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EX-31.1 - CERTIFICATION - Excel Corpf10k2013ex31i_excelcorp.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

or

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

For the transition period from                to                

Commission File Number:  333-173702
 
Excel Corporation
 (Exact name of registrant as specified in its charter)

Delaware
 
27-3955524
(State or other jurisdiction of
 
(I.R.S. Employer)
incorporation or organization)
 
Identification No.)

595 Madison Avenue, Suite 1101, New York, NY
 
10022
(Address of principal executive offices)
 
(Zip Code)

212-377-0100
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
 
Name of Each Exchange on Which Registered
None
 
N/A

Securities registered pursuant to Section 12(g) of the Act:  N/A

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes o    No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x
 
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. (Check one):
 
Large accelerated filer
o
Accelerated filer
o
Non-Accelerated filer
o
Smaller reporting company
x
(Do not check if smaller reporting company)
   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o    No x

The number of shares of Common Stock held by non-affiliates as of April 11, 2014 was 12,613,733 shares, all of one class of common stock, par value $0.0001 per share, having an aggregate market value of approximately $4,162,532 based upon the closing price of registrant’s common stock on such date of $0.33 per share as quoted on the Over the Counter Bulletin Board. For purposes of the foregoing calculation, all directors, executive officers, and 5% beneficial owners have been deemed affiliated.

As of April 11, 2014, there were 68,693,462 shares of common stock, par value $0.0001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
 
None
 


 
 

 
 
TABLE OF CONTENTS

PART I
   
     
Item 1.
Business
3
Item 1A.
Risk Factors
10
Item 1B.
Unresolved Staff Comments
22
Item 2.
Properties
23
Item 3.
Legal Proceedings
23
Item 4.
Mine Safety Disclosures
23
     
PART II
   
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
24
Item 6.
Selected Financial Data
24
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
24
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
27
Item 8.
Financial Statements and Supplementary Data
28
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
29
Item 9A.
Controls and Procedures
29
Item 9B.
Other Information
29
     
PART III
   
Item 10.
Directors, Executive Officers and Corporate Governance
30
Item 11.
Executive Compensation
32
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
32
Item 13.
Certain Relationships and Related Transactions, and Director Independence
33
Item 14.
Principal Accountant Fees and Services
33
     
PART IV
   
Item 15.
Exhibits and Financial Statement Schedules
34
     
Signatures
36
 
 
 

 
 
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements,” all of which are subject to risks and uncertainties.  Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning.  One can identify them by the fact that they do not relate strictly to historical or current facts.  These statements are likely to address our growth strategy and financial results.  One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward looking statements.  These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not.  No forward looking statement can be guaranteed and actual future results may vary materially.

Information regarding market and industry statistics contained in this Report is included based on information available to us that we believe is accurate.  It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis.  We have not reviewed or included data from all sources, and cannot assure investors of the accuracy or completeness of the data included in this Report.  Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of our services.  We do not assume any obligation to update any forward-looking statement.  As a result, investors should not place undue reliance on these forward-looking statements.

PART I

Item 1.             Business.

Corporate History

We were incorporated in the state of Delaware in November 2010 as Ruby Worldwide, Ltd. for the purpose of commencing a licensing business.  In November 2010 we amended our Articles of Incorporation to amend our authorized capital from a non-stock corporation to its present authorized capital of 200,000,000 shares of common stock, $.0001 par value and 10,000,000 shares of preferred stock, $.0001 par value. In January 2011 we again amended our Articles of Incorporation to change our corporate name from Ruby Worldwide, Ltd. to Excel Corporation (the “Company”).

On January 14, 2013, we entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with Excel Business Solutions, Inc., a Delaware corporation (“EBSI”), and ECB Acquisition Corp., our newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transaction contemplated under the Merger Agreement (the “Merger”), Acquisition Sub merged with and into EBSI, and EBSI, as the surviving corporation, became a wholly-owned subsidiary of the Company.
 
Pursuant to the terms and conditions of the Merger Agreement, at the closing of the Merger, each share of EBSI’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive an aggregate of 33,532.446 shares of common stock, par value $0.0001 per share, of the Company, with fractional shares of the Company’s common stock rounded up or down to the nearest whole share.
 
On August 19, 2013, Excel Cash Solutions, Inc. (“ECSI”) was formed as a wholly owned subsidiary of Excel Business Solutions, Inc.  
 
On September 25, 2013, Excel Capital Solutions, LLC (“ECap”) was formed as a wholly owned subsidiary of Excel Cash Solutions, Inc.
 
On March 20, 2014, 420 Solutions Corporation (“420”) was formed as a wholly owned subsidiary of the Company.
 
As of December 31, 2013, there were 67,064,892 shares of common stock issued and outstanding.

Principal Services

Our business and main focus is now concentrated on the merchant servicing business, which began when we acquired with EBSI, and continued with the formations of ECSI, Ecap and 420.

Merchant Acquisition Business

As a result of the Merger, EBSI became a wholly-owned subsidiary of the Company and the Company succeeded to the business of EBSI.  The Company is a merchant acquirer (as described below) with the intention of providing credit and debit card processing services to merchants in a variety of industries.  The Company also plans to engage in financing the acquisition of existing merchant credit card portfolios. As of the date of this report, the Company has begun servicing a limited number of merchants.  The Company is also actively looking to acquire existing companies with active operations in the merchant servicing business, and on February 17, 2014, signed a definitive Securities Exchange Agreement for the acquisition of 90% of the membership interests of Payprotec Oregon, LLC d/b/a Securus Payments and 100% of the membership interests of Securus Consulting, LLC ("Securus"). Securus is a merchant acquirer providing credit and debit card processing services to merchants in all 50 states.
 
 
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Overview
 
In the Payment Processing Industry, EBSI acts as a merchant acquirer.  Our primary business will be to provide bankcard payment processing services, receivable purchases, and credit card terminal leases to merchants in the United States.

On the processing side, this entails establishing a contractual relationship with a processor.  The processer, in turn, facilitates the exchange of information and funds between merchants and cardholders' financial institutions, providing end-to-end electronic payment processing services to merchants, including merchant set-up and training, transaction authorization and electronic draft capture, clearing and settlement, merchant accounting, merchant assistance and support and risk management. We will primarily target small and mid-sized merchants as clients. Such clients will be solicited directly through an internal sales effort and by recruiting Independent Sales Organizations (“ISOs”).   ISOs are sales agents authorized by contract with one or more credit card processors to sell processing and acquiring services on their behalf. ISOs navigate the merchant’s application for processing and acquiring services through the process of approvals, credit checks, guarantees, etc. that are required before the merchant can be approved to accept consumer credit cards for payment.
 
In addition, we plan on acquiring recurring monthly residual income streams derived from credit card processing fees paid by retail stores in the United States (the “Residual Portfolios”). Small and medium-sized retail merchants typically buy their credit card processing and acquiring services from ISOs in the U.S. Consistent with being a merchant acquirer, we will not act as a credit card processor, but simply as a purchaser of revenue streams resulting from the relationships between processors and ISOs and other ISOs. In addition, we may also seek to acquire servicing rights with respect to Residual Portfolios acquired from ISOs.  EBSI has entered into a non-binding Letter of Intent with RBL Capital Group, LLC (“RBL”) to serve as a facility to fund the acquisition of such residual income streams.  RBL may underwrite each prospective portfolio and subsequently provide funding for the purchase of the respective portfolio.
 
Our purchases of Residual Portfolios are expected to range in size and complexity from one-time events involving a single portfolio to multiple events over an extended period covering the entire current and possibly future portfolios of an ISO.  Our aim is to acquire merchant Residual Portfolios by acquiring them directly from the ISOs that originated the contracts with the merchants. In a Residual Portfolio purchase, we buy the rights to the residual revenue streams owned by the ISO for a negotiated amount. Prior to acquisition of the Residual Portfolio from the ISO, our company and the ISO notify the processor that we plan to acquire the rights to the Residual Portfolio and that all future residual payments should be paid to us.  Processors are required to approve all such acquisitions as a condition of closing.

Credit card terminals are a key product offering that complements our merchant processing services.  Typically, when reviewing the processing needs of a merchant, we can find options and benefits for the merchant to upgrade their terminal, leading to lowered monthly processing fees for the merchant.  A new terminal is normally leased at a monthly rate.  We, in turn sell the lease paper to a leasing company, and collect a percentage on the total lease value.

Receivable purchases involve the purchase of a merchant’s future receivables for a discounted price.  These allow a merchant to get up front cash for immediate business needs.  We act as a broker between the merchant and a prospective buyer for their receivables, and provide us another product offering to combine with our processing services.  Once a buyer is found, we receive a commission on the discount the buyer receives for the purchase.

The Industry

The payment processing industry provides merchants with credit, debit, gift and loyalty card and other payment processing services, along with related information services. The industry continues to grow as a result of wider merchant acceptance, increased consumer use of bankcards and advances in payment processing and telecommunications technology. According to The Nilson Report, February 2012, combined consumer and commercial credit, debit, and prepaid cards generated $3.595 trillion in purchase volume in 2011, up 10.4% from 2010.  The proliferation of bankcards has made the acceptance of bankcard payments a virtual necessity for many businesses, regardless of size, in order to remain competitive. This use of bankcards, enhanced technology and security initiatives, efficiencies derived from economies of scale and the availability of more sophisticated products and services to all market segments has led to a highly competitive and specialized industry.

The detailed network of a credit card transaction includes several aspects: credit card associations (i.e. Visa and MasterCard); card issuers; merchants; merchant acquirers; processors; and the consumers who are buying the goods and merchants that are selling them.  The card issuers distribute cards to consumers, bill them and collect payment from them.  The processor is responsible for delivering the transaction to the appropriate card issuer so that the customer is billed and the merchant receives funds for the purchase.  The merchant acquirer recruits merchants to accept cards and provides the front-end service of routing the transaction to the network’s processing facilities.  Merchant acquirers often delegate the actual processing to third-party service providers.

Merchant acquirer revenue is primarily comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions.  Fees are calculated on either a percentage of the dollar volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction.   
 
 
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Bankcard processing revenue from contracted merchants is typically recurring in nature.  The industry average term of a merchant processing contract is three years.  Our combined product offerings in the form of receivable purchases and upgraded credit card terminal leases have the added value of establishing a longer term relationship with the customer, as they have the ability to use us for many service needs.
 
We anticipate the uptrend in credit card use to continue. As consumers age, we expect that they will continue to use the payment technology to which they have grown accustomed. Young consumers have become accustomed to using bankcards and other electronic payment methods for purchase. As these consumers, who have witnessed the wide adoption of card products, technology and the Internet, comprise a greater percentage of the population and increasingly enter the work force, it can be expected that purchases using card-based payment methods will comprise an increasing percentage of total consumer spending.

The proliferation of credit and debit cards has made the acceptance of bankcards a necessity for businesses, both large and small, in order to remain competitive. As a result, many of these small to medium-sized businesses are seeking to provide customers with the ability to pay for merchandise and services using credit or debit cards, including those in industries that have historically accepted cash and checks as the only forms of payment for their products. Previously, larger acquiring banks have marketed credit card processing services to national and regional merchants and have not focused on small to medium-sized merchants, as small to medium-sized merchants have often been perceived as too difficult to identify and expensive to service.  These merchants generally have a lower volume of credit card transactions, are difficult to identify and have traditionally been underserved by credit card processors.

Market researchers expect dramatic growth in card-not-present transactions due to the rapid growth of the Internet. According to Forrester Research, US online sales were $155 Billion in 2009 and projected to be nearly $250 Billion in 2014. This growth is based on the continued shift of sales away from traditional brick and mortar stores to online and catalog purchases and the trend is projected to continue.  Furthermore, where concerns around secure transactions had once been in the forefront, as those concerns continue to subside, the reluctance to use bankcards will further diminish and the uptrend in bankcard volume will likely be bolstered.

Our Services

We will sell electronic payment processing services, which include credit and debit card processing, check approval, and ancillary processing equipment and software services to merchants who accept credit cards, debit cards, checks, and other non-cash forms of payment.  We will provide merchants the option to upgrade their credit card terminals to current technology, and in doing so, provide them opportunities to reduce their monthly processing fees.  In addition, we will acquire monthly residual streams currently in place between ISOs and processors.

We will also facilitate the process for merchants to connect with companies interested in purchasing their future receivables.

On June 7, 2013, the Company through its subsidiary, EBSI,  entered into a Management Services Agreement (“Tribul Agreement”) with Tribul Merchant Services, LLC, Tribul, LLC, Tribul Cash, LLC, Tribul of America, LLC and Second Source Funding LLC (collectively, the “Tribul Entities”), each a New York limited liability company, under which Tribul Entities retained the services of Excel to perform management and administrative services (with respect to the apportionment and settlement of collected commissions, fees, payments, charges and/or “residual revenues” among banks, financial institutions, credit card processors, independent sales organizations (“ISOs”), super-ISOs, sales representatives, sales agents, ancillary service providers and merchants (collectively, and as more fully described in the Agreement A,  “ISO Office Functions”) as agent and on behalf of the Tribul Entities.

Under the terms of the Tribul Agreement, until Excel has purchased a minimum of $80,000 per month in residual revenues from ISOs and super-ISOs currently doing business directly with the Tribul Entities, the Tribul Entities would pay to Excel as the managing agent a service fee of $29,500 per month and reimburse Excel for its reasonable out-of-pocket expenses incurred in the course of performing the ISO Office Functions.  Excel was also granted a limited, non-transferable, non-exclusive, royalty-free license and access to utilize Tribul Entities’ online systems for purposes of performing the ISO Office Functions. Pursuant to the Agreement, the Tribul Entities were not allowed to enter into similar agreements with any third parties.  However, in November 2013, the agreement was terminated due to Tribul Entities inability to continue paying the management fee.

On October 25, 2013, the Company through its subsidiary, EBSI, entered into an ISO Agreement (“TOT Agreement”) with TOT Payments, LLC, a Florida limited liability company (“TOT”), under which Excel agreed to solicit merchants (the “Merchants”) for TOT to provide credit and debit card processing services to Merchants.
 
 
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The initial term of the Tot Agreement was five years and would automatically renew for additional successive one year periods, unless terminated pursuant to the terms of the Agreement. During the term of the Agreement, TOT is granting Excel a non-transferable, non-exclusive sub-license to use for its own business the processing, CRM and merchant support programs and platforms of TOT's processor(s). Under the Agreement, Excel would market the credit card and debit card processing services of TOT, and would encourage qualified customers to become Merchants.  During the first 12 months, TOT would advance to Excel on a monthly basis an amount not to exceed $90,000/month to support Excel’s expansion and marketing efforts (the “Advance”).  Excel was to have a five (5) month ramp up period and thereafter will be required to generate sufficient business and monthly minimum fees for TOT.   The minimum fee requirements under the Agreement were 50% of the Advance within five (5) months of the effective date of the Agreement, 80% within eight (8) months, and 100% within twelve (12) months.  Should Excel fail to reach minimum fee requirements, TOT was to have the right to adjust the revenues due to be paid to Excel under the Agreement  to cover any shortfall.
 
Under the terms of the Agreement, the initial revenue split between Excel and TOT was to be 90% and 10% respectively, and Excel was to be entitled to monthly Compensation (also known in the industry as “Residuals”, which is defined in the Agreement as Excel’s 90% of the revenues for Merchants, less any applicable fees or set-offs permitted to be charged by TOT under the Agreement). Excel would receive the Merchants Residuals for life; Excel’s entitlement to receive its Residuals and Compensation survives the termination or expiration of the Agreement (so long as Excel does not violate certain obligations under the Agreement, primarily the covenant not to solicit TOT’s employees, agents, vendors and Merchants for any competitors of TOT).  The Agreement also provides terms under which TOT will purchase from Excel a portion or all of Excel’s interests in the Residuals. All losses incurred by TOT in excess of 3 basis points of “Net Losses” as defined in the Agreement would be borne 90% by Excel (through a reserve account established under the Agreement) and 10% by TOT.  The Agreement contains standard non-solicitation and indemnification provisions.   In November 2013, TOT failed to provide the Advance.

On February 17, 2014, the Company entered into a Securities Exchange Agreement with Payprotec Oregon, LLC (d/b/a Securus Payments) (“Payprotec”), Mychol Robirds and Steven Lemma, that will effectuate the purchase of 90% of the membership interests of Payprotec and its subsidiary Securus Consultants, LLC..  In exchange for the membership interests in Payprotec and Securus, the Company has agreed to issue to Messrs. Robirds and Lemma a total of 20,400,000 shares of the Company’s Common Stock and two shares of the Company’s Series A Preferred Stock.  Pursuant to the Agreement, at closing, Payprotec will also enter into three year employment agreements (the “Employment Agreements”) with each of Messrs. Robirds and Lemma.  The Securities Exchange Agreement is subject to a number of conditions, including without limitation, the delivery of audited financial statements for Payprotec and Securus, consents of third parties, the filing of the certificate of designation for the Series A Preferred Stock ("Certificate of Designation") and the execution of the Employment Agreements.   On April 10, 2014 the Securities Exchange Agreement was amended to extend the closing date to April 21, 2014.

Sales and Marketing

Our in-house sales effort, will focus on soliciting small to medium-sized merchants. These merchants may be underserved by the large processors in terms of pricing and customer service and may therefore be better suited to receive service from a merchant acquirer.  As a result of our processing relationships, we believe that we will be able to provide competitively priced credit and debit card processing while providing a high level of customer service.

We will utilize our extensive relationships with management’s network of ISOs to reach merchants in an array of industries and geographic locations.  ISOs either cultivate new or existing relationships with merchants in order to sell them payment processing services.

Much of our efforts will include expanding our base of ISOs because we believe it is a cost effective solution to expanding our reach.  We intend to aggressively advertise in industry publications as well as use social media outlets to recruit ISOs to bolster our sales efforts as well as those ISOs who would be interested in selling their residual portfolio streams.
 
 
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Government Regulations

The industry in which we operate is subject to extensive governmental regulation. In particular, there are numerous laws and regulations restricting the purchase, sale, and sharing of personal information about consumers. Although, as the merchant acquirer, we do not expect to have possession of consumer level data and, therefore, do not believe that we will be subject to these regulations, the laws in this area are new and continuing to evolve. Accordingly, it is difficult to determine whether and how existing and proposed privacy laws will apply to our business.  The electronic payment processor is subject to regulation by federal, state and professional governing bodies. Prospective financial institution customers, including commercial banks and credit unions, operate in markets that are subject to rigorous regulatory oversight and supervision.
 
Competition
 
The payment processing industry is highly competitive.  The merchant acquirer competes with ISOs for the acquisition of merchant agreements.  Several large processors including First National Bank of Omaha, Chase Paymentech, L.P., Bank of America Merchant Services and Wells Fargo frequently solicit merchants directly or through their own network of ISOs.  In many cases, larger competition has demonstrated to not be as proactive in adjusting to changes in the market and we believe they will not be as competent to provide superior service we do that many small and mid-sized business owners require.
 
When competing for the acquisition of existing residual stream portfolios, pricing will be the determining factor.  Other than straightforward cash acquisitions and offering favorable contractual terms, the ability to offer publicly traded stock as part of the purchase price will be a valuable competitive advantage.  ISOs considering the sale of their residual stream may ultimately prefer to seek financing using their portfolio as collateral rather than directly selling the asset.

Licensing Business

Prior to the acquisition of EBSI, we were a United States based company focused on bringing national and international brands to the retail marketplace. We acted as agent for licensing brands of corporations, people, government agencies, etc. (“Licensors”) in a broad range of product categories.  We intended to obtain agent rights to license select brands where the brand name can be leveraged into new categories. Our objective was to develop a diversified portfolio of iconic consumer brands by creating and facilitating relationships between Licensors and retail businesses, wholesale businesses, manufacturers, etc. (“Licensees”) who would sell products under the Licensor’s brand.  We expected to organically grow the existing portfolio and enter into joint ventures or other partnerships with the goal of leveraging the experience of our management and that of our licensees to facilitate sales of branded products.

Upon acquiring the rights to a license from a Licensor, we expected that such a license will typically require us to pay royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach specified targets.  Licenses for brands also typically require a licensee to pay to the brand owner certain minimum amounts for the advertising and marketing of the respective license brand. We intended to seek royalties from Licensees for brands where we are the agent. In addition, we will seek agent fees on minimum royalties and advertising and marketing fees which would offset any expenses we incur while acting as an agent.

We intended to seek the rights to license brands and enter into license relationships with domestic and/or international partners that have demonstrated ability to produce quality products that have been successfully marketed and sold domestically and/or internationally in a broad range of products categories. 
 
 
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In October 2011, we purchased assets of the business known as “Billy Martin’s,” including the intellectual property (IP), goodwill and fixtures and equipment for a purchase price of $150,000, consisting of $30,000 cash and a promissory note in the original principal amount of $120,000 (the “BM Note”), and a 20% share of the net profits generated from the sale of clothing and other products.  The Company is currently in default under the BM Note because it has not made the payment of $30,000 that was required in October 2012 and the following payment that was required in October 2013. However, the Company does not retain any rights to the IP/business name, and therefore, regards the agreement as no longer in effect.

On January 2, 2012, the Company entered into an agreement with Lifeguard Licensing Corp, (“LLC”) in which LLC owns rights to trademarks, packaging, designs, images, copyrights and other intellectual property.  LLC, pursuant to the agreement, designated the Company as the licensing agent to negotiate and service license agreements with respect to commercial exploitation of the property within the defined territory.  The term of the agreement is for one year commencing on the effective date. LLC may terminate the agreement upon written notice if the Company does not meet certain terms set forth in the agreement. The Company’s compensation will be calculated at 25%, 20% and 15% of Net Revenues (as defined in the agreement) for the initial term, second renewal term, and third renewal term, respectively.  In addition to the Company’s compensation, LLC will reimburse the Company for out of pocket expenses.  This agreement is still active.
 
On February 4, 2012, the Company entered into an agreement with Soupman, Inc. (“Soupman”).  Pursuant to the agreement, the Soupman has designated the Company as the exclusive licensing agent in the Territory, as defined in the agreement. As licensing agent, the Company will negotiate and service licensing agreements on behalf of Soupman. As compensation, the Company will receive 25% of all licensing revenue from agreements executed pursuant to the terms of the agreement and five percent (5%) of other licensing revenue as defined in the agreement.  All payments from license agreements are made payable to Soupman and after such payment, the Company will be paid the commission as indicated above.  The initial term of the agreement is for one year and automatically renews provided that the Company has submitted to Soupman a minimum of five potential license applications.  Subsequent to the second year, the agreement will terminate unless extended by written agreement.  As of Feb 4, 2014 the agreement was not renewed.

On February 21, 2012, the Company entered into an agreement with Camuto Consulting, Inc. (“Camuto”), in which the Camuto engaged the Company as the licensing agent to identify and secure licenses as applicable.  The agreement is for a one year term and expires February 28, 2013.  Compensation to the licensing agent pursuant to the agreement is as follows: (i) commissions payable at 6.5% on royalties earned and received by Camuto during the first term of solicited agreements with eligible licensees that are executed; and (ii) commissions payable at 5% on royalties earned and received by Camuto during any renewal term of solicited agreements with eligible licensees that are executed.  As of Feb 28, 2014, the agreement was not renewed.

On May 3, 2012, the Company entered into an agreement with Benedetto Arts, LLC  (“BA”), in which BA will utilize the Company as an independent contractor for the solicitation of licensing opportunities.   As compensation for its services, the Company will receive a commission based on 20% of Gross Revenue (as defined in the agreement).  The term of the Agreement is for one year commencing on May 3, 2012 with an option to extend if both parties agree.  In addition, if the Company does not deliver three business opportunities from the May 3, 2012 date, BA has the right to terminate the Agreement.  The agreement is still active, though it is not operative as of December 31, 2013.

Target Market

Despite our lack of activity in the license space, we still intend to focus on bringing national and international brands to the mass marketplace by acquiring the agent rights to Licensors’ brands and creating relationships between Licensor and Licensees.

The target market for our portfolio of clients’ brands will consist primarily of young lifestyle customers who are physically active and participate in more than one sporting activity or have aspirations to appear physically active. These are consumers that are both brand and quality conscious.
 
Through licensed brands, we intend to target consumers who want to be ahead of the latest styles and trends as well as consumers that connect with the heritage and tradition of an age-old brand and value its authenticity. In all cases, we will be targeting consumers that look for top performance, high quality and comfortable products that are affordably priced.

The Lifeguard brand is the focus of our licensing, with efforts under way to utilize the name and potentially produce products in the e-Cigarette business.  There are no current operations, but the Company has continued to move forward with its effort in establishing a presence in the e-Cigarette market.
 
 
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Sales Cycle

Many product lines are seasonal in nature. It can be assumed that any sales bearing our clients’ brands will vary as a result of seasons, holidays, weather, and the timing of product shipments. Accordingly, a portion of our future potential revenue from agent fees on the license royalty revenue will likely be subject to seasonal fluctuations. The results of operations in any quarter therefore may not necessarily be indicative of the results that may be achieved for a full fiscal year or any future quarter.

Product Selection

As an agent, Licensees will develop and design their own products. However, we anticipate that from a selection offered by Licensees, our senior executives will be instrumental in creating a focused product program to be shown to U.S. and International customers. We also anticipate that Licensees will source the products, primarily from non-U.S. and non- European sources, and will negotiate manufacturing and quality control standards for the products.
 
We do not own or operate any manufacturing facilities. We expect that products will be distributed through the following distribution channels:
 
 
 With licensor approval, mass merchants;
     
 
 Department stores;
     
 
 Sporting goods chains;
     
 
 Specialty stores;
     
 
 Chain stores;
     
 
 Internet merchants;
     
 
 With licensor approval, discount stores; and
     
 
 Other media oriented retailers.
 
Industry Regulations/Standards

We are subject, both directly and indirectly, to various laws and regulations relating to our business.  We are subject to local laws and regulations in the U.S. If any of the laws are amended, compliance could become more expensive and directly affect our income.” We intend to comply with such laws, but new restrictions may arise that could materially adversely affect us.

Research and Development

We do not currently have a budget specifically allocated for research and development purposes.
 
Competition

Agent fees on royalties paid to us under licensing agreements between Licensor and Licensee will generally be based on a percentage of Licensee’s net sales of licensed products. The sale of branded goods is subject to extensive competition by numerous domestic and foreign companies. Factors which shape the competitive environment include quality of construction and design, brand name, style and color selection, price and the ability to respond quickly to the retailer on a national basis. In recognition of the increasing trend towards consolidation of retailers and greater emphasis by retailers on the manufacture of private label merchandise, in the United States our business plan will focus on creating strategic alliances with major retailers for their sale of products bearing our clients’ brands through the licensing of client trademarks directly to manufacturers, distributors and retailers. Therefore, our degree of success is dependent on the strength of our clients’ brands, consumer acceptance of and desire for our clients’ brands, our Licensees' ability to design, manufacture and sell products bearing our clients’ brands and to respond to ever-changing consumer demands, and any significant failure by Licensees to do so could have a material adverse effect on our business prospects, financial condition, results of operations and liquidity. We cannot control the level of resources that Licensees commit to supporting our clients’ brands, and Licensees may choose to support other brands to the detriment of our clients.
 
Employees

As of April 15, 2014, we have 1 full-time employee, including the executive staff. We will also utilize independent consultants to assist with accounting, sales and compliance matters.
 
 
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Item 1A.         Risk Factors.

Risks Relating to Our Merchant Acquisition Business

We have limited operating history in the merchant processing and acquisition business. There is no guarantee that we will become profitable and that makes it difficult to predict future results and raises substantial doubt as to our ability to successfully develop profitable business operations and continue as a going concern.
 
We only recently decided to operate in the merchant processing and acquisition industry through the acquisition of EBSI, and have limited revenue from this business to date (as EBSI had no existing business at the time of the acquisition). We anticipate that we will operate at a loss for some time. We may never become profitable. In the future, we may experience under-capitalization, delays, lack of funding, and many of the others problems, delays, and expenses encountered by any early stage business, many of which are beyond our control. These include, but are not limited to:
 
 
 
inability to establish profitable strategic relationships with credit and debit card processing providers and the ability to secure the approvals of existing processors and other entities necessary to execute an acquisition of a merchant credit and debit card residual portfolio,
 
 
inability to identify suitable revenue streams for acquisition and/or to effectively and efficiently integrate acquired assets into our operations,
     
 
inability to raise sufficient capital to fund our anticipated business plan, or
     
 
competition from larger and more established transaction processing and acquiring companies, banks, large ISOs, and internet-based providers of similar services that may compete with us now or in the future.
 
In addition, our independent registered public accountants have included a going concern explanatory paragraph in their opinion of our 2013, 2012 and 2011 financial statements.

We may not be able to raise the additional capital necessary to execute our business strategy and that could result in the curtailment or cessation of our operations.
 
Our ability to raise additional capital is uncertain and dependent upon numerous factors beyond our control, including but not limited to economic conditions, regulatory factors, continued high unemployment, reduced retail sales, increased taxation, reductions in consumer confidence, changes in levels of consumer spending, changes in preferences in how consumers pay for goods and services, weak housing markets and availability or lack of availability of credit. If we are unable to obtain additional financing, or if the terms thereof are too costly, we may be forced to curtail or cease operations until such time as alternative additional financing is arranged, which would have a material adverse impact on our planned operations.
 
We may need even more financing earlier than we anticipate if we:
 
 
expand faster than our internally generated cash flow can support,
     
 
purchase merchant portfolios from a large number of ISOs,
 
 
need to increase merchant portfolio purchase prices in response to competition,
     
 
acquire complementary products, businesses, technologies or residual ISO commissions.
 
We remain at risk regarding our ability to conduct successful operations.
 
The results of our operations will depend, among other things, upon our ability to acquire and successfully integrate into our operations merchant credit and debit card processing and acquisition contracts, operations, and other support tasks. Our operations may be affected by many factors, some known by us, some unknown, and some that are beyond our control. Any of these problems, or a combination thereof, could have a materially adverse effect on our viability as an entity and might cause the investment of our shareholders to be impaired or lost. Our strategic relationships are in various stages of development. Unanticipated obstacles can arise at any time that may result in lengthy and costly delays or in a determination that further development of the business plan and ongoing operations are not feasible.
 
The execution of our business plan to acquire merchant credit and debit card processing and acquisition contracts may take longer than anticipated and could be additionally delayed for reasons outside our control. Therefore, we may not be able to timely identify, negotiate, acquire and integrate merchant credit and debit card processing and acquisition contracts, operations and other support tasks on a cost-effective basis, or that such opportunities may not achieve market acceptance such that, in combination with existing or future merchant credit and debit card processing and acquisition contracts under management, they will sustain us or allow us to achieve profitable operations.
 
 
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The Company has limited experience in the merchant credit and debit card processing and acquisition industry, which could hinder our ability to attract and engage with potential strategic partners and ISO targets.
 
We may not be successful in executing our planned activities to the levels that we are seeking. We do not know whether or when we will be able to develop efficient capabilities to acquire, integrate and finance merchant credit and debit card processing and acquisition contracts in sufficient quantities to enable us to successfully execute on our anticipated business plan. Even if we are successful in developing our capabilities and processes, we do not know whether we will sustain our business or continue to satisfy the requirements of our potential strategic relationships and ISO targets, the inability of which could have a material adverse effect on our financial condition and operations.
 
Unauthorized disclosure of merchant and cardholder data, whether through breach of our computer systems or otherwise, could expose us to liability and protracted and costly litigation.
 
We collect and store sensitive data about merchants, including names, addresses, social security numbers, driver’s license numbers and checking account numbers.. Any loss of cardholder data by us or our merchants could result in significant fines and sanctions by the card networks or governmental bodies, which could have a material adverse effect upon our financial position and/or results of operations. Our computer systems could be in the future, subject to penetration by hackers and our encryption of data may not prevent unauthorized use. In this event, we may be subject to liability, including claims for unauthorized purchases with misappropriated bankcard information, impersonation or other similar fraud claims. We could also be subject to liability for claims relating to misuse of personal information, such as unauthorized marketing purposes. These claims also could result in protracted and costly litigation. In addition, we could be subject to penalties or sanctions from the card networks.
 
Although we generally require that our agreements with our service providers who have access to merchant and customer data include confidentiality obligations that restrict these parties from using or disclosing any customer or merchant data except as necessary to perform their services under the applicable agreements, these contractual measures may not prevent the unauthorized use or disclosure of data. In addition, our agreements with financial institutions most likely will require us to take certain protective measures to ensure the confidentiality of merchant and consumer data. Any failure to adequately enforce these protective measures could result in protracted and costly litigation.
 
If we fail to comply with the applicable requirements of the Visa and MasterCard bankcard networks, Visa or MasterCard could seek to fine us, suspend us or terminate our registrations. Fines could have an adverse effect on our operating results and financial condition, and if these registrations are terminated, we will not be able to conduct our business.
 
If we are unable to comply with Visa and MasterCard bankcard network requirements (including Payment Card Industry Data Security Standard, or PCI-DSS, compliance), Visa or MasterCard could seek to fine us, suspend us or terminate our registrations. We may receive notices of non-compliance and fines, which have typically related to excessive chargebacks by a merchant or data security failures on the part of a merchant. If we are unable to recover fines from our merchants, we would experience a financial loss. The termination of our registration, or any changes in the Visa or MasterCard rules that would impair our registration, could require us to stop providing Visa and MasterCard payment processing services, which would make it impossible for us to conduct our business.
 
We could in the future face chargeback liability when our merchants refuse or cannot reimburse chargebacks resolved in favor of their customers, reject losses when our merchants go out of business, and merchant fraud. We cannot accurately anticipate these liabilities, which may adversely affect our results of operations and financial condition.
 
In the event a billing dispute between a cardholder and a merchant is not resolved in favor of the merchant, the transaction is normally “charged back” to the merchant and the purchase price is credited or otherwise refunded to the cardholder. If we or our clearing banks are unable to collect such amounts from the merchant’s account, or if the merchant refuses or is unable, due to closure, bankruptcy or other reasons, to reimburse us for the chargeback, we bear the loss for the amount of the refund paid to the cardholder. The risk of chargebacks is typically greater with those merchants that promise future delivery of goods and services rather than delivering goods or rendering services at the time of payment. We may experience significant losses from chargebacks in the future. Any increase in chargebacks not paid by our merchants may adversely affect our financial condition and results of operations.
 
We have potential liability for fraudulent bankcard transactions initiated by merchants. Merchant fraud occurs when a merchant knowingly uses a stolen or counterfeit bankcard or card number to record a false sales transaction, processes an invalid bankcard or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. We plan to establish systems and procedures designed to detect and reduce the impact of merchant fraud, but we these measures may not be effective. It is possible that incidents of fraud could increase in the future. Failure to effectively manage risk and prevent fraud would increase our chargeback liability. Increases in chargebacks could have an adverse effect on our operating results and financial condition.
 
 
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Increased merchant attrition that we cannot offset with increased bankcard processing volume from same store sales growth or new accounts would cause our revenues to decline.
 
We may experience attrition in merchant bankcard processing volume resulting from several factors, including business closures, transfers of merchants’ accounts to our competitors and account closures that we initiate due to heightened credit risks relating to, or contract breaches by, merchants, and when applicable same store sales contraction. We cannot predict the level of attrition in the future, and it could increase. Increased attrition in merchant bankcard processing volume may have an adverse effect on our financial condition and results of operations. If we are unable to establish accounts with new merchants or otherwise increase our bankcard processing volume in order to counter the effect of this attrition, our revenues will decline.

We rely on various financial institutions to provide clearing services in connection with our settlement activities. If we are unable to maintain clearing services with these financial institutions and are unable to find a replacement, our business may be adversely affected.

We rely on various financial institutions to provide clearing services in connection with our settlement activities. If we are unable to maintain clearing services with these financial institutions or are unable to find such a replacement for them, we may no longer be able to provide processing services to certain customers which could negatively impact our revenue and earnings.
 
If we cannot pass increases in bankcard network interchange fees, assessments and transaction fees along to our merchants, our operating margins will be reduced.
 
We expect to pay interchange fees and other network fees set by the bankcard networks to the card issuing bank and the bankcard networks for each transaction we process. From time to time, the bankcard networks increase the interchange fees and other network fees that they charge payment processors and the sponsor banks. We expect that our potential sponsor bank will pass any increases in interchange fees on to us. If we are unable to pass these fee increases along to our merchants through corresponding increases in our processing fees in the future, our operating margins will be reduced.
 
Current or future bankcard network rules and practices could adversely affect our business.
 
We plan to be registered with the Visa and MasterCard networks through our bank sponsors as an ISO with Visa and a Member Service Provider with MasterCard. The rules of the bankcard networks are set by their boards, which may be strongly influenced by card issuers, and some of those card issuers are our competitors with respect to these processing services. Many banks directly or indirectly sell processing services to merchants in direct competition with us. These banks could attempt, by virtue of their influence on the networks, to alter the networks’ rules or policies to the detriment of non-members like us. The bankcard networks or issuers who maintain our future registrations or arrangements or the bankcard network or issuer rules allowing us to market and provide payment processing services may not remain in effect. The termination of our registration or our status as an ISO or Member Service Provider, or any changes in card network or issuer rules that limit our ability to provide payment processing services, could have an adverse effect on our bankcard processing volumes, revenues or operating costs. In addition, if we were precluded from processing Visa and MasterCard bankcard transactions, we would lose substantially all of our revenues.
 
Any new laws and regulations, or revisions made to existing laws, regulations, or other industry standards affecting our business may have an unfavorable impact on our operating results and financial condition.

Our business is impacted by laws and regulations that affect the bankcard industry. The number of new and proposed regulations has increased significantly, particularly pertaining to interchange fees on bankcard transactions, which are paid to the bank card issuer. In July 2010, Congress passed The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which significantly changed financial regulation. Changes included restricting amounts of debit card fees that certain issuer banks can charge merchants and allowing merchants to offer discounts for different payment methods. The impact which the Dodd-Frank Act will have on our operating results is difficult to determine, as the changes are not directed at us and final regulations on interchange fees are still to be set by the Federal Reserve Board. When final, these regulations could adversely affect our operating results and financial condition.
 
Governmental regulations designed to protect or limit access to consumer information could adversely affect our ability to effectively provide our services to merchants.
 
Governmental bodies in the United States and abroad have adopted, or are considering the adoption of, laws and regulations restricting the transfer of, and safeguarding, non-public personal information. For example, in the United States, all financial institutions must undertake certain steps to ensure the privacy and security of consumer financial information. While our operations are subject to certain provisions of these privacy laws, we will limit our use of consumer information solely to providing services to other businesses and financial institutions. We will also limit sharing of non-public personal information to that necessary to complete the transactions on behalf of the consumer and the merchant and to that permitted by federal and state laws. In connection with providing services to the merchants and financial institutions that use our services, we will be required by regulations and contracts with our merchants to provide assurances regarding the confidentiality and security of non-public consumer information. These contracts may require periodic audits by independent companies regarding our compliance with industry standards and best practices established by regulatory guidelines. The compliance standards relate to our infrastructure, components, and operational procedures designed to safeguard the confidentiality and security of non-public consumer personal information shared by our clients with us. Our ability to maintain compliance with these standards and satisfy these audits will affect our ability to attract and maintain business in the future. The cost of such systems and procedures may increase in the future and could adversely affect our ability to compete effectively with other similarly situated service providers.
 
 
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Our systems and our third-party providers’ systems may fail due to factors beyond our control, which could interrupt our service, cause us to lose business and increase our costs.
 
We depend on the efficient and uninterrupted operation of computer network systems, software, data center and telecommunications networks, as well as the systems of third parties. Our systems and operations or those of our third-party providers could be exposed to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, unauthorized entry and computer viruses. Our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur. Defects in our systems or those of third parties, errors or delays in the processing of payment transactions, telecommunications failures or other difficulties could result in:
 
 
loss of revenues;
     
 
loss of merchants, although our contracts with merchants do not expressly provide a right to terminate for business interruptions;
     
 
loss of merchant and cardholder data;
     
 
harm to our business or reputation;
     
 
exposure to fraud losses or other liabilities;
     
 
negative publicity;
     
 
additional operating and development costs; and/or
     
 
diversion of technical and other resources.
 
We do not own or maintain a processing network and expect to depend on outsourced suppliers for this and other essential service; our inability to obtain and retain such outsourced services would require us to discontinue our operations.

We do not own or maintain a computer system or software or communications network necessary to process debit or credit card transactions. We expect to depend on outsourced vendors for these and other key functions, including credit card transaction processing, check guarantee and gift and loyalty card processing and provision of point of sale processing equipment. We will therefore be dependent on the continued capabilities of these vendors to provide such services on terms acceptable to us. Should any one of these vendors experience difficulties in providing processing services for any reason, or if we can no longer engage vendors to provide such services, we would be required to discontinue operations.

We may experience software defects, undetected errors, and development delays, which could damage customer relations, decrease our potential profitability and expose us to liability.

We rely on technologies and software supplied by third parties that may contain undetected errors, viruses or defects.   Defects in software products and errors or delays in processing of electronic transactions could result in additional costs, diversion of technical and other resources from our other efforts, loss of credibility with current or potential customers, harm to our reputation, or exposure to liability claims. In addition, the sophisticated software and computing systems that we rely on often encounter development delays and the underlying software may also contain undetected errors, viruses, or defects that could have a material adverse effect on our business, financial condition and results of operations.
 
Many of our merchants depend upon the ability to utilize the Internet for the conduct of a significant portion of their business; disruption to that system could make it impossible for them to continue to conduct their current businesses.

Possible disruption to the normal functioning of the Internet through, for example, power failure or terrorist sabotage, could make it impossible for aspects of the lending, electronic payment processing, and web hosting to function. In the event of a major disruption, and assuming that such disruptions would be long-lived, the merchants would be required to make extensive changes in the way they do business. These merchants may not have the time and resources to make these changes, which could have a material adverse effect on our business, financial condition and results of operations.
 
 
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Adverse conditions in markets in which we obtain a substantial amount of our bankcard processing volume could negatively affect our results of operations.
 
Adverse economic or other conditions in the states where we obtain a substantial amount of our bankcard processing volume could negatively affect our revenue and could materially and adversely affect our results of operations. As a result of any geographic concentration of our merchants, we will be exposed to the risks of downturns in these local economies and to other local conditions, which could adversely affect the operating results of our merchants in these markets.

None of our officers and directors have any meaningful accounting or financial reporting education or experience, which increases the risk we may be unable to comply with all rules and regulations.
 
Our ability to meet our ongoing reporting requirements on a timely basis will be dependent to a significant degree on advisors and consultants. Our officers and directors have no meaningful accounting or financial reporting education or experience. As such, there is risk about our ability to comply with all financial reporting requirements accurately and on a timely basis.
 
If we are unable to attract and retain qualified sales people, our business and financial results may suffer.
 
Our success partially depends on the skill and experience of our sales force. If we are unable to retain and attract sufficiently experienced and capable relationship managers, our business and financial results may suffer.
 
Any acquisitions or portfolio buyouts that we make could disrupt our business and harm our financial condition.
 
We expect to evaluate potential strategic acquisitions of complementary businesses, products or technologies. We may not be able to successfully finance or integrate any businesses, products or technologies that we acquire. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations. We may spend time and money on projects that do not increase our revenue. To the extent we pay the purchase price of any acquisition in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with our stock, it could be dilutive to our stockholders. While we, from time to time, may evaluate potential acquisitions of businesses, products and technologies, we have no present understandings, commitments or agreements with respect to any acquisitions.
 
We are subject to the business cycles and credit risk of our merchants, which could negatively impact our financial results.
 
A recessionary economic environment could have a negative impact on our merchants, which could, in turn, negatively impact our financial results, particularly if the recessionary environment disproportionately affects some of the market segments that represent a larger portion of our bankcard processing volume. If our merchants make fewer sales of their products and services, we will have fewer transactions to process, resulting in lower revenue. In addition, we have a certain amount of fixed and semi-fixed costs, including rent, processing contractual minimums and salaries, which could limit our ability to quickly adjust costs and respond to changes in our business and the economy.
 
In a recessionary environment our merchants could also experience a higher rate of business closures, which could adversely affect our business and financial condition. In the event of a closure of a merchant, we are unlikely to receive our fees for any transactions processed by that merchant in its final month of operation.

Our operating results are subject to seasonality, which could result in fluctuations in our quarterly revenue.
 
We expect to experience seasonal fluctuations in our revenues as a result of consumer spending patterns.

Our growth plans depend on completion of acquisitions of merchant portfolios, which require processor consents that we may be unable to obtain.
 
Our merchant portfolio acquisition strategy requires that processors consent to our acquisition of the ISOs’ merchant portfolios. If processors do not agree to the transfer of ownership of the merchant portfolios from the ISOs to us, our business model will be disrupted and we may no longer be able to continue business as currently contemplated.
 
 
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Revenues generated by acquired portfolios may be less than anticipated, resulting in losses or a decline in profits.
 
In evaluating and determining the purchase price for a prospective acquisition, we plan to estimate the future revenues from that acquisition based on the historical transaction volume of the acquired provider of payment processing services or portfolio of merchant accounts. Following an acquisition, it is customary to experience some attrition in the number of merchants serviced by an acquired provider of payment processing services or included in an acquired portfolio of merchant accounts. Should the rate of post-acquisition merchant attrition exceed the rate we have forecasted, the revenues generated by the acquired providers of payment processing services or portfolio of accounts may be less than we estimated, which could result in losses or a decline in profits.
 
We may have significant impairment charges due to lack of acquisition performance after closing a transaction, which may result in a reduction of carrying value, if our revenues relating to these assets decline.
 
We will attempt to acquire ISO residual streams. A material decline in the revenues generated from any of our purchased portfolios could reduce the fair value of the portfolio or operations. In that case, we may be required to reduce the carrying value of the related asset. Additionally, changes in accounting policies or rules could affect the way in which we reflect these assets in our financial statements, or the way in which we treat the assets for tax purposes, either of which could have a material adverse effect on our financial condition.
 
We may fail to uncover all liabilities of acquisition targets through the due diligence process prior to an acquisition, exposing us to potentially large, unanticipated costs.
 
Prior to the consummation of any acquisition, we expect to perform a due diligence review of the provider of payment processing services or portfolio of merchant accounts that we propose to acquire. Our due diligence review, however, may not adequately uncover all of the contingent or undisclosed liabilities we may incur as a consequence of the proposed acquisition.
 
We may encounter delays and operational difficulties in completing the necessary links required by an acquisition, resulting in increased costs for and a delay in the realization of revenues from, that acquisition.
 
The acquisition of a residual stream will require the transfer of functions and links to [our systems and] those of our own third party service providers. If the transfer of these functions and links does not occur rapidly and smoothly, delays and errors may occur, resulting in a loss of revenues, increased merchant attrition and increased expenditures to correct the transitional problems, which could preclude our attainment of, or reduce, profits.
 
Special non-recurring costs associated with acquisitions could adversely affect our operating results in the periods following these acquisitions.
 
In connection with some acquisitions, we may incur non-recurring severance expenses, restructuring charges and change of control payments. These expenses, charges, and payments could adversely affect our operating results during the initial financial periods following an acquisition.
 
Our facilities, personnel and financial and management systems may not be adequate to effectively manage the future expansion we believe necessary to increase our revenues and remain competitive.

We anticipate that future expansion will be necessary in order to increase our revenues. In order to effectively manage our expansion, we may need to attract and hire additional sales, administrative, operations and management personnel. Our facilities, personnel, and financial and management systems and controls may not be adequate to support the expansion of our operations. If we fail to effectively manage our growth, our business could be harmed.
 
The payment processing industry is highly competitive and we compete with certain firms that are larger and have greater financial resources than we do. Such competition could increase, which would adversely influence our prices to merchants and, as a result, our operating margins.
 
The market for payment processing services is highly competitive. Other providers of payment processing services have established a sizable market share in the small- and medium-size merchant processing sector. The weakness of the current economic recovery could cause future growth in electronic payment transactions to slow compared to historical rates of growth. This competition may influence the prices we are able to charge. If the competition causes us to reduce the prices we charge, we will have to aggressively control our costs in order to maintain acceptable profit margins. In addition, some of our competitors are financial institutions, subsidiaries of financial institutions or well-established payment processing companies, including Heartland Payment Systems, Inc., Newtek Business Services, Inc., Global Payments Inc., First Data Corporation, Vantiv Inc., Calpian Inc., Fifth Third Processing Solutions, Chase Paymentech Solutions and Elavon, Inc. Our competitors that are financial institutions or subsidiaries of financial institutions do not incur the costs associated with being sponsored by a bank for registration with the card networks and can settle transactions more quickly for their merchants than we can for ours. These competitors have substantially greater financial, technological, management and marketing resources than we have. This may allow our competitors to offer more attractive fees to our current and prospective merchants, or other products or services that we do not offer. This could result in a loss of customers, greater difficulty attracting new customers, and a reduction in the price we can charge for our services.
 
 
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In addition, many of our competitors may have the ability to devote more financial and operational resources than we can to the development of new technologies and services, including Internet payment processing services and mobile payment processing services that provide improved operating functionality and features to their product and service offerings. If successful, their development efforts could render our product and services offerings less desirable to customers, again resulting in the loss of customers or a reduction in the price we could demand for our offerings. Furthermore, we are facing competition from non-traditional competitors offering alternative payment methods, such as PayPal and Google. These non-traditional competitors have significant financial resources and robust networks and are highly regarded by consumers. If these non-traditional competitors gain a greater share of total electronic payments transactions, it could also have a material adverse effect on our business, financial condition and results of operation.
 
We expect to be subject to increased operating margin pressure, which could erode our margins and adversely affect our ability to retain merchants and attain and maintain profitability.

We expect to experience increasingly downward pricing pressure from merchants for merchant credit and debit card processing and acquiring services, similar to what many of our competitors have experienced. The services we plan to offer are a commodity and as such are not differentiable except using price. Low barriers to entry in becoming an ISO means that price competition in the industry is persistent and strong. Our management has noted this trend and does not anticipate that this trend will cease in the near future, if at all. Continued margin erosion could adversely affect our merchant retention and profitability.

There may be a decline in the use of cards as a payment mechanism for consumers or adverse developments with respect to the card industry in general.

If consumers do not continue to use credit or debit cards as a payment mechanism for their transactions or if there is a change in the mix of payments between cash, credit cards, and debit cards, which is adverse to us, it could have a material adverse effect on our business, financial condition, and results of operations. We believe future growth in the use of credit and debit cards and other electronic payments will be driven by the cost, ease-of-use, and quality of products and services offered to consumers and businesses.

Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk.

We operate in a rapidly changing industry. Accordingly our risk management policies and procedures may not be fully effective to identify, monitor, and manage our risks. If our policies and procedures are not fully effective or we are not always successful in capturing all risks to which we are or may be exposed, we may suffer uninsured liability, harm to our reputation or be subject to litigation or regulatory actions that could have a material adverse effect on our business, financial condition and results of operation.

Continued consolidation in the banking and retail industries could adversely affect our growth.
 
Historically, the banking industry has been the subject of consolidation, regardless of overall economic conditions, while the retail industry has been the subject of consolidation due to cyclical economic events. Since 2008, there have been multiple bank failures and government-encouraged consolidation. Larger banks and larger merchants with greater transaction volumes may demand lower fees which could result in lower revenues and earnings for us.
 
We may become subject to additional U.S., state or local taxes that cannot be passed through to our merchants, which could negatively affect our results of operations.
 
Companies in the payment processing industry, including us, may become subject to taxation in various tax jurisdictions on our net income or revenues. Application of these taxes is an emerging issue in our industry and taxing jurisdictions have not yet adopted uniform positions on this topic. If we are required to pay additional taxes and are unable to pass the tax expense through to our merchants, our costs would increase and our net income would be reduced.
 
 
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Risks Relating to Our Licensing Business
 
If we fail to develop our clients’ brands cost-effectively, our business may be adversely affected.
 
Successful promotion of our clients’ brands will depend largely on the effectiveness of our marketing efforts and those of Licensees. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses incurred in building the brands. If we fail to successfully promote and maintain our clients’ brands, or incur substantial expenses in an unsuccessful attempt to promote and maintain our clients’ brands, we may fail to attract enough new customers or retain existing customers to the extent necessary to realize a sufficient return on our client brand-building efforts, and our business and results of operations could suffer.
 
The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.
 
The licensing business in general is highly competitive and fragmented. Our competitors will include numerous licensors, and our own clients’ private label programs. We will face competition on many fronts, including the following: (i) establishing and maintaining favorable brand recognition; (ii) Licensees’ ability in developing products that appeal to customers; and (iii) pricing products appropriately. Most of our competitors will be larger than us and have access to significantly greater financial, marketing and other resources than us. We believe that the principal competitive factors in the industry are: (1) brand name and brand identity, (2) timeliness, reliability and quality of service provided, (3) price, (4) the ability to anticipate consumer demands, and (5) market share. We may not be able to compete successfully. If we are unable to successfully compete in this market, our business, prospects, financial condition and results of operations will be materially adversely affected.
 
Some of our competitors will also offer a wider range of branded lines, have greater name recognition and more extensive customer bases than we do. These competitors may be able to respond more quickly to new or changing opportunities and customer desires, undertake more extensive promotional activities, offer terms that are more attractive to customers and adopt more aggressive pricing policies than we can. Moreover, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to enhance their visibility. Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their products. Our current and potential competitors may have more extensive customer bases and broader customer relationships than we have. In addition, these companies may have longer operating histories and greater name recognition than we have and may be able to acquire more desirable brands or licensees that we can. These competitors may be better able to exploit branded merchandise. If we are unable to compete with such companies, the demand for our licensed products could be insufficient to allow us to profit from our activities.
 
We may not be able to anticipate consumer preferences and trends, which could negatively affect acceptance of  products by retailers and consumers and result in a significant decrease in net sales.
 
The products sold under our clients’ brand names must appeal to a broad range of consumers, whose preferences cannot be predicted with certainty and are subject to rapid change. Products sold under clients’ brands will need to successfully meet constantly changing consumer demands. If branded products are not successfully received by retailers and consumers, our business, financial condition, results of operations and prospects may be harmed.
 
If a third party asserts that we are infringing its intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business may be adversely affected.
 
The licensing industry is characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Third parties may assert patent, trademark, copyright and other intellectual property infringement claims against us in the form of lawsuits, letters or other forms of communication. These claims, whether or not successful, could:
 
 
divert management’s attention;
     
 
result in costly and time-consuming litigation;
     
 
require us to enter into royalty or licensing agreements, which may not be available on acceptable terms, or at all; or
     
 
require us to modify our agreements for brands, trademarks, copyrights and/or patents to avoid infringement.
 
 
17

 
 
As a result, any third-party intellectual property claims against us could increase our expenses and adversely affect our business. In addition, many of our agreements with Licensors will likely require us to indemnify them for third-party intellectual property infringement claims, which would increase the cost to us resulting from an adverse ruling on any such claim. Even if we have not infringed any third parties’ intellectual property rights, our legal defenses may not be successful, and even if we are successful in defending against such claims, our legal defense could require significant financial resources and management time. Finally, if a third party successfully asserts a claim that our products infringe its proprietary rights, royalty or licensing agreements might not be available on terms we find acceptable or at all and we may be required to pay significant monetary damages to such third party.

The downturn in the economy has negatively affected consumer purchases of discretionary items and can adversely affect Licensee sales.
 
The success of our operations will depend upon a number of factors relating to consumer spending, primarily in the United States, including future economic conditions affecting disposable consumer income such as employment, business conditions, interest rates, the availability of consumer credit, consumer confidence in future conditions and tax rates. Consumer spending might decline in response to economic conditions, thereby adversely affecting our growth, net sales and profitability. Consumer purchases of discretionary items, including our Licensee products, have declined during the current recessionary period and also may decline at other times when disposable income is lower. A further downturn in the economy may adversely affect our sales.
 
Our ability to generate revenues will depend upon our ability to identify Licensees that can develop, design, manufacture, market and distribute compelling products.
 
The ability to develop brands and products that the market finds desirable and willing to purchase is critically important to our success. In order to succeed, we will need to find Licensees that have the ability to design, manufacture, market and distribute products that will be appealing to the market. If we fail to engage Licensees who have these abilities, there may not be any or only limited demand for products that carry our clients’ licensed brands. If this were to happen, sales could be limited and we may never realize any revenues. In addition, if Licensees alter or develop new product lines in the future, market demand for these may not develop, which would adversely affect our business.

If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.
 
Our future depends, in part, on our ability to attract and retain key personnel. Our future also depends on the continued contributions of our executive officers and other key technical personnel, each of whom would be difficult to replace. The loss of the services of executive officers or key personnel and the process to replace any of our key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives. Our anticipated growth could strain our personnel resources and infrastructure, and if we are unable to implement appropriate controls and procedures to manage our anticipated growth, we may not be able to successfully implement our business plan.
 
We are anticipating a period of growth in our headcount and operations, which may place, to the extent that we are able to sustain such growth, a significant strain on our management and our administrative, operational and financial reporting infrastructure.
 
Our success will depend in part on the ability of our senior management to manage this expected growth effectively. To do so, we believe we will need to continue to hire, train and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational and financial controls and our reporting procedures and systems. The expected addition of new employees and the capital investments that we anticipate will be necessary to manage our anticipated growth will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. If we fail to successfully manage our anticipated growth, we will be unable to execute our business plan.

Conflicts of interest may arise with our officers and directors.
 
Our officers and directors are and in the future may become involved in other licensing ventures, any of which may compete with our business. In some instances, opportunities may be presented to our officers or directors that would be appropriate for us as well as other ventures in which our officers and directors are engaged. Since most of the ventures in which our officers and directors are currently engaged are larger and have greater financial resources than we do, we believe that most opportunities, at least in the next year or two, that may be presented to our officers and directors will be exploited by the entity most suited to undertake such opportunity. However, this assumption may not be correct and our officers and directors may not resolve potential conflicts of interest in a manner that benefits us.
 
 
18

 
 
Additional conflicts of interest and non-arm’s length transactions may also arise in the future in the event that one of our officers or directors is involved in the management or ownership of any entity with which we transacts business. While our officers and directors expect to enter into any related party transactions on terms that are fair to us and similar to those that would be acceptable in an unrelated party transaction, a related party transaction with our officers or directors may not be on terms that are fair to us.
 
In the event that we enter into an agreement in which any of our officers or directors have a financial interest, we intend to comply with provisions of Delaware Law that provide that no contract or transaction between a corporation and 1 or more or its directors or officers, or between a corporation and other corporation, partnership, association, other organization in which 1 or more of its directors or officers, are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the contract or transaction, or solely because any such director’s or officer’s votes are counted for such purpose, if:
 
(1)           The material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority or the disinterested directors, even though the disinterested directors be less than a quorum; or
 
(2)           The material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
 
(3)           The contract or transition is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the stockholders.
  
Our quarterly results may fluctuate and if we fail to meet the expectations of analysts or investors, our stock price could decline substantially.
 
Our quarterly operating results may fluctuate, and if we fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock could decline. Some of the important factors that could cause our revenue and operating results to fluctuate from quarter to quarter include:

 
·
the timing of our brand acquisition, development and/or licensing activities;
 
 
·
the scope of our marketing and advertising efforts;

 
·
our ability to retain existing customers, attract new customers and satisfy our customers’ requirements;
 
 
·
general economic conditions;

 
·
changes in our pricing policies or those of our licensees;
 
 
·
our ability to expand our business;

 
·
the effectiveness of our personnel;
 
 
·
new product introductions;

 
·
costs associated with future acquisitions of brands; and
 
 
·
extraordinary expenses such as litigation or other dispute-related settlement payments.
 
Some of these factors are not within our control, and the occurrence of one or more of them may cause our operating results to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and should not be relied upon as an indication of future performance.
  
Risks Relating to Our Common Stock
 
There is only a limited public market for our securities.
 
Our common stock is traded on the OTC Markets under the trading symbol “EXCC.” Our common stock is thinly traded, if traded at all, and a robust and active trading market may never develop. Certain shareholders have agreed not to sell their shares until January 14, 2014. Most of our remaining shares may not be sold into the market unless there is an effective registration statement covering the resale of such shares, or such shares are eligible to be sold under Rule 144. A shareholder who decides to sell some or all of his shares in a private transaction may be unable to locate persons who are willing to purchase the shares, given the restrictions. Also, because of the various risk factors described herein, the price of the publicly traded shares of common stock may be highly volatile and not provide the true market price of our common stock.
 
 
19

 
 
Our stock price could be volatile.
 
The market prices of securities of merchant services-related companies are extremely volatile and sometimes reach unsustainable levels that bear no relationship to the past or present operating performance of such companies. Factors that are expected to contribute to the volatility of the trading price of our common stock include, among others:
 
 
 
our quarterly results of operations;
 
 
 
the variance between our actual quarterly results of operations and predictions by stock analysts;
 
 
 
financial predictions and recommendations by stock analysts concerning companies engaged in merchant services-related and companies competing in our market in general, and concerning us in particular;
 
 
 
public announcements of regulatory changes or new ventures relating to our business, new products or services by us or our competitors, or acquisitions, joint ventures or strategic alliances by us or our competitors;
 
 
 
public reports concerning our services or those of our competitors;
 
 
 
the operating and stock price performance of other companies that investors or stock analysts may deem comparable to us;
 
 
 
large purchases or sales of our capital stock;
 
 
 
investor perception of our business prospects or the merchant card processing and acquisition industry in general; and
 
 
 
general economic, political, and financial conditions, and the occurrence of natural disasters and terrorist attacks.
 
In addition to the foregoing factors, the trading prices for equity securities in the stock market in general, and of merchant services-related companies in particular, have been subject to wide fluctuations that may be unrelated to the operating performance of the particular company affected by such fluctuations. Consequently, broad market fluctuations may have an adverse effect on the trading price of our common stock, regardless of our results of operations.
 
Our common stock may be deemed “penny stock” and therefore subject to special requirements that could make the trading of our common stock more difficult than for stock of a company that is not “penny stock.”
 
Our common stock may be deemed to be a “penny stock” as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Penny stocks are stocks (i) with a price of less than $5.00 per share; (ii) that are not traded on a “recognized” national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of issuers with net tangible assets of less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than $6,000,000 for the last three years.
 
Section 15(g) of the Exchange Act, and Rule 15g-2 promulgated thereunder, require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 promulgated under the Exchange Act requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of them.
 
 
20

 
 
We do not currently intend to pay dividends.
 
We have not paid any cash dividends on our common stock since our inception and we do not anticipate paying any cash dividends in the foreseeable future. Earnings, if any, that we may realize will be retained in the business for further development and expansion.
 
We need to raise capital, which will cause additional dilution or issue securities senior to our common stock.

In order to execute our business strategy, we will need to raise additional capital. We may not be able to raise any such additional capital and we may not be able to raise such capital on acceptable terms. Any such financing may result in significant dilution to our existing shareholders. If we raise additional funds through the sale of equity securities, such transactions may dilute the value of our outstanding shares. We may also decide to issue securities, including debt securities or preferred stock, that have rights, preferences, and privileges senior to our common stock (although no such plans are currently in place).
 
Future sales of large amounts of our common stock could have a negative impact on our stock price.
 
Future sales of our common stock by existing shareholders pursuant to an effective registration statement covering the resale of such shares or Rule 144 could adversely affect the market price of our common stock. While our controlling shareholders and their affiliates are subject to lock-up agreements that restrict their ability to sell or transfer their shares, sales of a large number of shares of common stock in the public market by such controlling shareholders following the expiration or waiver of the lock-up agreements could adversely affect the market price of the common stock and could materially impair our future ability to generate funds through sales of our equity securities.
 
Our Board of Directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to existing common stockholders and with the ability to affect adversely stockholder voting power and perpetuate their control over us.
 
Our certificate of incorporation allows us to issue shares of preferred stock without any vote or further action by our common stockholders. Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock.  As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.
 
Preferred stock could be used to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to, and assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including voting rights, of the holders of our common stock.
 
Provisions in our charter documents and Delaware law could discourage a takeover that our shareholders may consider favorable or could cause current management to become entrenched and difficult to replace.
 
Certain provisions of our Bylaws are intended to strengthen the board’s position in the event of a hostile takeover attempt.  These provisions have the following effects:

 
they provide that only business brought before an annual meeting by the board or by a stockholder who complies with the procedures set forth in the Bylaws may be transacted at an annual meeting of stockholders; and
     
 
they provide for advance notice or certain stockholder actions, such as the nomination of directors and stockholder proposals.
 
 
21

 
 
We are subject to the provisions of Section 203 of the DGCL, an anti-takeover law.  In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.  For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior, did own, 15% or more of the voting stock.
 
Our common stock is not registered under the Exchange Act. As a result, we are not subject to the federal proxy rules and our directors, executive officers and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In addition, our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year.
 
Our common stock is not registered under the Exchange Act and we do not intend to register our common shares under the Exchange Act for the foreseeable future; provided, that we will register our common stock under the Exchange Act if we have, after the last day of our fiscal year, more than 500 shareholders of record, in accordance with Section 12(g) of the Exchange Act. As a result, although we are required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our common stock is not registered under the Exchange Act, we will not be subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without furnishing to shareholders and filing with the SEC a proxy statement and form of proxy complying with the proxy rules. In addition, so long as our common shares are not registered under the Exchange Act, our directors and executive officers and beneficial holders of 10% or more of our outstanding common shares will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than 10% of a registered class of equity securities, to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common stock and other equity securities, on Forms 3, 4 and 5, respectively. Such information about our directors, executive officers, and beneficial holders will only be available through periodic reports we file with the SEC.
 
Furthermore, so long as our common stock is not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
 
Section 404 of the Sarbanes-Oxley Act requires us to evaluate annually the effectiveness of our internal controls over financial reporting as of the end of each fiscal year and to include a management report assessing the effectiveness of our internal controls over financial reporting in our annual report.  If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. 
 
We may rely on our member sponsors to provide financial data, such as revenue billed to merchants, to assist us with compiling our accounting records.  As such, our internal controls over financial reporting could be materially affected, or could reasonably likely be materially affected, by the internal controls and procedures of our member sponsors in these markets.  In order to mitigate this risk, we plan to implement internal controls over financial reporting which monitor the accuracy of the financial data being provided by our member sponsors.

While we continue to dedicate resources and management time to ensuring that we have effective controls over financial reporting, failure to achieve and maintain an effective internal control environment could have a material adverse effect on the market’s perception of our business and our stock price.

Item 1B.          Unresolved Staff Comments.

Not Applicable
 
 
22

 
 
Item 2.             Properties.

We operate out of executive offices at 595 Madison Avenue, Suite 1101 New York, NY 10022.   We intend to lease additional space in the New York City area to expand operations. In March 2013, we entered into a lease agreement as a subtenant at 1 Metrotech Center, 20th Floor Brooklyn, NY 11201.  The lease term will expire on June 30, 2014 and we currently pay $4,000 per month.
 
Item 3.             Legal Proceedings.

Currently there are no outstanding judgments against us or any consent decrees or injunctions to which we are subject or by which our assets are bound and there are no claims, proceedings, actions or lawsuits in existence, or to our knowledge threatened or asserted, against us or with respect to any of our assets that would materially and adversely affect our business, property or financial condition. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

Item 4.             Mine Safety Disclosures.

Not applicable. 
 
 
23

 
 
PART II

Item 5.            Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our shares of common stock are quoted on the Over the Counter Bulletin Board (OTCBB) under the trading symbol “EXCC.” Prior to January 31, 2012 there was no active market for our common stock. The following table sets forth the high and low sales prices as reported on the OTCBB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

FISCAL YEAR 2012
 
HIGH
   
LOW
 
First Quarter
 
$
.75
   
$
.45
 
Second Quarter
 
$
.60
   
$
.15
 
Third Quarter
 
$
.23
   
$
.07
 
Fourth Quarter
 
$
.12
   
$
.07
 
 
FISCAL YEAR 2013
 
HIGH
   
LOW
 
First Quarter
 
$
.17
   
$
.08
 
Second Quarter
 
$
.09
   
$
.03
 
Third Quarter
 
$
.05
   
$
.01
 
Fourth Quarter
 
$
.38
   
$
.01
 
 
The last reported sales price of our common stock on the OTCBB on December 31, 2013 was $ 0.08 and on April 11, 2014, the last reported sales price was $0.30.

Holders

According to the records of our transfer agent, as of April 11, 2014, there were approximately 90 holders of record of our common stock.  This number does not include the number of persons whose shares are in nominee or in “street name” accounts through brokers.

Dividend Policy

We have never declared or paid dividends on our common stock.  We intend to retain earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future.  Payment of future dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.

Securities Authorized for Issuance Under Equity Compensation Plans

As of December 31, 2013, there were no securities issued under our 2010 Equity Incentive Plan.
 
Item 6.            Selected Financial Data.

Not applicable

Item 7.            Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our results of operations and financial condition for the fiscal years ended December 31, 2013 and 2012 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this annual report.  Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Risk Factors,” “Cautionary Notice Regarding Forward-Looking Statements” and “Description of Business” sections and elsewhere in this report.  We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “predict,” and similar expressions to identify forward-looking statements.    Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business, our actual results could differ materially from those discussed in these statements.   We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.
 
 
24

 

Current Overview

We have been in a developmental phase since inception and currently have two lines of business operations: licensing and providing merchant services, including credit and debit card processing services, the purchase of merchant receivables, and credit card terminal leases.

Our merchant acquisition business began in 2013 and therefore, we have had no revenues from such operation during 2012. However, during 2013, we began servicing a limited amount of merchants, with some revenue.  Our primary source of revenue came from a management agreement with Tribul Entities, where we oversaw the distribution and servicing of a potential residual acquisition.  However, this ended in November 2013, as Tribul was no longer able to afford our management fee.  In addition, we entered into a definitive agreement with TOT, which provided us with a supplement on residuals to help us grow, but TOT did not continue to provide the supplement to residuals as outlined in the agreement.  Despite these setbacks, we currently have executed a definitive Securities Exchange Agreement for the purchase of 90% of the membership interests of Payprotec Oregon, LLC (d/b/a Securus Payments) (“Payprotec”), and its subsidiary Securus Consultants, LLC (collectively "Securus").. Securus is an established business in the merchant servicing industry, with over 150 employees and market accessibility in the mainland United States.  We expect that this business will  become the larger part of our merchant operations in 2014.

With respect to our licensing business, we are focused on bringing national and international brands to the retail market. We act as agent for licensing brands of corporations, people, government agencies, etc. (“Licensors”) in a broad range of product categories.  We intend to obtain agent rights to license select brands where the brand name can be leveraged into new categories. Our objective is to develop a diversified portfolio of iconic consumer brands by creating and facilitating relationships between Licensors and retail businesses, wholesale businesses, manufacturers, etc. (“Licensees”) who would sell products under the Licensor’s brand.  We expect to organically grow the existing portfolio and enter into joint ventures or other partnerships with the goal of leveraging the experience of agent management and that of our licensees to facilitate sales of branded products.

Upon acquiring the rights to a license from a Licensor, we expect that such a license will typically require us to pay royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach specified targets.  Licenses for brands also typically require a licensee to pay to the brand owner certain minimum amounts for the advertising and marketing of the respective license brand. We intend to seek royalties from Licensees for brands where we are the agent. In addition, we will seek agent fees on minimum royalties and advertising and marketing fees which would offset any expenses we incur while acting as an agent.

We intend to seek the rights to license brands and enter into license relationships with domestic and/or international partners that have demonstrated ability to produce quality products that have been successfully marketed and sold domestically and/or internationally in a broad range of products categories.  The Lifeguard brand is our primary focus in this area, with the intent of moving into the e-cigarette market, though currently there are no active operations in this area.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations are based on our audited consolidated financial statements included with this report that have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods.  On an ongoing basis, we evaluate our estimates and assumptions.  We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 1 to our audited consolidated financial statements.  Our critical accounting policies are those where we have made the most difficult, subjective or complex judgments in making estimates, and/or where these estimates can significantly impact our financial results under different assumptions and conditions.  Our critical accounting policies are:

Basis of presentation and consolidation

Our accounting and reporting policies conform with generally accepted accounting principles (“GAAP”) and include our subsidiaries, after elimination of all intercompany transactions in the consolidation.

Date of Management’s Review of Subsequent Events

Subsequent events were considered through April 15, 2014, which is the date the financial statements were available to be issued.

Accounting Method

Our financial statements are prepared on the accrual method of accounting.
 
 
25

 
 
Revenue Recognition

The Company’s revenue will consist of fees from licenses issued and merchant acquirer fees.  License revenues will include royalties and brand fund contributions which will be based on a percent of sales and an initial license fee.  Royalties, license fees and brand fund contributions will be recognized in the period earned.

Merchant acquirer revenue is primarily comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions.  Fees are calculated on either a percentage of the dollar volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction.

As part of being a merchant acquirer, the Company does also receive fees for management of potential acquired portfolios, as well as subsidy payments to aid the company in growth for a period.  Typically these are negotiated through a contract.

In addition, the Company may also receive payment for brokering deals between a funder and a merchant where the funder purchases a portion of the merchant’s future receivables.  The commission the Company receives is typically calculated as a percentage on the profit the funder makes from such purchase.

Finally, the company may also from time to time lease a credit card terminal to a merchant.  This lease  is not held by the company, but instead is sold at a discounted percentage of the total value on the life of the lease as negotiated with the merchant for the terminal.  Revenue for the sale of the lease is recognized when it is paid.

Cash and Cash Equivalents

For purposes of reporting the statement of cash flows, we include all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents. The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held.

Income Taxes

Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards. The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available. Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond our control, it is at least reasonably possible that our judgment about the need for a valuation allowance for deferred taxes could change in the near term.

Loss Per Share

Loss per share is based on the weighted average number of common shares.  Diluted loss per share was not presented, as the company as of December 31, 2013 has outstanding 150,000 options which would have an anti-dilutive effect on earnings.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amount 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. Actual results could differ from those estimates.
 
Off-Balance Sheet Financing Arrangements

We do not have any off-balance sheet financing arrangements.

Results of Operations

Revenues
 
During the year ended December 31, 2013, we had licensing revenues of $86,500 compared to $7,500 revenues for the year ended December 31, 2012.  During the year ended December 31, 2013, we had residual revenues of $92,092, management service and brokering revenue of $209,750, advance commission revenues of $33,015, and revenue related to the sale of leases of $11,104, as compared to $0 revenue in all these areas during the year ended December 31, 2012.   Although we may have some revenue from licensing for 2014, we anticipate that the majority of our future revenues will come from our merchant acquisition business.  We have a Securities Exchange Agreement with Payprotec that we expect will expand our growth in 2014 immensely.
 
Selling, General and Administrative Expense

Our selling, general and administrative expenses were $1,185,189 during the year ended December 31, 2013 as compared to $564,216 during the year ended December 31, 2012, an increase of $620,973 or 110%. The increase in our selling, general and administrative expense was mainly as a result of establishing our merchant service operations as well as our operating as a publicly traded company. We anticipate that our general and administrative expenses will increase as we further establish our business operations as well as operating as a publicly traded company.
 
 
26

 
 
Other Income

Our other income was ($1,065) for the year ended December 31, 2013 mainly due to a write off of uncollectable interest, as compared to $223,078 for the year ended December 31, 2012, which was mainly a result on a gain on the sale of a note receivable held by a subsidiary, LifeguardCig, Inc. (formerly XL Fashions, Inc.), that resulted in other income of $220,313. As the gain on the note receivable is unrelated to our licensing and/or merchant acquisition business, we do not anticipate other income of any significance in the near future.
 
Net income

As a result of the forgoing, our net losses were $940,579 and $333,638 for the years ended December 31, 2013 and 2012, respectively. We are currently a development stage company and have spent the last year developing our merchant acquisition and license business.  However, we anticipate the Securities Exchange Agreement with Payprotec will bring us much more revenue opportunities.  Although it is possible we may continue to incur net losses in the future, our anticipation is that we will be able to see profitability in 2014.
 
Liquidity and Capital Resources

The following summarizes our cash flows:
 
   
Years ended December 31,
 
   
2013
   
2012
 
Net cash used in operating activities
  $ (890,145 )   $ 243,920  
Net cash provided by (used in) investing activities
  $ (240,000 )   $ 10,000  
Net cash provided by financing activities
  $ 12,337     $ 426,998  
 
Net cash used in operating activities in 2013 was $890,145 as compared with $243,920 in 2012.  This increase of $646,225 was mainly attributable to an increased net loss of $606,941.  
 
Net cash provided by investing activities was $240,000 in 2013, compared with $10,000 used in 2012.  The increase of $250,000 was mainly the result of writeoffs of the ShoutOmatic note receivable and the Billy Martin license.
 
Net cash provided by financing activities was 12,337 for the year ended December 31, 2013 as compared to $426,998 during the year ended December 31, 2012. During the year ended December 31, 2012, we raised $149,908 through the issuance of common stock and raised $227,000 in net proceeds as the result of a mandatory redemption, while in 2013 there was little investing activity.
 
As of December 31, 2013, we had cash and cash equivalents of $8,328, total current assets of $43,557 and total current liabilities of $375,101. To date, we have raised $1,167,653 through the sale of 35,161,016 shares of our common stock. While we expect that this may be sufficient to operate our business through June 2014, there can be no assurance that we will not need additional capital for operations prior to such date.  If we require additional capital, we may attempt to raise additional funds through sales of common stock or borrowings, but there are no assurances that we will raise sufficient amounts to meet our current needs.
 
Going Concern

Our independent registered public accountants have included a going concern explanatory paragraph in their opinion of our 2013 and 2012 financial statements.

Off-Balance Sheet Financing Arrangements

We do not have any off-balance sheet financing arrangements.

Item 7A.         Quantitative and Qualitative Disclosures About Market Risk.
  
Not applicable.
 
 
27

 
 
Item 8.            Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS
 
Excel Corporation and Subsidiaries
A Development Stage Company
December 31, 2013
 
Contents
 
Report of Independent Registered Public Accounting Firm
F-1
   
Consolidated Financial Statements
   
Consolidated Balance Sheet, December 31, 2013 and December 31, 2012
F-2
   
Consolidated Statement of Operations
For the Years Ended December 31, 2013 and 2012 and From Inception, November 13, 2010 through December 31, 2013
F-3
   
Consolidated Statement of Stockholders' Equity
From Inception, November 13, 2010 through December 31, 2013
F-4
   
Consolidated Statement of Cash Flows
For the Years Ended December 31, 2013 and 2012 and From Inception, November 13, 2010 through December 31, 2013
F-5
   
Notes to Consolidated Financial Statements
F-6 - F-15
 
 
28

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Excel Corporation and Subsidiaries
595 Madison
Ste 1101
New York, New York 10022

We have audited the accompanying consolidated balance sheets of Excel Corporation and Subsidiaries (a Delaware Development Stage Company) as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2013 and 2012 and for the period November 13, 2010 (date of inception) to December 31, 2013.  Excel Corporation’s management is responsible for these financial statements.  Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Excel Corporation and Subsidiaries as of December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for the for the years ended December 31, 2013 and 2012 and for the period November 13, 2010 (date of inception) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has incurred losses since inception and has not yet been successful in establishing profitable operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern.  Management’s plans in regards to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
 
/s/ Connolly, Grady & Cha, P.C.
 
Certified Public Accountants

Philadelphia, Pennsylvania

April 15, 2014
 
 
F-1

 
 
Excel Corporation and Subsidiaries
 
(A Development Stage Company)
 
Consolidated Balance Sheet
 
             
   
December 31,
   
December 31,
 
   
2013
   
2012
 
ASSETS
           
Current Assets
           
Cash and cash equivalents
 
$
8,328
   
$
646,136
 
Accounts receivable
   
2,250
     
7,500
 
Prepaid Expenses
   
32,979
         
Notes receivable
           
60,000
 
Accrued interest on note receivable
           
1,515
 
Total current assets
   
43,557
     
715,151
 
                 
Other Assets
               
Security Deposits
   
7,939
         
License agreements
           
150,000
 
Total other assets
   
7,939
     
150,000
 
Total Assets
   
51,496
     
865,151
 
                 
LIABILITIES
               
Current Liabilities
               
Accounts payable
   
146,949
     
140,514
 
Accrued Payroll and Payroll Liabilities
   
66,113
         
Other Accrued Liabilities
   
12,039
         
Notes payable
Advances
   
 
150,000
     
120,000
 
 
Shares subject to mandatory redemption
           
277,000
 
Total current liabilities
   
375,101
     
537,514
 
                 
STOCKHOLDERS' EQUITY
               
Preferred stock, $.0001 par value, 10,000,000 shares
authorized, none issued and outstanding
               
Common stock, $.0001 par value, 200,000,000 shares authorized 67,064,892 and 31,523,745 shares
issued and outstanding as of December 31, 2013 and December 31, 2012 respectively
   
6,706
     
3,152
 
Additional paid-in capital
   
1,010,947
     
725,164
 
Accumulated (deficit)
   
(1,341,258
)
   
(400,679
)
Total stockholders' equity (deficit)
   
(323,605
)
   
327,637
 
Total Liabilities and Stockholders' Equity
 
$
51,496
   
$
865,151
 
 
See accompanying notes to consolidated financial statements.
 
 
F-2

 
 
Excel Corporation and Subsidiaries
 
(A Development Stage Company)
 
Consolidated Statement of Operations
 
                   
   
For the Years Ended
   
From Inception November13,
 2010
through
 
   
December 31,
   
December 31,
 
   
2013
   
2012
   
2013
 
Revenues
                 
Commission Income
 
$
33,015
   
$
     
$
33,015
 
Management Fee Income
   
209,750
             
209,750
 
Residual Income
   
92,092
             
92,092
 
Lease Income
   
11,104
             
11,104
 
Service Fee Income
   
86,500
     
7,500
     
94,000
 
Total Revenues
   
432,461
     
7,500
     
439,961
 
                         
Cost of Sales
                       
Commissions & Other Merchant Costs
   
45,070
     
 
     
45,070
 
Total Cost of Sales
   
45,070
     
 
     
45,070
 
Gross Profit
   
387,391
     
7,500
     
394,891
 
                         
Sales, General and Administrative Expense
                       
Payroll
   
687,037
             
687,037
 
Legal & Professional Fees
   
164,321
     
198,616
     
426,118
 
Outside Services
   
127,322
     
207,222
     
334,544
 
Rent
   
 36,000
             
36,000
 
Bad Debt
   
33,281
             
33,281
 
Travel
   
31,181
             
31,181
 
Marketing & Advertising
   
29,782
     
 72,425
     
102,207
 
Insurance
   
28,441
             
28,441
 
Misc SG&A Expense
   
53,667
     
85,953
     
143,480
 
Total SG&A Expense
   
1,191,032
     
564,216
     
1,822,289
 
                         
Net (loss) before other income, other expense and income taxes
   
(803,641
)
   
(556,716
)
   
(1,427,398
)
                         
Other Income
                       
Gain on sale of note receivable
           
220,313
     
220,313
 
Referral fee income
           
1,250
     
1,250
 
Interest income (writeoff for uncollectible interest)
   
(1,515
)
   
1,515
         
Miscellaneous other income
   
450
             
450
 
Total Other Income
   
(1,065
)
   
223,078
     
222,013
 
                         
Other Expense
                       
Acquisition of subsidiary
   
20,868
             
20,868
 
Miscellaneous other expense
   
115,005
             
115,005
 
Total Other Expense
   
135,873
             
135,873
 
                         
Net (loss) before income taxes
   
(940,579
)
   
(333,638
)
   
(1,341,258
)
                         
Income Taxes
                       
Current
                       
Deferred
                       
Total income taxes
                       
                         
Net (loss)
 
$
(940,579
)
 
$
(333,638
)
 
$
(1,341,258
)
                         
Loss Per Share
                       
Basic & Diluted
 
$
(0.01435
)
 
$
(0.01077
)
 
$
(0.02046
)
                         
Weighted Average Shares Outstanding
                       
Basic & Diluted
   
65,548,471
     
30,968,240
     
65,548,471
 
 
See accompanying notes to consolidated financial statements.
 
F-3

 
 
Excel Corporation and Subsidiaries
 
(A Development Stage Company)
 
Consolidated Statement of Stockholders’ Equity
 
From November 13, 2010 (Date of Inception) to December 31, 2013
 
                                     
   
Preferred Stock
   
Common Stock
   
Additional
Paid-in
   
Deficit Accumulated During the Development
 
   
Shares
   
Amount
   
Shares
   
Amount
   
 Capital
   
 Stage
 
                                     
Balances, November 13, 2010
          $               $       $       $    
                                                 
Issuance of common stock for
                                               
cash at $.002 per share
                    28,986,000       2,899       55,073          
                                                 
Less: Stock offering costs
                                    (16,500 )        
                                                 
Net loss from inception on
                                               
   November 13, 2010 to
                                               
   December 31, 2010
                                            (750 )
                                                 
Balances, December 31, 2010
          $         28,986,000     $ 2,899     $ 38,573     $ (750 )
                                                 
Issuance of common stock for
                                               
cash at $.40 per share
                    1,500,000       150       599,850          
                                                 
Less: Stock offering costs
                                    (63,156 )        
                                                 
Net loss for the year ended
                                               
   December 31, 2011
                                            (66,291 )
                                                 
Balances, December 31, 2011
          $         30,486,000     $ 3,049     $ 575,267     $ (67,041 )
                                                 
Retirement of common stock
                                               
at .0001 per share
                    (50,000 )     (5 )     5          
                                                 
Issuance of common stock for
                                               
exchange of subsidiaries
                                               
preferred stock @ .1379 per share
                    1,087,745       108       149,892          
                                                 
Net loss for the year ended
                                               
   December 31, 2012
                                            (333,638 )
                                                 
Balances, December 31, 2012
                    31,523,745     $ 3,152     $ 725,164     $ (400,679 )
                                                 
Issuance of common stock for
                                               
exchange of subsidiaries
                                               
preferred stock @ .1379 per share
                    2,008,701       201       276,799          
                                                 
Issuance of common stock for
                                               
acquisition of Excel Business Solutions
                                               
at par value (.0001 per share)
                    33,532,446       3,353                  
                                                 
Recognition of options vested
                                               
   on April 11, 2013
                                    8,984          
                                                 
Net loss for the year ended
                                               
   December 31, 2013
                                           
(940,579
)
                                                 
Balances, December 31, 2013
          $         67,064,892     $ 6,706     $ 1,010,947     $
(1,341,258
)
 
 
See accompanying notes to consolidated financial statements.
 
F-4

 
 
Excel Corporation and Subsidiaries
 
(A Development Stage Company)
 
Consolidated Statement of Cash Flows
 
                   
   
For the Years Ended
   
From Inception
November 13,
2010
through
 
   
December 31,
   
December 31,
 
   
2013
   
2012
   
2013
 
Operating Activities:
                 
Net (Loss)
 
$
(940,579
)
 
$
(333,638
)
 
$
(1,341,258
)
Adjustments to reconcile net (loss) to net cash used in Operating Activities:
                       
Changes in operating assets and liabilities:
                       
Decrease (increase)
                       
Accounts receivable
   
5,250
     
(7,500
)
   
(2,250
)
Prepaid and other current assets
   
(32,979
)
   
 
     
(32,979
)
Security deposits
   
(7,939
   
 
     
(7,939
)
Accrued interest on note
   
1,515
     
(1,515
)        
Increase (decrease)
                       
Accounts payable
   
6,435
     
98,733
     
146,949
 
Accrued payroll and payroll liabilities
   
66,113
     
 
     
66,113
 
Other accrued liabilities
   
12,039
     
 
     
12,039
 
                         
Net cash (used in) operating activities
   
(890,145
)
   
(243,920
)
   
(1,159,325
)
                         
Cash flows from investing activities:
                       
Decrease (increase) in due from notes receivable
   
60,000
     
(60,000
)
   
 
 
Decrease in payments on notes payable
   
(120,000
)
   
 
     
(120,000
)
Increase from proceeds from advances
   
150,000
     
 
     
270,000
 
Increase (decrease) in license agreements
   
150,000
     
50,000
     
 
 
                         
Net cash provided by (used in) investing activities
   
240,000
     
(10,000
)
   
150,000
 
                         
Cash flows from financing activities:
                       
Issuance of shares subject to mandatory redemption
   
(277,000
)
   
277,000
     
 
 
Increase (decrease) in additional paid in capital
   
285,783
     
149,895
     
1,010,947
 
Issuance of common stock
   
3,554
     
103
     
6,706
 
                         
Net cash provided by financing activities
   
12,337
     
426,998
     
1,017,653
 
                         
Net increase (decrease) in cash
   
(637,808
)
   
173,078
     
8,328
 
                         
Cash - beginning
   
646,136
     
473,058
     
 
 
                         
CASH - ENDING
 
$
8,328
   
$
646,136
   
$
8,328
 
                         
Supplemental disclosures of cash flow information:
                       
Interest paid
                       
Income taxes paid
 
$
 
   
$
 
   
$
 
 
                         
Supplemental disclosures of noncash investing and financing activities
   
None
     
None
     
None
 
 
See accompanying notes to consolidated financial statements.
 
 
F-5

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
1.         ORGANIZATION AND OPERATIONS

Excel Corporation (the “Parent”) was organized November 13, 2010 as a Delaware corporation.  The Parent has two wholly owned subsidiaries, LifeguardCig Inc., formerly XL Fashions Inc., formed in fiscal year 2012, (the “First Subsidiary”), and Excel Business Solutions, Inc., formed in fiscal year 2013 (see note 14), (the “Second Subsidiary”), (Parent,  First Subsidiary and Second Subsidiary, collectively, the “Company”).

The Company currently is considered a development stage company as defined by FASB ASC 915-205-45-6.  The Company is currently devoting substantially all of its efforts in two areas.  First, the Company is licensing brands in a broad range of product categories.   The Company also intends to license select brands where the brand name can be leveraged into new categories.  The Company’s objective is to develop a diversified portfolio of iconic consumer brands by issuing licenses and then organically growing the existing portfolio, licensing new brands and entering into joint ventures or other partnerships with the goal of leveraging the experience of management in the license of branded merchandise.

Based upon the experience of its management, the Company expects that its licenses will typically require licensees to pay royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach specified targets.  The Company further expects that any licenses issued will require licensees to pay certain minimum amounts for the advertising and marketing of the respective license brands.

The Company’s other efforts are in the merchant processing industry.  The Company focuses on acquiring merchants for credit card processing.  The Company does this through Independent Sales Organizations (“ISO”s) who solicit small to medium sized merchants. These merchants may be underserved by the large processors in terms of pricing and customer service and may therefore be better suited to receive service from a merchant acquirer.  As a result of processing relationships, the Company believes that it will be able to provide competitively priced credit and debit card processing while providing a high level of customer service.

The Company sells electronic payment processing services, which include credit and debit card processing, check approval, and ancillary processing equipment and software services to merchants who accept credit cards, debit cards, checks, and other non-cash forms of payment.  In addition, the Company looks to acquire monthly residual streams currently in place between ISOs and processors.

Excel Cash Solutions, Inc. (“ECSI”) has been formed as a wholly owned subsidiary of Excel Business Solutions, Inc on August 19, 2013.  ECSI manages a sales team intending to originate the sales of financial products targeted for small to mid-sized merchants.  ECSI is compensated with referral fees for realized credit card processing agreements, equipment leases and cash advances.  All payment processing accounts will be referred to Excel Business Solutions, Inc.  The Company is exploring the opportunity of expanding its business into the receivable purchasing space and would have first right of refusal to participate in any transactions originated by ECSI.

Additionally, Excel Capital Solutions, LLC, (“ECap”), has been formed as a wholly owned subsidiary of Excel Cash Solutions, Inc on September 25, 2013.  ECap negotiates, manages and holds agreements between other merchant service providers and ECap.

 
2.        GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern.  However, the Company has incurred losses since its inception and has not yet been successful in establishing profitable operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern.  In this regard, management is proposing to raise any necessary additional funds through sales of its common stock or through loans from shareholders.  There is no assurance that the Company will be successful in raising additional capital or achieving profitable operations.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
 
 
F-6

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform with generally accepted accounting principles (GAAP).  In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the consolidated balance sheets as of December 31, 2013 and December 31, 2012, the consolidated statements of operations and comprehensive income for the years ended December 31, 2013 and 2012, and the consolidated statements of cash flows for the years ended December 31, 2013 and 2012.  The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”).  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  The results of operations for the year ended December 31, 2013 are not necessarily indicative of the results of operations to be expected for the full fiscal year.  These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
 
Date of Management’s Review of Subsequent Events

Subsequent events were considered through April 15, 2014, which is the date the financial statements were available to be issued.

Accounting Method

The Company’s financial statements are prepared on the accrual method of accounting.

Revenue Recognition

The Company’s revenue will consist of fees from licenses issued and merchant acquirer fees.  License revenues will include royalties and brand fund contributions which will be based on a percent of sales and an initial license fee.  Royalties, license fees and brand fund contributions will be recognized in the period earned.

Merchant acquirer revenue is primarily comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions.  Fees are calculated on either a percentage of the dollar volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction.

As part of being a merchant acquirer, the Company does also receive fees for management of potential acquired portfolios, as well as subsidy payments to aid the company in growth for a period.  Typically these are negotiated through a contract.

In addition, the Company may also receive payment for brokering deals between a funder and a merchant where the funder purchases a portion of the merchant’s future receivables.  The commission the Company receives is typically calculated as a percentage on the profit the funder makes from such purchase.

Finally, the company may also from time to time lease a credit card terminal to a merchant.  This lease  is not held by the company, but instead is sold at a discounted percentage of the total value on the life of the lease as negotiated with the merchant for the terminal.  Revenue for the sale of the lease is recognized when it is paid.

Cash and Cash Equivalents

For purposes of reporting the statement of cash flows, the Company includes all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents.  The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held.
 
 
F-7

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
3.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Income Taxes
 
Income taxes are provided for the tax effects of the transactions reported in the financial statements and  consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards. The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available.  Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond the Company’s control, it is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred taxes could change in the near term.

Loss Per Share

Loss per share is based on the weighted average number of common shares.  Diluted loss per share was not presented, as the company as of December 31, 2013 has outstanding 150,000 options which would have an anti-dilutive effect on earnings.
 
Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount 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.  Actual results could differ from those estimates.
 
Material estimates that are particularly susceptible to significant change relate to the evaluation of deferred tax assets.
 
Reclassification
 
Certain amounts as of the year ended December 31, 2012 have been reclassified to conform to the current year’s presentation. These changes have no effect on the company’s results of operations or financial position.
 
4.         RECENT ACCOUNTING PRONOUNCEMENTS

In February 2013, the FASB issued ASU No. 2013-02 Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income    , which is intended to improve the reporting of reclassifications out of accumulated other comprehensive income. It does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012, with early adoption permitted. The adoption of the provision in this ASU did not have a material impact on the Company’s consolidated financial statements.
 
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
 
5.         FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below:
 
Level 1: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
 
 
F-8

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
5.         FAIR VALUE MEASUREMENTS (Continued)
 
Level 2: Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest rates.
 
Level 3: Level 3 inputs are unobservable inputs.
 
The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies.  However, considerable judgment is required to interpret market data to develop the estimates of fair value.  Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows:
 
Cash and Cash Equivalents, Accounts Receivable, Prepaid Expenses, Security Deposits, Accounts Payable, Accrued Payroll and Payroll Liabilities, and Other Acrrued Liabilities.
  
The items are generally short-term in nature, and accordingly, the carrying amounts reported in the consolidated statements of financial condition are reasonable approximations of their fair values.

License Agreements, Note Receivable, Note Payable and Advances.

The carrying amounts approximate the fair value.

6.         INCOME TAXES

The Company accounts for income taxes in accordance with FASB Accounting Standards Codification Topic 740-10 which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards.  At December 31, 2013, the Company has available unused operating loss carryforwards of approximately $1,200,000 which may be applied against future federal and state taxable income which expires in 2033.  The Company is carrying a valuation allowance against the deferred tax asset as the Company believes that it is more likely than not that the net operating losses will not be utilized.  The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined because of the uncertainty surrounding the realization of the loss carryforwards.  The Company has established a valuation allowance equal to the effect of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards
.
7.         STOCKHOLDERS EQUITY

At December 31, 2013, the Company had 200,000,000 shares of common stock authorized par value $.0001 and 10,000,000 shares of preferred stock authorized par value $.0001.  As of April 15, 2014, the Company had 68,893,462 shares of common stock issued and outstanding.

 
F-9

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
8.         STOCK OPTIONS

On November 13, 2010 the Company’s Board of Directors (the “Board”) approved a stock plan pursuant to which

the Company may grant incentive and non-statutory options to employees, non-employee members of the Board and consultants and other independent advisors who provide services to the Corporation.  The maximum shares of common stock which may be issued over the term of the plan shall not exceed 4,000,000 shares.  Awards under this plan are made by the Board of Directors or a committee of the Board.  Options under the plan are to be issued at the market price of the stock on the day of the grant except to those issued to 10% or more stockholders which shall be issued at 110% of the fair market value on the day of the grant.  Each option exercisable at such time or times, during such period and for such numbers of shares shall be determined by the Plan Administrator.  However, no option shall have a term in excess of 10 years from the date of the grant.
 
On April 11, 2013, the Company modified its employment agreement with its Vice President of Licensing, Mr. Rob Stone, granting Mr. Stone options to purchase 250,000 shares at $0.30. Pursuant to the agreement, 150,000 options vested immediately with the 50,000 shares to vest on February 1, 2014 and 50,000 shares to vest on February 1, 2015.
 
As of April 14, 2014, Mr. Stone’s options have expired.

9.         RELATED PARTY TRANSACTIONS.

On January 14, 2013, in conjunction with the acquisition of subsidiary (see note 14), there was an issuance of stock, 33,523,446, approximately 50% of total stock issued, of which 6,789,641 was issued to current officers and directors of Excel Corp.

10.       LOSS PER SHARE

Loss per share is based on the weighted average number of common shares.  Diluted loss per share was not presented, as the company as of December 31, 2013 has outstanding 150,000 options which would have an anti-dilutive effect on earnings.
 
The following is a reconciliation of the basic and diluted loss per share – common calculation for the years ended December 31, 2013 and 2012 and for the period November 13, 2010 (date of inception) through December 31, 2013.
 
   
For the
   
For the
   
November 13, 2010
(date of
inception)
 
   
Year Ended
   
Year Ended
   
through
 
   
December 31, 2013
   
December 31, 2012
   
December 31, 2013
 
                   
Loss from continuing operations available to common stockholders
   
(940,579
)
   
(333,638
)
   
(1,341,258
)
 
                       
Weighted average number of common shares outstanding used in earnings per share during the period Basic and Diluted
   
65,548,471
     
30,968,240
     
65,548,471
 
                         
Loss per common share Basic and Diluted
   
(.01435
)
   
(.01077
)
   
(.02046
)
  
 
F-10

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
11.       LICENSING AGREEMENTS

Billy Martin Agreement

On October 21, 2011, the Company (the “Purchaser”) entered into an Agreement of Sale (the “Agreement”) with Real American Capital Corp (the “Seller”) to purchase the assets of the business known as “Billy Martin’s”, (collectively the “Assets”).  The Assets included the following:
 
 
1)
All rights, title and interest in and under the trademarks including all claims associated with the license, the “Trademarks”.
     
 
2)
The right, title and interest of the Seller in the name of Billy Martin’s, the “Name”.
     
 
3)
Any goodwill associated with the trademark, (the “Goodwill”).
     
 
4)
Any furniture, furnishings, and fixtures, (collectively, “fixtures and equipment”), as defined in the agreement.
     
The purchase price for the assets above was $150,000 due as follows:
     
 
1)
$30,000 was paid at the closing date, October 24, 2011. $120,000 to be paid in four annual interest free installments: $30,000 on October 17, 2012, 2013, 2014 and 2015.
 
The Company is currently in default under the BM Note because it has not made the payment of $30,000 that was required in October 2012 and the following payment that was required in October 2013. However, the Company does not retain any rights to the IP/business name, and therefore, regards the agreement as no longer in effect.

Representation Agreement (Soupman Inc.)

On February 4, 2012, the Company, the “Agent”, entered into an Agreement with Soupman, Inc. (Principal).  Pursuant to the agreement, the Principal has designated the Agent as the exclusive licensing agent in the Territory, as defined in the Agreement. As licensing agent, the Company will negotiate and service licensing agreements on behalf of the Principal.

As compensation, Excel will receive 25% of all licensing revenue from agreements executed pursuant to the terms of the Representation Agreement and five percent (5%) of other licensing revenue as defined in the Agreement.  All payments from License Agreements are made payable to the Principal and after such payment, the Agent will be paid the commission as indicated above.

The initial term of the Agreement is for one year and automatically renews provided that the Agent has submitted to the Principal a minimum of five potential license applications.  Subsequent to the second year, the Agreement will terminate unless extended by written agreement.

As of Feb 4, 2014 the agreement was not renewed.
 
 
F-11

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
11.       LICENSING AGREEMENTS (Continued)
 
Camuto Consulting
 
On February 21, 2012, the Company entered into an Agreement with Camuto Consulting, Inc. (the “Principal”), in which the Principal engaged the Company as the Licensing Agent to identify and secure licenses as applicable.  The Agreement is for a one year term and expires February 28, 2013.

Compensation to the Licensing Agent pursuant to the agreement is as follows:
 
 
1)
Commissions payable at six and a half (6.5%) on Royalties earned and received by the Principal during the first term of solicited agreements with eligible Licensees that are executed.
 
 
2)
Commissions payable at five (5%) on Royalties earned and received by the Principal during any renewal term of solicited agreements with eligible Licensee that are executed.
 
As of Feb 28, 2014, the agreement was not renewed.
 
Benedetto Arts, LLC
 
On May 3, 2012, the Company entered into an Agreement with Benedetto Arts, LLC  (“BA”), in which BA will utilize the Company as an independent contractor for the solicitation of licensing opportunities.   As compensation for its services, the Company will receive a commission based on 20% of Gross Revenue as defined in the Agreement.

The term of the Agreement is for one year commencing on May 3, 2012 with an option to extend if both parties agree.  In addition, if the Company does not deliver three business opportunities from the May 3, 2012 date, BA has the right to terminate the Agreement.

The agreement is still active, though it is not operative as of December 31, 2013.

Representation Agreement-Life Guard
 
On January 2, 2012, the Company (the “Agent”) entered into an Agreement with Lifeguard Licensing Corp, (the “Principal)  in which the Principal owns rights to trademarks, packaging, designs, images, copyrights and other intellectual property, collectively the “Property”.  The Principal, pursuant to the Agreement designated the Company as the Licensing Agent to negotiate and service license agreements with respect to commercial exploitation of the Property within the Territory as defined in the Agreement.
 
The term of the Agreement is for one year commencing on the effective date (January 2, 2012). The Principal may terminate the Agreement upon written notice if the agent does not meet certain terms as defined in the agreement. The Agents compensation will be calculated at 25%, 20% and 15% of Net Revenues for the initial term, second renewal term, and third renewal term respectively.  In addition to the Agent’s Compensation the Principal will reimburse the Agent for out of pocket expenses.

The agreement has been renewed and as of December 31, 2013, the agreement is still active.

12.       NOTE RECEIVABLE

On August 1, 2012, the Company entered into a Secured Promissory Note with Shoutomatic LLC (the “Maker”) in which the Maker promises to pay the Company (the “Payee”) the principal sum of $60,000 at an interest rate of six percent per annum.  The interest was to accrue and be paid on August 1, 2013 (“Maturity Date”). The Maker did have the right to prepay without penalty.
 
Currently, the payment remains past due, and management has written it off with the expectation that it will not be paid.
 
 
F-12

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
13.       SHARE SUBJECT TO MANDATORY REDEMPTION

The funds that XL Fashions utilized for the Orix Note acquisition were raised from the sale of 9,608,412 shares of its Preferred stock, at a price of $.1379 per share.  The shares will convert on a one for one basis for shares of Excel Corporation common stock or will be purchased back in cash.  As of December 31, 2013, all shares of this Preferred stock was either converted to Excel Corporation common stock or purchased back in cash.  

14.       ACQUISITION OF SUBSIDIARY

On January 14, 2013, the Company entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with Excel Business Solutions, Inc., a Delaware corporation (“EBSI”), and ECB Acquisition Corp., our newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transaction contemplated under the Merger Agreement (the “Merger”), Acquisition Sub merged with and into EBSI, and EBSI, as the surviving corporation, became a wholly-owned subsidiary of the Company.
 
Pursuant to the terms and conditions of the Merger Agreement, at the closing of the Merger, each share of EBSI’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive an aggregate of 33,532,446 shares of common stock, par value $0.0001 per share, of the Company, with fractional shares of the Company’s common stock rounded up or down to the nearest whole share.  Following the closing of the Merger, there were 65,201,223 shares of common stock issued and outstanding.

As of April 15, 2014, there are 68,893,462  shares of common stock issued and outstanding.

15.       ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

Tribul Agreement

On June 7, 2013, the Company through its subsidiary, EBSI,  entered into a Management Services Agreement (“Tribul Agreement”) with Tribul Merchant Services, LLC, Tribul, LLC, Tribul Cash, LLC, Tribul of America, LLC and Second Source Funding LLC (collectively, the “Tribul Entities”), each a New York limited liability company, under which Tribul Entities retained the services of Excel to perform management and administrative services (with respect to the apportionment and settlement of collected commissions, fees, payments, charges and/or “residual revenues” among banks, financial institutions, credit card processors, independent sales organizations (“ISOs”), super-ISOs, sales representatives, sales agents, ancillary service providers and merchants (collectively, and as more fully described in the Agreement A,  “ISO Office Functions”) as agent and on behalf of the Tribul Entities.

Under the terms of the Tribul Agreement, until Excel has purchased a minimum of $80,000 per month in residual revenues from ISOs and super-ISOs currently doing business directly with the Tribul Entities, the Tribul Entities would pay to Excel as the managing agent a service fee of $29,500 per month and reimburse Excel for its reasonable out-of-pocket expenses incurred in the course of performing the ISO Office Functions.  Excel was also granted a limited, non-transferable, non-exclusive, royalty-free license and access to utilize Tribul Entities’ online systems for purposes of performing the ISO Office Functions. Pursuant to the Agreement, the Tribul Entities were not allowed to enter into similar agreements with any third parties.

However, in November 2013, the agreement was terminated due to Tribul Entities inability to continue paying the management fee.

 
F-13

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013

15.       ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT (Continued)

TOT Agreement

On October 25, 2013, the Company through its subsidiary, EBSI, entered into an ISO Agreement (“TOT Agreement”) with TOT Payments, LLC, a Florida limited liability company (“TOT”), under which Excel agreed to solicit merchants (the “Merchants”) for TOT to provide credit and debit card processing services to Merchants.

The initial term of the Tot Agreement was five years and would automatically renew for additional successive one year periods, unless terminated pursuant to the terms of the Agreement. During the term of the Agreement, TOT is granting Excel a non-transferable, non-exclusive sub-license to use for its own business the processing, CRM and merchant support programs and platforms of TOT's processor(s). Under the Agreement, Excel would market the credit card and debit card processing services of TOT, and would encourage qualified customers to become Merchants.  During the first 12 months, TOT would advance to Excel on a monthly basis an amount not to exceed $90,000/month to support Excel’s expansion and marketing efforts (the “Advance”).  Excel was to have a five (5) month ramp up period and thereafter will be required to generate sufficient business and monthly minimum fees for TOT.   The minimum fee requirements under the Agreement were 50% of the Advance within five (5) months of the effective date of the Agreement, 80% within eight (8) months, and 100% within twelve (12) months.  Should Excel fail to reach minimum fee requirements, TOT was to have the right to adjust the revenues due to be paid to Excel under the Agreement  to cover any shortfall.
 
Under the terms of the Agreement, the initial revenue split between Excel and TOT was to be 90% and 10% respectively, and Excel was to be entitled to monthly Compensation (also known in the industry as “Residuals”, which is defined in the Agreement as Excel’s 90% of the revenues for Merchants, less any applicable fees or set-offs permitted to be charged by TOT under the Agreement). Excel would receive the Merchants Residuals for life; Excel’s entitlement to receive its Residuals and Compensation survives the termination or expiration of the Agreement (so long as Excel does not violate certain obligations under the Agreement, primarily the covenant not to solicit TOT’s employees, agents, vendors and Merchants for any competitors of TOT).  The Agreement also provides terms under which TOT will purchase from Excel a portion or all of Excel’s interests in the Residuals. All losses incurred by TOT in excess of 3 basis points of “Net Losses” as defined in the Agreement would be borne 90% by Excel (through a reserve account established under the Agreement) and 10% by TOT.  The Agreement contains standard non-solicitation and indemnification provisions.   In November 2013, TOT failed to provide the Advance.

16.      SUBSEQUENT EVENTS

Securities Exchange Agreement

On February 17, 2014, the Company entered into a Securities Exchange Agreement with Payprotec Oregon, LLC (d/b/a Securus Payments) (“Payprotec”), Mychol Robirds and Steven Lemma, that will effectuate the purchase of 90% of the membership interests of Payprotec and its subsidiary Securus Consultants, LLC..  In exchange for the membership interests in Payprotec and Securus, the Company has agreed to issue to Messrs. Robirds and Lemma a total of 20,400,000 shares of the Company’s Common Stock and two shares of the Company’s Series A Preferred Stock.  Pursuant to the Agreement, at closing, Payprotec will also enter into three year employment agreements (the “Employment Agreements”) with each of Messrs. Robirds and Lemma.  The Agreement is subject to a number of conditions, including without limitation, the delivery of audited financial statements for Payprotec and Securus, consents of third parties, the filing of the certificate of designation for the Series A Preferred Stock ("Certificate of Designation") and the execution of the Employment Agreements.   The closing date for the Securities Exchange Agreement has been extended to April 21, 2014.
 
 
F-14

 
 
Excel Corporation and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013
 
16.      SUBSEQUENT EVENTS (Continued)
 
Entry into a Material Definitive Agreement

On March 24, 2014, Excel Corporation (the “Company”), through its wholly owned subsidiary 420 Solutions Corporation (“420 Solutions”), entered into an Exclusive Reseller Agreement (the “Agreement”) with TransBlue, LLC (“TransBlue”).  The Agreement gives 420 Solutions the exclusive right to resell TransBlue’s Point of Banking (“POB”) processing services to certain merchant types/market segments during the term of the Agreement (“Reseller Rights”).  The term of the Agreement (the “Term”) is for a period of four years commencing on March 24, 2014. Thereafter, the Agreement automatically renews for consecutive, additional one year terms unless either party provides the other party written notice of non-renewal at least 30 days prior to the commencement of any additional one year term.

In exchange for the Reseller Rights, the Company, upon signing of the Agreement, agreed to issue to Trans Blue 200,000 shares of the Company’s Common Stock (the “Initial Shares”).  In addition to the Initial Shares, during the Term, the Company has agreed to issue up to 800,000 shares of the Company’s Common Stock entirely dependant on and proportionally related to the Company’s ability to successfully sell TransBlue’s POB services.

The foregoing summary of the Agreement is qualified in its entirety by reference to the Agreement a copy of which is filed as Exhibit 10.01 to this report and is incorporated herein by reference.

 Issuance of Stock

In 2014, as of the date of this report, the company has raised $150,000 through the issuance of 1,628,570 shares of its Common Stock.
 
 
F-15

 
 
Item 9.          Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
 
At no time have there been any disagreements with our accountants regarding any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Item 9A.       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 15d-15(e) promulgated under the Exchange Act, as of December 31, 2013. Based on this evaluation, our principal executive officer and principal financial officer 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 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules.

Management’s Annual Report on Internal Control Over Financial Reporting
 
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 15d-15(f) under the Exchange Act.  The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with United States’ generally accepted accounting principles (“US GAAP”), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
 
Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting.  Based on this evaluation, management has concluded that as of December 31, 2013, our internal control over financial reporting was effective. 
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
 
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant rules of the SEC that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting
 
There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.       Other Information.

None   
 
 
29

 
 
PART III

Item 10.        Directors, Executive Officers and Corporate Governance.

The following table sets forth the names, ages, and positions of our executive officers and directors as of the date of this report. Executive officers are elected annually by our Board of Directors.  Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and qualified.  Directors are elected annually by our stockholders at the annual meeting.  Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.

Name
 
Age
 
Position with the Company
Ruben Azrak
 
61
 
Chief Executive Officer and Chairman of the Board
Shawn Alcoba
 
39
 
Chief Financial Officer and Comptroller
Charles Azrak
 
26
 
Director
Antonio Rubio
 
43
 
Director

The term of office of each director ends at the next annual meeting of our stockholders or when such director's successor is elected and qualified. No date for the next annual meeting of stockholders is specified in our bylaws or has been fixed by the Board of Directors. The term of office of each officer ends at the next annual meeting of our Board of Directors, expected to take place immediately after the next annual meeting of stockholders, or when such officer's successor is elected and qualifies. 
 
Biographies

Ruben Azrak, Chief Executive Officer and Chairman of the Board of Directors. Ruben Azrak a founder of the Company and has been a director since our incorporation in November 2010. Mr. Azrak was our Chief Executive Officer from inception until the date of the Merger and on February 13, he became Chief Executive Officer again. Beginning in 1998, along with Russell Simmons, Mr. Azrak developed Phat Farm Licensing. Phat Farm Licensing was sold in 2004. In 1996 he started Check Group LLC, a company engaged in the apparel business. Mr. Azrak subsequently sold his entire interest in Check Group to a partner. Mr. Azrak is Chairman and a Director of RVC Enterprises, which was formed with his two sons, Victor and Charles. RVC, through its subsidiaries and affiliates, now licenses ROCAWEAR, the ladies sportswear line from the entertainer-entrepreneur Jay-Z. In addition, RVC owns the license for ELLEN TRACY sportswear and BEVERLY HILLS POLO CLUB. Mr. Azrak is also President and the sole director of Lifeguard Licensing Corp. and Lucky Star licensing. Mr. Azrak is active in the real estate business as both an investor and owner of a number of commercial buildings throughout the NY City area. Our board is of the opinion that Ruben Azrak’s prior experience in licensing with both Phat Farm Licensing and RVC qualifies him to serve as a member of our Board of Directors. Mr. Azrak is the father of Charles Azrak.

Shawn Alcoba, Chief Financial Officer and Comptroller. Shawn Alcoba became our Comptroller upon consummation of the Merger. On August 1, 2013 Shawn became Chief Financial Officer. He served as the Comptroller for Intermedia.net Inc., a provider of cloud computing services for small and medium sized businesses, from January 2007 until the company was purchased by Oak Hill Capital Management Partners in May 2011. From June 2011 to October 2012, he continued at Intermedia.net Inc. under the new ownership. Mr. Alcoba graduated from Columbia University in 1998.  On August 1, 2013, Mr. Alcoba assumed the position of Chief Financial officer.
  
Charles Azrak, Director. Charles Azrak has been a director of ours since inception. Mr. Azrak was our Vice President and Secretary from inception until the date of the Merger. He has been involved in all phases of RVC's operations since 2006; specifically, finance, sourcing of product and production. Charles Azrak is Vice President, Secretary and a director of RVC. Our board is of the opinion that Charles Azrak’s prior experience in licensing with RVC qualifies him to serve as a member of our Board of Directors. Charles Azrak is the son of Ruben Azrak.
 
 
30

 

Antonio Rubio, Director. Mr. Rubio became a director of ours upon consummation of the Merger. He has over 15 years’ experience in the Merchant Acquisition Industry. Since its inception in 2006 to present, Mr. Rubio has been the President at VLA Merchant Services where he recruited bilingual sales agents for merchant acquirers.  Mr. Rubio managed over two hundred Sales Agents targeting Hispanic business owners.  Mr. Rubio completed his Bachelor of Science at O&M University in the Dominican Republic. Our board is of the opinion that Antonio Rubio’s prior experience in the Merchant Acquisition Industry qualifies him to serve as a member of our Board of Directors.

Directors’ and Officers’ Liability Insurance

We are in the process of obtaining directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions.  Such insurance also insures us against losses which we may incur in indemnifying our officers and directors.

Compliance With Section 16(a) of the Exchange Act

Our common stock is not registered under Section 12 of the Exchange Act and therefore our directors, executive officers and beneficial holders of 10% or more of our outstanding common stock are not subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than 10% of a registered class of equity securities, to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common stock and other equity securities.

Code of Ethics

We have adopted a written code of business conduct and ethics, to be known as our code of ethics, which applies to our principal executive officer, principal financial officer, principal accounting officer and all persons providing similar functions.

A code of ethics is a written standard designed to deter wrongdoing and to promote:
 
 
honest and ethical conduct,
     
 
full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements,
     
 
compliance with applicable laws, rules and regulations,
     
 
the prompt reporting violation of the code, and
     
 
accountability for adherence to the code.
 
We will provide a copy of the code of ethics free of charge upon request to any person submitting a written request to our Chief Executive Officer.

Board Committees

Our Board of Directors has no separate committees.  No one serving on our Board of Directors would qualify as an audit committee financial expert.  As a small reporting issuer with limited resources, the Board of Director has determined not to expend resources to engage a financial expert.
 
 
31

 
 
Item 11.             Executive Compensation.

Summary Compensation Table

The table below summarizes the total compensation paid or awarded to our Named Executive Officers by Company during the years ended December 31, 2013.  Prior to 2013, none of our officers received compensation.
 
Name and Principal Position
 
Fiscal Year
 
Salary
($)
   
Bonus
($)
   
Stock
Awards
($)
   
Option
Awards
($) (1)
   
All other
Compensation
($)
   
Total
($)
 
Ruben Azrak
Chairman of the Board and
Chief Executive Officer (1)
 
Fiscal 2013
 
$
-
   
$
-
   
$
-
   
$
-
   
$
-
   
$
-
 
                                                     
David Popkin
Chief Executive Officer (2)
 
Fiscal 2013
 
$
182,500
   
$
-
   
$
-
   
$
-
   
$
-
   
$
182,500
 
                                                     
Shawn Alcoba
Chief Financial Officer (2)
 
Fiscal 2013
 
$
140,000
   
$
-
   
$
-
   
$
-
   
$
-
   
$
140,000
 

(1)  
Ruben Azrak became Chief Finanical Officer on February 13, 2014, after David Popkin resigned his position.
(2)  
David Popkin resigned on February 10, 2014.
(3)  
Shawn Alcoba became Chief Financial Officer on August 1, 2013.

Except as provided for in agreements that the Company may enter into with its executive officers, any bonus compensation to executive officers will be determined by our Compensation Committee based on factors it deems appropriate, including the achievement of specific performance targets and our financial and business performance.

Employment Agreements and Compensation

David Popkin, who was Chief Executive Officer on December 31, 2013, officially resigned his position on February 10, 2014.  On February 13, 2014, The Board voted to accept Mr. Popkin’s resignation and to appoint Mr. Ruben Azrak as the Company’s Interim Chief Executive Officer.  Mr. Azrak does not receive compensation from the Company.
 
The Company has entered into three-year employment agreements in January 2013 with Shawn Alcoba.  Shawn Alcoba, our Chief Financial Officer, earns a salary of $180,000 per year.  He is also entitled to participate in the Company’s benefit plans and to receive such additional consideration, including cash and stock bonuses and option grants, as determined by our Board of Directors. Their employment agreement can be terminated, among the other things, by the Company for cause or by the employees for certain good reasons. Their employment agreement also contains customary provisions of confidentiality and non-competition or non-solicitation.

Stock Option Grants

We did not grant any stock options to anyone during the most recent fiscal period ended December 31, 2013.
 
Compensation of Directors

None of our directors received compensation for the year ended December 31, 2013.

Item 12.             Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following tables set forth certain information as of April 11, 2014 regarding the beneficial ownership of our common stock, taking into account the consummation of the Merger, by (i) each person or entity who, to our knowledge, owns more than 5% of our common stock; (ii) our executive officers; (iii) each director; and (iv) all of our executive officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power.  Each 5% stockholder's address is c/o Excel Corporation at 595 Madison Avenue, Suite 1101 New York, NY 10022, unless stated otherwise.
 
 
Name of Beneficial Owner
 
Number of Shares
Beneficially Owned
   
Percentage
Beneficially Owned (1)
 
5% Owners:
           
Sarah Azrak(2)
    10,007,200       14.5 %
The Samuel Chanin Irrevocable Insurance Trust December 21, 2006(3)
    6,474,320       9.4 %
S.E.A Forever LLC(4)
    3,862,570       5.6 %
Executive Officers and Directors:
               
Ruben Azrak
    3,104,600       4.5 %
Shawn Alcoba
    992,461       1.4 %
Charles Azrak
    3,104,600       4.5 %
Antonio Rubio
    1,984,922       2.9 %
All executive officers and directors as a group (four persons)
    9,186,583       13.3 %
 

 
(1)  
Based on 68,893,462 shares of our common stock issued and outstanding.
 
 
32

 
 
 
(2)  
Sarah Azrak is a natural person with voting and dispositive power over 6,902,600 shares of our common stock as trustee for The Azrak Family 2010 Irrevocable Trust. In addition, she is the holder of 3,104,600 shares of our common stock. Ms. Azrak is the wife of Ruben Azrak. Charles Azrak is the son of Ruben and Sarah Azrak.
     
 
(3)  
Lieba Chanin is a natural person with voting and dispositive power over 6,474,320 shares of our common stock as trustee for The Samuel Chanin Irrevocable Insurance Trust December 21, 2006.  
     
 
(4)  
Yeruchem Blesofsky is a natural person with voting and dispositive power over 3,862,570 shares of our common stock held by S.E.A. Forever LLC.
 
Changes in Control
 
We are not aware of any arrangements that may result in a change in control.

Item 13.            Certain Relationships and Related Transactions.

There has not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party and in which any related person had or will have a direct or indirect material interest, in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of the Company’s total assets at the end of the last two fiscal years.

Director Independence

The Company has determined that none of our directors would be considered independent.
 
Item 14.            Principal Accountant Fees and Services.

During the fiscal years ended December 31, 2013 and December 31, 2012, the firm of Connolly, Grady & Cha, P.C. was our principal accountant and the firm of Sasserath & Zoraian, LLP was our principal tax firm. The following is a summary of fees paid or to be paid to them for services rendered.

Audit Fees: Aggregate fees billed by Connolly, Grady & Cha, P.C. for professional services rendered for the audit of our annual financial statements and review of our interim financial statements for the years ended December 31, 2013 and December 31, 2012 were $23,920 and $24,640, respectively.

Audit-Related Fees: There were no additional fees billed by Connolly, Grady & Cha, P.C. for services related to the performance of the audit or review of our financial statements and not reported under “Audit Fees” above in the years ended December 31, 2013 and December 31, 2012.

Tax Fees: Aggregate fees billed by Sasserath & Zoraian, LLP for tax compliance, tax advice and tax planning for the years ended December 31, 2013 and December 31, 2012 were $8,735 and $15,960 respectively.

All Other Fees: There were no additional fees billed by Connolly, Grady & Cha, P.C. for products and services other than those described above for the years ended December 31, 2013 and December 31, 2012.
 
 
33

 
 
PART IV

Item 15.            Exhibits, Financial Statement Schedules.

(a)            List of Financial Statements

The following consolidated financial statements of the Company are included in “Financial Statements and Supplementary Data”:

Consolidated Balance Sheets
 
F-2
Consolidated Statements of Operations
 
F-3
Consolidated Statements of Stockholders’ Deficit
 
F-4
Consolidated Statements of Cash Flows
 
F-5
Notes to Consolidated Financial Statements
 
F-6 - F-15
 
(b)           Exhibits

Exhibit No.
 
Description
     
2.1
 
Agreement of Merger and Plan of Reorganization, dated January 14, 2013 by and among Excel Corporation, ECB Acquisition Corp and Excel Business Solutions, Inc., is incorporated herein by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
2.2
 
Certificate of Merger, dated January 14, 2013, merging ECB Acquisition with Excel Business Solutions, is incorporated herein by reference to Exhibit 2.2 of Company’s Current Report on Form 8-K dated January 18, 2013.
     
3.1
 
Certificate of Incorporation of Ruby Worldwide Ltd., dated November 11, 2010, is incorporated herein by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
3.2
 
Certificate of Amendment of Certificate of Incorporation of Ruby Worldwide Ltd., dated December 1, 2012, is incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
3.3
 
Certificate of Amendment of Certificate of Incorporation of Excel Corporation, dated January 19, 2011, is incorporated herein by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
3.4
 
By-Laws of Excel Corporation is incorporated herein by reference to Exhibit 3.4 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
10.1
 
Employment Agreement, dated January 14, 2013, by and between Excel Corporation and David Popkin, is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
10.2
 
Employment Agreement, dated January 14, 2013, by and between Excel Corporation and Shawn Alcoba, is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
10.3
 
Form of Lockup Agreement, dated January 14, 2013, by and between Excel Business Solutions and Excel Corporation, is incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
10.4
 
Equity Incentive Plan by Excel Corporation, dated for the year 2011, is incorporated herein by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
10.5
 
Subscription Agreement, dated as of April 31, 2011, of and between Excel Corporation and Purchaser, is incorporated herein by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1/A, as filed with the SEC on April 31, 2011 (File No. 333-173702).
 
 
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10.6
 
Licensing Agreement, dated February 21, 2012 by and between Camuto Consulting, Inc. and Excel Corporation, is incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q dated May 5, 2012.
     
10.7
 
Exclusive Agreement, dated May 3, 2012, by and between Benedetto Arts, LLC c/o RPM Music Productions, Inc. and Excel Corporation, is incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q dated May 5, 2012.
     
10.8
 
Representation Agreement, dated March 12, 2011, by and between Excel Corporation and Hickory Farms, Inc., is incorporated herein by reference to Exhibit 10.6 in Company’s Quarterly Report on Form 10-Q dated November 26, 2012.
     
10.9
 
Representation Agreement, dated February 4, 2012, by and between Soupman Inc. and Excel Corporation, is incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q dated May 5, 2012.
     
10.10
 
Management Services Agreement, dated June 7, 2013, by and between Excel Business Solutions, Inc. and Tribul Merchant Services, LLC, Tribul, LLC, Tribul Cash, LLC, Tribul of America, LLC and Second Source Funding LLC is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated June 13, 2013.
     
10.11
 
Amendment No. 1 to the Employment Agreement by and between Shawn Alcoba and the Company is incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q dated November 19, 2013.
     
10.12
 
Amendment No. 1 to the Employment Agreement by and between David Popkin and the Company is incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q dated November 19, 2013.
     
10.13
 
Securities Exchange Agreement, dated February 17, 2014, between the Company, Payprotec Oregon, LLC (d/b/a Securus Payments), Mychol Robirds and Steven Lemma is incorporated herein by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K dated February 21, 2014.
     
10.14
 
Amendment dated as of April 10, 2014 to the Securities Exchange Agreement, dated February 17, 2014, between the Company, Payprotec Oregon, LLC (d/b/a Securus Payments), Mychol Robirds and Steven Lemma is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K/A dated April 11, 2014.
     
10.15
 
Exclusive Reseller Agreement, dated March 24, 2014, between 420 Solutions Corporation and TransBlue, LLC is incorporated herein by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K dated March 28, 2014.
     
14.1
 
Code of Business Conduct and Ethics Agreement by Excel Corporation, dated April 22, 2011, is incorporated herein by reference to Exhibit 14.1 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
31.1
 
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed  by Principal Executive Officer of Excel Corporation.
     
31.2
 
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed  by Principal Financial Officer of Excel Corporation.
     
32.1
 
Certification pursuant to 18 U.S.C, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Principal Executive Officer and Principal Financial Officer of Excel Corporation.
     
101.INS
 
XBRL Instance Document
     
101.SCH
 
XBRL Taxonomy Extension Schema Document
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
     
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
35

 
 
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

 
EXCEL CORPORATION
 
       
 April 14, 2014
By: 
/s/ Ruben Azrak
 
   
Ruben Azrak
   
Chief Executive Officer

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature
 
Title
 
Date
         
/s/ Ruben Azrak
 
Chief Executive Officer and Director
 
April 14, 2014
Ruben Azrak
 
(principal executive officer)
   
         
/s/ Shawn Alcoba
 
Chief Financial Officer and Comptroller
 
April 14, 2014
Shawn Alcoba
 
(principal financial and accounting officer) 
   
         
/s/ Charles Azrak
 
Director
 
April 14, 2014
Charles Azrak
       
         
/s/ Antonio Rubio
 
Director
 
April 14, 2014
Antonio Rubio
       

 
36

 
 
Exhibit Index
 
Exhibit No.
 
Description
     
2.1
 
Agreement of Merger and Plan of Reorganization, dated January 14, 2013 by and among Excel Corporation, ECB Acquisition Corp and Excel Business Solutions, Inc., is incorporated herein by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
2.2
 
Certificate of Merger, dated January 14, 2013, merging ECB Acquisition with Excel Business Solutions, is incorporated herein by reference to Exhibit 2.2 of Company’s Current Report on Form 8-K dated January 18, 2013.
     
3.1
 
Certificate of Incorporation of Ruby Worldwide Ltd., dated November 11, 2010, is incorporated herein by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
3.2
 
Certificate of Amendment of Certificate of Incorporation of Ruby Worldwide Ltd., dated December 1, 2012, is incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
3.3
 
Certificate of Amendment of Certificate of Incorporation of Excel Corporation, dated January 19, 2011, is incorporated herein by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
3.4
 
By-Laws of Excel Corporation is incorporated herein by reference to Exhibit 3.4 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
10.1
 
Employment Agreement, dated January 14, 2013, by and between Excel Corporation and David Popkin, is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
10.2
 
Employment Agreement, dated January 14, 2013, by and between Excel Corporation and Shawn Alcoba, is incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
10.3
 
Form of Lockup Agreement, dated January 14, 2013, by and between Excel Business Solutions and Excel Corporation, is incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K dated January 18, 2013.
     
10.4
 
Equity Incentive Plan by Excel Corporation, dated for the year 2011, is incorporated herein by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
10.5
 
Subscription Agreement, dated as of April 31, 2011, of and between Excel Corporation and Purchaser, is incorporated herein by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1/A, as filed with the SEC on April 31, 2011 (File No. 333-173702).
     
10.6
 
Licensing Agreement, dated February 21, 2012 by and between Camuto Consulting, Inc. and Excel Corporation, is incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q dated May 5, 2012.
     
10.7
 
Exclusive Agreement, dated May 3, 2012, by and between Benedetto Arts, LLC c/o RPM Music Productions, Inc. and Excel Corporation, is incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q dated May 5, 2012.
     
10.8
 
Representation Agreement, dated March 12, 2011, by and between Excel Corporation and Hickory Farms, Inc., is incorporated herein by reference to Exhibit 10.6 in Company’s Quarterly Report on Form 10-Q dated November 26, 2012.
 
 
37

 
 
10.9
 
Representation Agreement, dated February 4, 2012, by and between Soupman Inc. and Excel Corporation, is incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q dated May 5, 2012.
     
10.10
 
Management Services Agreement, dated June 7, 2013, by and between Excel Business Solutions, Inc. and Tribul Merchant Services, LLC, Tribul, LLC, Tribul Cash, LLC, Tribul of America, LLC and Second Source Funding LLC is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated June 13, 2013.
     
10.11
 
Amendment No. 1 to the Employment Agreement by and between Shawn Alcoba and the Company is incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q dated November 19, 2013.
     
10.12
 
Amendment No. 1 to the Employment Agreement by and between David Popkin and the Company is incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q dated November 19, 2013.
     
10.13
 
Securities Exchange Agreement, dated February 17, 2014, between the Company, Payprotec Oregon, LLC (d/b/a Securus Payments), Mychol Robirds and Steven Lemma is incorporated herein by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K dated February 21, 2014.
     
10.14
 
Amendment dated as of April 10, 2014 to the Securities Exchange Agreement, dated February 17, 2014, between the Company, Payprotec Oregon, LLC (d/b/a Securus Payments), Mychol Robirds and Steven Lemma is incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K/A dated April 11, 2014.
     
10.15
 
Exclusive Reseller Agreement, dated March 24, 2014, between 420 Solutions Corporation and TransBlue, LLC is incorporated herein by reference to Exhibit 10.01 of the Company’s Current Report on Form 8-K dated March 28, 2014.
     
14.1
 
Code of Business Conduct and Ethics Agreement by Excel Corporation, dated April 22, 2011, is incorporated herein by reference to Exhibit 14.1 of the Company’s Registration Statement on Form S-1, as filed with the SEC on April 25, 2011 (File No. 333-173702).
     
31.1
 
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed  by Principal Executive Officer of Excel Corporation.
     
31.2
 
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed  by Principal Financial Officer of Excel Corporation.
     
32.1
 
Certification pursuant to 18 U.S.C, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Principal Executive Officer and Principal Financial Officer of Excel Corporation.
     
101.INS
 
XBRL Instance Document
     
101.SCH
 
XBRL Taxonomy Extension Schema Document
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
     
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
38