have an allowance for doubtful accounts.

Fair value measurements and fair value of financial instruments

The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

*
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
*
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.
*
Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
 
The carrying amounts  for cash,  accounts payable, and amounts due to related party approximate their fair market value based on the short-term maturity of these instruments. The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

Property and equipment

Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.  When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
 
Software development costs

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 “Costs of Software to Be Sold, Leased or Marketed.”  Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins upon initial product shipment. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months), using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset.  If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.  During the nine months ended September 30, 2013 and 2012, the Company did not capitalize any software development costs.

 
8

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of long-lived assets

In accordance with ASC Topic 360, the Company reviews, long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charges during the nine months ended September 30, 2013 and 2012.

Income taxes

The Company is governed by the Income Tax Law of the United States. The Company utilizes ASC Topic 740, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Under ASC Topic 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.  The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

Stock-based compensation

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50.

Advertising

Advertising is expensed as incurred and is included in selling, general and administrative expenses on the accompanying statements of operations. For the nine months ended September 30, 2013 and 2012, advertising expense was $570 and $2,140, respectively.

Research and development

Research and development costs which consisted primarily of salaries and fees paid to third parties for the development of software and applications were expensed as incurred and have been included in loss from discontinued operation. For the nine months ended September 30, 2013 and 2012, research and development costs were $16,368 and $155,343, respectively.

Net loss per share of common stock
 
Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.  Potentially dilutive common shares consist of common stock warrants (using the treasury stock method). These common stock equivalents may be dilutive in the future.

 
9

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

All potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:
 
   
Nine Months Ended
September 30,
 
   
2013
   
2012
 
Warrants
   
6,814
     
8,914
 
Stock options
   
525
     
525
 
Total
   
7,339
     
9,439
 

Recent accounting pronouncements

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
  
NOTE 2 - PROPERTY AND EQUIPMENT

At September 30, 2013 and December 31, 2012, property and equipment consisted of the following:

   
Useful Life
 
September 30, 2013
   
December 31, 2012
 
Office equipment and furniture
 
7 Years
  $ -     $ 214  
Computer equipment
 
5 Years
    6,581           6,581  
          6,581           6,795  
Less: accumulated depreciation
        (4,634 )       (3,738 )
        $ 1,947     $ 3,057  

For the nine months ended September 30, 2013 and 2012, depreciation expense amounted to $995 and $1,010, respectively. In March 2013, the Company disposed its office equipment and furniture with a net book value of $115 realizing a loss on disposal of property and equipment of $115.

NOTE 3 – DISCONTINUED OPERATIONS

In September 2013, the Company decided to discontinue its social games and mobile applications and crowdfunding business. The Company intends to focus its efforts on mineral exploration following the purchase of 20% ownership in FAL in October 2013. Certain amounts in the prior periods have been retrospectively reclassified in the Company’s financial statements and related footnotes to conform to this discontinued operations presentation.

The following table reflects results of operations of the Company’s discontinued operations of its social games and mobile applications and crowdfunding business.

   
For the Three Months ended September 30,
   
For the Nine Months ended September 30,
 
   
2013
   
2012
   
2013
   
2012
 
Revenues
  $ 121     $ 1,499     $ 1,163     $ 6,473  
Cost of revenues
    -       -       -       -  
                                 
Operating and other non-operating expenses
    -       (112,426 )     (16,368 )     (415,930 )
Income (loss) from discontinued operations
  $ 121     $ (110,927 )   $ (15,205 )   $ (409,457 )
 
The following table reflects assets of discontinued operations

Assets
 
September 30, 2013
   
December 31, 2012
 
Accounts receivable
  $ -     $ 815  
Assets of discontinued operations
  $ -     $ 815  

 
10

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 4 – RELATED PARTY TRANSACTIONS

As of September 30, 2013 and December 31, 2012, the Company owed $40,550 and $9,000, respectively, to a company owned by its chief financial officer for services rendered.
 
NOTE 5 – STOCKHOLDERS’ (DEFICIT) EQUITY

Preferred stock

The Company authorized 20,000,000 preferred shares. Preferred shares may be designated by the Company’s board of directors.  There were no shares designated as of September 30, 2013.

Equity incentive plan

On September 23, 2010, the Company’s board of directors adopted, and the Company’s stockholders approved the FAL Exploration Corp. Equity Incentive Plan (the “Plan”), which covers 5,000,000 shares of common stock.  The purpose of the Plan is to advance the interests of the Company by enhancing the ability of the Company to (i) attract and retain employees and other persons or entities who are in a position to make significant contributions to the success of the Company and its subsidiaries; (ii) reward such persons for such contributions; and (iii) encourage such persons or entities to take into account the long-term interest of the Company through ownership of shares of the Company’s common stock, par value $.001 per share. The Plan is intended to accomplish these objectives by enabling the Company to grant awards in the form of incentive and nonqualified stock options, stock appreciation rights, restricted stock, deferred stock, or other stock based awards. The Plan will be administered by the Board of Directors of the Company or, upon its delegation, by the Compensation Committee of the Board of Directors.  The Plan became effective on September 23, 2010 and will terminate on September 23, 2020.

Subject to adjustment as provided in the Plan, the aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the Plan shall be five million (5,000,000) shares; provided, however ,  that within sixty (60) days of the end of each fiscal year following the adoption of the Plan, the Board, in its discretion, may increase the aggregate number of shares of Common Stock available for issuance under the Plan by an amount not greater than the difference between (i) the number of shares of Common Stock available for issuance under the Plan on the last day of the immediately preceding fiscal year, and (ii) the number of shares of Common Stock equal to 15% of the shares of Common Stock outstanding on the last day of the immediately preceding fiscal year. As of September 30, 2013, no instruments have been granted under the Plan.

Common stock

On July 22, 2013, the Company received approval from FINRA to effectuate a reverse split of 1000 to 1 in which each shareholder will be issued 1 share of common stock in exchange for 1000 shares of their currently issued common stock, which became effective as of July 22, 2013.  The Reverse Split had been previously approved and authorized by the board of directors and majority holders of the Company. All share and per share values for all periods presented in the accompanying unaudited financial statements are retroactively restated for the effect of the Reverse Split..
 
In March 2013, the Company issued 90 post-split (89,820 pre-split) shares of its common stock to a consultant for payment of public relations services rendered. The Company valued these common shares at the fair value of $16.70 post-split ($0.0167 pre-split) per common share (see Note 6) based on the quoted trading price of the common stock on the grant date which is the measurement date and recorded stock-based compensation of $1,500 during the nine months ended September 30, 2013.
 
In April 2013, the Company issued 200 post-split (200,000 pre-split) shares of its common stock to two consultants for services rendered in April 2013 and May 2013. The Company valued these common shares at the fair value of $12 post-split ($0.012 pre-split) per common share based on the quoted trading price of the common stock on the grant date which is the measurement date. In connection with issuance of these common shares, the Company recorded stock-based consulting of $2,400.

On September 6, 2013, the Company entered into subscription agreements with 15 subscribers to issue a total of 10,910,000 shares of common stock for $10,910 at a price per share of $0.001.

On September 6, 2013, the Company issued 20,000,000 shares of its common stock to the Company’s chief executive officer to settle accrued salary. The Company valued these common shares at the fair value of $0.001 per common share based on the sale of common stock in a private placement at $0.001 per common share. In connection with issuance of these common shares, the Company reduced accrued salary by $20,000 for the nine months ended September 30, 2013.
 
 
11

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 5 – STOCKHOLDERS’ (DEFICIT) EQUITY (continued)
 
On September 26, 2013, the Company entered into stock purchase agreements with 2 investors for the purchase of 200,000 shares of common stock for $50,000 at a price per share of $0.25.

Common stock warrants

On January 16, 2013, the Company entered into an Advisory Board Agreement (the “Agreement”). Pursuant to the Agreement, the Company issued warrants exercisable for the purchase of 100 post-split (100,000 pre-split) shares of the Company’s common stock at an exercise price equal to $50 post-split ($0.05 pre-split) per share.  The warrants will be exercisable until January 2016. The Company accounted for the equity instruments issued pursuant to the Agreement in accordance with ASC 505-50, “Equity Based Payments to Non-Employees”.  

The Company calculated the fair value of the 100 post-split (100,000 pre-split) warrants granted using the Black-Scholes option pricing model and recorded the fair value of $783. In applying the Black-Scholes method, the Company calculated volatility using actual historical volatility, utilized discount rates obtained from the Federal Reserve Statistical Release for treasury instruments of the same duration, and an expected term based on the estimated contractual term of the warrants of 3 years. The value of the warrant on the grant date was based upon the following Black-Scholes assumptions; exercise prices of $50 post-split ($0.05 pre-split), actual historical volatility of 123%, expected term of 3 years and discount rate of 0.39%. In connection with these warrants, the Company recorded stock-based consulting expense of $783 during the nine months ended September 30, 2013.

Warrant activities for the nine months ended September 30, 2013 are summarized as follows:

   
Number of Warrants
   
Weighted
Average
Exercise Price
   
Weighted Average Remaining Contractual Life (Years)
   
 
Aggregate Intrinsic Value
 
Balance at December 31, 2012
   
8,914
   
$
260.0
             
Issued
   
100
     
50.0
             
Exercised/forfeited
   
(2,200
)
   
270.0
             
Balance at September 30, 2013
   
6,814
   
$
249.6
     
3.15
   
$
-
 
Warrants exercisable at September 30, 2013
   
6,814
   
$
249.6
     
3.15
   
$
-
 

Stock option activities for the nine months ended September 30, 2013 are summarized as follows:

   
Number of Options
   
Weighted
Average
Exercise Price
   
Weighted Average Remaining Contractual Life (Years)
   
 
Aggregate Intrinsic Value
 
Balance at December 31, 2012
   
525
   
$
140.00
             
Granted
   
-
     
-
             
Exercised/forfeited
   
-
     
-
             
Balance at September 30, 2013
   
525
   
$
140.00
     
3.28
   
$
-
 
Options exercisable at September 30, 2013
   
525
   
$
140.00
     
3.28
   
$
-
 

The weighted-average grant-date fair value of options granted to employees/consultants during the nine months ended September 30, 2013 was none. As of September 30, 2013, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $0.

 
12

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 6 – COMMITMENT AND CONTINGENCIES

Licensing Agreements related to discontinued operations

NEP Snooki Enterprises, LLC

On October 17, 2011 (the “Effective Date”), the Company entered into an exclusive, worldwide licensing agreement (the “License Agreement”) with NEP Snooki Enterprises, LLC (the “NEP”) and Starz Management & PR (“Starz”), which granted the Company the right to use Nicole Polizzi’s (known by the stage name “Snooki”) name and likeness in the development, manufacture, marketing, sale and distribution of social applications and social games (the “Apps”) to be released and offered on the Android, Apple's iOS, Facebook, and Google+ platforms. Pursuant to the License Agreement, the Company was to develop a total of four Apps within one year of the Effective Date (the “Initial Term”). Through June 2012, the Company released three Apps and will not issue the fourth App. The term of the License (the “Term”) was one year from the earlier of (i) the Release Date of fourth App described above or (ii) eight months after the Effective Date. Accordingly, the License agreement expired in June 2013 and the Company will not renew this agreement, in consideration for the exclusive license granted by NEP during the Initial Term, the Company paid a non-refundable license fee of $55,000 (the “Cash Fee”). The Company shall be entitled to recover the Cash Fees or Additional Cash Fees from any revenue generated by the sale of the products related to the License Agreement by deducting the Cash Fee (or Additional Cash Fees, if applicable) prior to the payment of any royalties, as described below; provided, however, the Company shall only be entitled to deduct a maximum of $13,750 for each product.

The Company shall pay NEP non-returnable royalties (“Royalties”) in an amount equal to 50% of the revenue generated, directly or indirectly, from the virtual sale of the Products, advertising sponsorship, commercial tie-ins and/or product placement related to the licensed property, and shall pay Starz Royalties equal to 10% of the revenue generated from the sale of the products related to the licensed property. The revenue shall be calculated as the gross revenue less any mandatory third party commissions, including fees from all sites that sell and market the products and any additional marketing or advertising expenses, and any recovery of Cash Fees as permitted, as discussed above.

In addition, on the Effective Date, the Company issued NEP or assignees warrants exercisable for the purchase of 1,100 post-split (1,100,000 pre-split) shares of the Company’s common stock at an exercise price equal to $310 post-split ($0.31 pre-split) per share on a for-cash or cashless exercise basis (the “Warrants”) and 70 post-split (70,000 pre-split) shares of the Company’s common stock were issued to Starz.  The Warrants were exercisable by Licensor until the later of (i) one hundred fifty (150) days following the end of the Term (and any extensions thereto) or (ii) eighteen (18) months following the Effective Date.  The warrants expired in April 2013. 

In September 2013, the Company decided to discontinue its social games and mobile applications. Accordingly, transactions under this licensing agreement have been included in discontinued operations.
 
Mike Sorrentino and MPS Entertainment LLC

On February 9, 2012 (the “Effective Date”), the Company entered into an exclusive, worldwide licensing agreement (the “MPS License Agreement”) with Mike Sorrentino and MPS Entertainment LLC (“MPS”) and Starz Management & PR (“Starz”), which granted the Company the right to use Mike Sorrentino’s (known by the stage name “The Situation”) name and likeness in the development, manufacture, marketing, sale and distribution of social applications and social games (the “Apps”) to be released and offered on the Android, Apple's iOS, Facebook, and Google+ platforms. Pursuant to the MPS License Agreement, the Company will develop a total of four Apps within 18 months of the Effective Date (the “Initial Term”). The Company issued one App in May 2012 and has not released and does not intend to release any additional Apps under the MPS License Agreement.  The MPS License Agreement expired in August 2013.

The Company shall pay MPS non-returnable royalties (“Royalties”) in an amount equal to 42.5% of the revenue generated, directly or indirectly, from the virtual sale of the Products, advertising sponsorship, commercial tie-ins and/or product placement related to the licensed property, and shall pay Starz Royalties equal to 15% of the revenue generated from the sale of the products related to the licensed property. The revenue shall be calculated as the gross revenue less any mandatory third party commissions, including fees from all sites that sell and market the products and any bonus payments made. The Company shall pay a bonus to Licensor equal to $10,000 per 100,000 active users up to 1,000,000 active users. The bonus is fully recoupable by the Company against future revenues.

In consideration for the exclusive license granted by Licensor during the Term, the Company issued Licensor warrants exercisable for the purchase of 1,000 post-split (1,000,000 pre-split) shares of the Company’s common stock at an exercise price equal to $230 post-split ($0.23 pre-split) per share (the “Situation Warrants”) and the Company has issued Starz warrants exercisable for the purchase of 100 post-split (100,000 pre-split) shares of the Company’s common stock at an exercise price equal to $230 post-split ($0.23 pre-split) per share (the “Starz Warrants”).  The Situation Warrants are exercisable by Licensor until the later of (i) one hundred fifty (150) days following the end of the Term (and any extensions thereto) or (ii) eighteen (18) months following the Effective Date.  The warrants expired in August 2013. 

In September 2013, the Company decided to discontinue its social games and mobile applications. Accordingly, transactions under the MPS License Agreement have been included in discontinued operations.

 
13

 
 
FAL EXPLORATION CORP.
(FORMERLY APPS GENIUS CORP.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
 
NOTE 6 – COMMITMENT AND CONTINGENCIES (continued)

Consulting Agreement for Public Relations Services

On February 6, 2013, the Company entered into a 5 month consulting agreement for public relations services.  Pursuant to the consulting agreement, the Company shall pay the consultant (a) $1,250 per month and (b) $750 per month payable in the Company’s common stock equal to either the previous months running average of the daily close price or $16.70 post-split ($0.0167 pre-split), whichever is greater. In March 2013, the Company issued 90 post-split (89,820 pre-split) shares of its common stock to such consultant which represents payment for February and March 2013 services. The consulting agreement maybe cancelled in writing by either party with at least 30 days notice. Effective March 31, 2013, the Company cancelled this consulting agreement. The Company has paid its obligation under this consulting agreement.
 
NOTE 7 – SUBSEQUENT EVENTS
 
Effective October 7, 2013 the Company entered into a Securities Purchase Agreement with FAL Minerals LLC (see Note 1). Pursuant to the Agreement the Company agreed to purchase from FAL newly issued membership interests of FAL representing twenty percent (20%) of the issued and outstanding membership interests of FAL. The purchase price for the Interests is $100,000 payable in common stock at a per share price of $0.25 or a total issuance of 400,000 shares. On October 7, 2013, the Company issued 400,000 shares of common stock to FAL in exchange for a 20% interest in FAL (see Note 1).
 
On November 13, 2013 the Company entered into a Real Estate Purchase and Sale Agreement (hereinafter referred to as “Contract”)  for the purchase and sale for 220 acres of land in Clay County, Alabama.  The terms of the Contract provide for a 10 day inspection period, and a closing of title 10 days after the Company completes its inspections.  Pursuant to the Contract, the Purchase Price will be $400,000 and payable as follows:  At Closing, the Company agrees to issue, on a pro rata basis to each (5) Sellers in proportion to their percentage ownership in the Property, a total of 800,000 shares of stock of the Company, based on a price of $0.25 per share. In addition, at Closing, the Company will execute a promissory note (the “Note”) in the principal amount of $200,000, payable to each Seller in proportion to each Sellers’ ownership interest in the Property, bearing interest at the lowest imputed rate, with no payments of principal or interest due or payable until the thirty-sixth month after Closing (the “Maturity Date”).  On the Maturity Date, the Company shall elect to either (i) pay all outstanding principal and interest in cash, or (ii) issue stock in the Company to each Seller in proportion to its ownership interest in the Property, in an aggregate amount equal to the principal and interest outstanding on the Maturity Date.  The value of the stock and the determination of the number of shares to be issued to satisfy (ii) above shall be the then market price on the Maturity Date, discounted by ten percent (10%).  The Company may prepay the Note in whole or in part at any time prior to the Maturity Date.
 
The State of Alabama had last issued a permit to mine Gold, Graphite and Mica on the Property which expired on July 17, 2013.  The Company plans to reapply for a new permit to explore the property, and intends to utilize it as the main production plant assuming the Brown Mine or other mines in close proximity to the Property whereby the Company currently owns a 20% interest in the Brown mining rights, proves to be commercially viable and/or may seek to monetize the graphite which is contained on the 220 acres should that prove to be commercially viable.
 
 
14

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

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
 
Overview
 
We were incorporated in the State of Nevada on December 17, 2009 as Apps Genius Corp.  On July 9, 2013, we changed our name to FAL Exploration Corp.

Initially, we had developed, marketed, published and distributed social games and software applications that consumers could use on a variety of platforms. Included were such platforms as social networks, wireless devices such as cellular phones and smart phones including the Apple iPhone™ and standalone websites. We released several applications including ‘Bruisers’, a game application for Facebook, ‘My Mad Millions’, a game application for Facebook™, Drama Llama, an application for Facebook™, ‘Slap a Friend’, a game application for the Apple Iphone™, Bed Bug Alert, a utility application for Apple Iphone™ and Crazy Dream Application for Facebook™, Snookify Me! application for Iphone and Android, and Snooki’s Match Game Application for Facebook amongst other games and apps. Beginning in January 2013, we had changed the focus of our Business Plan to develop and operate a crowdfunding platform.  In September 2013, we decided to discontinue the social games and mobile applications and crowdfunding business. We intend to focus our efforts on mineral exploration following the purchase of 20% ownership in FAL Minerals LLC in October 2013.

Plan of Operations
 
Effective October 7, 2013, we entered into a Securities Purchase Agreement with FAL Minerals LLC. Pursuant to the Agreement we agreed to purchase from FAL newly issued membership interests of FAL representing twenty percent (20%) of the issued and outstanding membership interests of FAL. The purchase price for the Interests is $100,000 payable in common stock at a per share price of $0.25 or a total issuance of 400,000 shares. On October 7, 2013, we issued 400,000 shares of common stock to FAL in exchange for a 20% interest in FAL.

We intend to acquire minority and majority interest in natural resource properties located throughout the United States. Our initial project is a twenty percent interest in an open pit mine located in Clay County Alabama also known as the Brown Mine. Initial test results have shown gold bearing materials. We intend to explore the property to determine the commercial viability of the project. Historically, graphite and gold have been mined in the area. The property which is over two hundred and twenty acres contains graphite and some surface gold. We plan to explore the property and either may utilize it as the main production plant should the Brown Mine prove to be commercially viable or seek to monetize the graphite, should it prove to be commercially viable.

Limited Operating History

We have generated a limited financial history and have not previously demonstrated that we will be able to expand our business. Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.
 
Critical Accounting Policies and Estimates

While our significant accounting policies are more fully described in Note 1 to our financial statements for the nine months ended September 30, 2013, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.
 
 
15

 
 
Impairment of long-lived assets

In accordance with ASC Topic 360, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. We did not record any impairment charges during the nine months ended September 30, 2013 and 2012.
 
Stock-based compensation

We account for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. We account for non-employee share-based awards in accordance with ASC Topic 505-50.

Recent accounting pronouncements

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Results of Operations
 
Comparison of the Three and Nine Months Ended September 30, 2013 and 2012
 
Revenues

We have not generated revenues to date in connection with our current mineral exploration business.
 
Operating Expenses

For the three months ended September 30, 2013 and 2012, operating expenses amounted to $45,686 and $334,427, respectively, a decrease of $288,741 or 86%. For the nine months ended September 30, 2013 and 2012, operating expenses amounted to $190,010 and $819,040 respectively, a decrease of $629,030 or 77%. Changes in operating expenses consisted of the following:

   
For the Three
 Months ended
September 30, 2013
   
For the Three
Months ended
September 30, 2012
   
For the Nine
Months ended
September 30, 2013
   
For the Nine Months ended September 30, 2012
 
                         
Administrative compensation
 
$
30,000
   
$
47,000
   
$
114,000
   
$
106,000
 
Professional fees
   
10,567
     
274,479
     
56,298
     
649,478
 
Other selling, general and administrative
   
5,119
     
12,948
     
19,712
     
63,562
 
Total
 
$
45,686
   
$
334,427
   
$
190,010
   
$
819,040
 
 
*
For the three months ended September 30, 2013, administrative compensation decreased by $17,000 or 36% as compared to the three months ended September 30, 2012.  For the nine months ended September 30, 2013, administrative compensation increased by $8,000 or 8% as compared to the nine months ended September 30, 2012. The increase during the nine month period is primarily attributable to an increase in wages of our Chief Executive Officer. We expect administrative salaries to increase in 2013 as we increase our operations.
 
 
*
For the three months ended September 30, 2013, professional fees decreased by $263,912 or 96% as compared to the three months ended September 30, 2012. For the nine months ended September 30, 2013, professional fees decreased by $593,180 or 91% as compared to the nine months ended September 30, 2012. During the three and nine months ended September 30, 2013, the decrease is primarily attributable to a decrease in consulting and investor relations fees. We expect professional fees to increase as we incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. 
 
 
*
For the three months ended September 30, 2013, other selling, general and administrative expenses decreased by $7,829 or 60% as compared to the three months ended September 30, 2012.  For the nine months ended September 30, 2013, other selling, general and administrative expenses decreased by $43,850 or 69% as compared to the nine months ended September 30, 2012.  

 
16

 
 
Other Income

For the three months ended September 30, 2013 and 2012, we recognized other income (expense) of $0 and $192, respectively. For the nine months ended September 30, 2013 and 2012, we recognized other expense of $111 and $85, respectively. The decrease in interest income was attributable to having a lower cash balance with which to earn interest on. Additionally, for the nine months ended September 30, 2013 and 2012, we incurred aggregate interest expense of $4 and $639 related to outstanding notes payable and related party notes, respectively, and in the nine months ended September 30, 2013 we lost $115 in the disposal of furniture.

Discontinued Operations

The following table indicates selected financial data of the Company’s discontinued operations of its social games and mobile applications and crowdfunding business.

   
For the Three Months ended September 30,
   
For the Nine Months ended September 30,
 
   
2013
   
2012
   
2013
   
2012
 
Revenues
  $ 121     $ 1,499     $ 1,163     $ 6,473  
Cost of revenues
    -       -       -       -  
Operating and other non-operating expenses
    -       (112,426 )     (16,368 )     (415,930 )
Income (loss) from discontinued operations
  $ 121     $ (110,927 )   $ (15,205 )   $ (409,457 )

Net Loss

As a result of the factors described above, our net loss for the three months ended September 30, 2013 and 2012 was $45,565 and $445,162, or a net loss per common share of $0.01 and $13.04 (basic and diluted), respectively. Our net loss for the nine months ended September 30, 2013 and 2012 was $205,326 and $1,228,582, or a net loss per common share of $0.08 and $37.96 (basic and diluted), respectively.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. To date, we have funded our operations through the sale of our common stock. Our primary uses of cash have been for salaries and fees paid to third parties for professional services. All funds received have been expended in the furtherance of growing the business. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

 
● 
An increase in working capital requirements to finance our current mineral explorations business,
 
 
● 
Addition of administrative and sales personnel as the business grows, and
 
 
● 
The cost of being a public company.
 
Our net revenues are not sufficient to fund our operating expenses.  At September 30, 2013, we had a cash balance of $47,068. We have been funding our operations through the sale of our common stock for operating capital purposes. We received net proceeds from the sale of our common stock of $60,910 during the nine months ended September 30, 2013.

We currently have no material commitments for capital expenditures. We will need to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.   We estimate that based on current plans and assumptions, that our available cash will be insufficient to satisfy our cash requirements under our present operating expectations. Other than working capital and funds received pursuant to the Securities Purchase Agreement, we presently have no other alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations and grow our company. We will need to raise significant additional capital to fund our operations and to provide working capital for our ongoing operations and obligations. We do not anticipate we will be profitable in 2013.  Therefore our future operation is dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will be required to cease our operations.
 
 
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We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern on their audit opinion for the year ended December 31, 2012.
 
Our liquidity is negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.

Our use of cash flow forecast within 12 months is estimated  below:
 
Description
 
Estimated Cost
 
Selling and marketing expenses
 
$
5,000
 
Professional fees
   
65,000
 
General and administrative
   
70,000
 
Total
 
$
140,000
 
 
Professional fee - Primarily includes professional fees associated with becoming a public company as summarized as follows:
 
   
Amount
 
Auditing fees
 
$
25,000
 
Legal fees
   
30,000
 
Other professional fees
   
10,000
 
Total
 
$
65,000
 
 
 General and administrative – Over the next 12 months, we estimate that we will incur general and administrative expenses as follows:
 
   
Amount
 
Administrative salaries and benefits
 
$
60,000
 
Other
   
10,000
 
Total
 
$
70,000
 
 
Our operating funds are not sufficient, therefore we will have to scale back our operating plans and it will be unlikely that we will be able to pursue our overall business plan without raising additional working capital.

Operating activities
 
For the nine months ended September 30, 2013, net cash flows used in operating activities amounted to $91,558 and was primarily attributable to our net losses of $205,326 offset by the add back of non-cash items such as depreciation expense of $995, loss on disposal of property and equipment of $115 and stock based compensation and fees of $4,683, and changes in operating assets and liabilities of $107,975.
 
For the nine months ended September 30, 2012, net cash used in operations of $535,661 was primarily attributable to our net losses of $1,228,582 offset by the add back of non-cash items such as depreciation expense of $1,010 and stock based compensation and fees of $652,897, and changes in operating assets and liabilities of $39,014.

 
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Financing activities
 
For the nine months ended September 30, 2013 and 2012 net cash flows provided by financing activities was $60,910 and $721,141, respectively. During the nine months ended September 30, 2013, we received net proceeds from sale of common stock of $60,910. During the nine months ended September 30, 2012, we received net proceeds from sale of common stock of $838,150 and proceeds from notes payable of $7,500 offset by the payments of notes payable $118,650 and the payment of insurance premium finance payable of $5,859.
 
Contractual Obligations

In the normal course of business, we may have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. At September 30, 2013, we did not have any material contractual obligations that would require us to pay cash in future periods.
 
Off-Balance Sheet Arrangements
 
We have no off-balance sheet arrangements.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
Not required for smaller reporting companies.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of September 30, 2013. Based on this evaluation, our principal executive officer and principal financial officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules.
 
Changes in Internal Controls
 
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses including a lack of segregation of duties) in our internal controls over financial reporting that occurred during the quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
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PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
We are not a party to, and none of our property is the subject of, any pending legal proceedings. To our knowledge, no governmental authority is contemplating any such proceedings.

Item 1A. Risk Factors.
 
Not required to be provided by smaller reporting companies.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
On September 6, 2013, the Company entered into subscription agreements with 15 subscribers to issue a total of 10,910,000 shares of common stock for $10,910 at a price per share of $0.001.
 
On September 6, 2013, the Company issued 20,000,000 shares of its common stock to the Company’s chief executive officer for accrued salary. The Company valued these common shares at the fair value of $0.001 per common share based on the sale of common stock in a private placement at $0.001 per common share. In connection with issuance of these common shares, the Company reduced accrued salary  in the amount of $20,000 for the nine months ended September 30, 2013.
 
These issuances were exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that Act.  Each person to whom the shares were issued was an accredited investor and acquired the shares for investment and not with a view to the sale or distribution and received information concerning us, our business and our financial condition, and the stock certificates bears an investment legend.  No brokerage fees were paid in connection with any of these stock issuances.

Item 3. Defaults Upon Senior Securities.
 
None.

Item 4. Mine Safety Disclosures.
 
Not applicable
 
Item 5. Other Information.
 
None.
  
Item 6. Exhibits.

Exhibit No.
 
Description
 
       
31.1*
 
Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
     
31.2*
 
Rule 13a-14(a)/15d-14(a) certificate of Principal Financial Officer
     
32.1**
 
Section 1350 certification of Chief Executive Officer and Chief Financial Officer
 
101.INS
XBRL Instance Document
   
101.SCH
XBRL Taxonomy Schema
   
101.CAL
XBRL Taxonomy Calculation Linkbase
   
101.DEF
XBRL Taxonomy Definition Linkbase
   
101.LAB
XBRL Taxonomy Label Linkbase
   
101.PRE
XBRL Taxonomy Presentation Linkbase

* Filed herewith.
** In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are furnished and not filed.
 
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
FAL EXPLORATION CORP.
     
Date: November 13, 2013
By:
/s/ Adam Kotkin  
   
Adam Kotkin, Chief Executive Officer
(Principal Executive Officer)
     
Date: November 13, 2013
By:
/s/ Adam Wasserman 
   
Adam Wasserman, Chief Financial Officer
and Principal Financial Officer and Principal Accounting Officer
 
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