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EX-31.1 - EXHIBIT 31.1 - Gopher Protocol Inc.s100467_ex31-1.htm

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)  
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the quarterly period ended September 30, 2014
   
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commissions file number: 000-54530

 

FOREX INTERNATIONAL TRADING CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   27-0603137
State or other jurisdiction of   I.R.S. Employer Identification Number
incorporation or organization    

 

c/o Fleming PLLC, 49 Front Street, Rockville Centre NY 11570

(Address of principal executive office)

 

Issuer's telephone number: 888-426-4780

 

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¨

 

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¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨       

 

Non accelerated filer ¨  (Do not check if a smaller reporting company)  Smaller reporting company x

 

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

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

 

Common Stock, $0.00001 par value   155,374 Common Shares
(Class)   (Outstanding at November 18, 2014)

 

 
 

  

FOREX INTERNATIONAL TRADING CORP.

 

TABLE OF CONTENTS

 

PART I. Financial Information  
     
Item 1. Condensed Consolidated Financial Statements (Unaudited)  
     
  Condensed Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013 (audited) 3
     
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and September 30, 2013 (unaudited)

4

     
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and September 30, 2013 (unaudited)

 5

     
  Notes to Condensed Consolidated Financial Statements (unaudited) 6
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 25
     
Item 4. Controls and Procedures 25
     
PART II. Other Information 25
     
Signatures   31

 

2
 

  

PART I. Financial Information
   
Item 1. Financial Statements

 

FOREX INTERNATIONAL TRADING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30, 2014   December 31, 2013 
   (UNAUDITED)   (AUDITED) 
ASSETS          
           
Current assets:          
Cash and cash equivalents  $24   $- 
Note and short-term receivables and prepaid expenses, including accrued interest   482,000    440,000 
Total current assets   482,024    440,000 
           
Property and equipment, net   3,730    5,034 
           
Other assets   600,000    600,000 
           
 Total assets  $1,085,754   $1,045,034 
           
LIABILITIES AND STOCKHOLDERS' DEFICIENCY          
           
Current liabilities:          
Accounts payable and accrued expenses  $167,876   $123,797 
Bank overdraft   -    17 
Derivative liability   10,000    - 
Notes payable and accrued interest   821,861    807,324 
Total current liabilities   999,737    931,138 
           
Total liabilities   999,737    931,138 
           
Contingencies          
           
Stockholders' equity:          
           
Series B Preferred stock, $0.00001 par value, 20,000,000 shares authorized;          
45,000 shares issued as of September 30, 2014 and December 31, 2013, respectively   -    - 
           
Series C Preferred stock, $0.00001 par value, 10,000 shares authorized;          
10,000 shares issued as of September 30, 2014 and December 31, 2013, respectively   -    - 
Common stock - $0.00001 par value, 2,000,000,000 shares authorized; 155,374 and 49,461 shares outstanding as of September 30, 2014 and December 31, 2013, respectively   7,769    2,473 
Treasury stock, at cost; 8 shares as of September 30, 2014 and December 31, 2013, respectively   (11,059)   (11,059)
Additional paid-in capital   2,443,025    2,238,943 
Accumulated deficit   (2,353,718)   (2,116,461)
           
Total stockholders' equity   86,017    113,896 
           
 Total liabilities and stockholders' equity  $1,085,754   $1,045,034 

 

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

 

3
 

  

FOREX INTERNATIONAL TRADING CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   Three months ended September 30,   Nine months ended September 30, 
   2014   2013   2014   2013 
                 
Revenues:                    
Income from consulting services  $30,000   $30,000   $90,000   $100,000 
Total revenues   30,000    30,000    90,000    100,000 
                     
Operating expenses:                    
Commitment and consulting expense   189,000    -    189,000    - 
General and administrative expenses   35,342    66,639    125,014    336,275 
Total Operating expenses:   224,342    66,639    314,014    336,275 
                     
Loss from operations   (194,342)   (36,639)   (224,014)   (236,275)
                     
Other income (expenses):                    
Interest income   14,000    10,000    42,000    30,893 
Interest expense   (15,788)   (13,373)   (47,900)   (31,545)
Amortizaton of debt discount   (3,657)   -    (3,657)   - 
Change in fair value of embedded derivative liability   (3,686)   -    (3,686)   - 
Total other income (expenses)   (9,131)   (3,373)   (13,243)   (652)
                     
Loss before income taxes   (203,473)   (40,012)   (237,257)   (236,927)
                     
Income tax expense   -    -    -    - 
                     
Net loss  $(203,473)  $(40,012)  $(237,257)  $(236,927)
                     
Net loss per share:                    
Basic and diluted  $(2.00)  $(5.47)  $(2.30)  $(32.41)
                     
Weighted average number of common shares outstanding:                    
Basic and diluted, post-split   101,780    7,310    103,131    7,310 

 

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

 

4
 

  

FOREX INTERNATIONAL TRADING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the Nine Months Ended 
   September 30, 2014   September 30, 2013 
         
Cash Flows From Operating Activities:          
Net loss  $(237,257)  $(236,927)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Depreciation of property and equipment   1,304    2,920 
Debt offering costs   -    2,500 
Amortization of debt discount   3,657    75,000 
Stock issued for services   99,000    - 
Bad debt expense   -    98,248 
Change in fair value of derivative liability   3,686    - 
Changes in assets and liabilities:          
Accounts receivable and prepaid expenses   -    10,845 
Accrued interest on notes receivable   (42,000)   (30,893)
Accounts payable and accrued expenses   44,079    11,506 
Accrued interest on notes payable   45,133    31,544 
           
Net cash provided by (used in) operating activities   (82,398)   (35,257)
           
Cash flows from investing activities:          
Net cash provided by investing activities   -    - 
           
Cash flows from financing activities:          
Cash inflow from "changes in bank overdraft"   (17)   - 
Additional borrowing under a note, net   122,500    40,364 
Repayment of note payable, net   (40,061)   - 
           
Net cash provided by financing activities   82,422    40,364 
           
Net increase (decrease) in cash and cash equivalents   24    5,107 
           
Cash and cash equivalents, beginning of year   -    618 
           
Cash and cash equivalents, end of year  $24   $5,725 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid during the quarter for:          
Interest  $-   $- 
Income taxes  $-   $- 
           
NON-CASH ACTIVITIES:          
Debt discount recorded on convertible and unsecured debt accounted for as a derivative liability  $6,314   $- 
Shares issued in conversion of convertible debt and accrued interest  $110,378   $- 

 

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

 

5
 

  

FOREX INTERNATIONAL TRADING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

 

Organization and Nature of Business

 

Forex International Trading Corp. (the “Company”) was incorporated on July 22, 2009, under the laws of the State of Nevada and is headquartered in Rockville Centre NY.. On September 9, 2009, the Company filed Form S-1 Registration Statement to provide for the registration of securities under the Securities Act of 1933. The Company’s principal business activities have been to engage in foreign currency market trading for non-US resident professionals and retail clients over its web-based trading systems. While these trading operations have been closed, the Company continues to operate in the consulting segment of the foreign currency market, leveraging its contacts and knowledge, and its consulting expertise in the area of foreign exchange. In addition, the Company is analyzing investments in joint ventures and is selectively pursuing acquisitions.

 

Effective April 4, 2014, the Company filed with the State of Nevada a Certificate of Amendment to Articles of Incorporation changing the Company’s number of authorized shares to 600,000,000.

 

On May 1, 2014, the Company stock was moved from OTCQB to OTC Pink Sheets due to the new OTCQB $.01 closing bid price requirement. From May1, 2014 to July 18, 2014, the Company stock traded both on OTCBB and on OTC Pink Sheets. On July 18, 2014, the last broker quoting the Company stock on the OTCBB had removed their quote, resulting in the company no longer trading on OTCBB from that date.

 

On August 13, 2014, the Company filed a definitive Information Statement Pursuant to Section 14 (c) of the Securities Exchange Act of 1934 for the following purposes:

 

·The amendment (the “Amendment”) to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”) to increase the Company’s authorized Common Stock from 400,000,000 shares to 2,000,000,000 shares, par value $0.00001
·The amendment Articles of Incorporation to effect up to a one-for-ten thousand (1-10,000) reverse stock split of the Company’s Common Stock (the “Reverse Split”)

 

On or about September 10, 2014, the Company filed an amended Certificate of Incorporation with the Secretary of State of Nevada to increase the authorized shares to 2,000,000,000 shares. On or about October 3, 2014, the Company implemented a 5,000-1 reverse split, with no fractional shares allowed.

 

2. Summary of Significant Accounting Policies

 

Presentation and Basis of Financial Statements

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Forex International Trading Corp. and its wholly owned subsidiary, DirectJV Investments, Inc. (together “Forex” or the Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission for interim financial information and reports pursuant to the requirements for reporting on Form 10-Q and Regulation S-X for scaled disclosures for smaller reporting companies. Accordingly, they do not include all, or include a condensed version of, the information and footnotes required by U.S. GAAP for complete financial statements. The Company believes, however, that the disclosures are adequate to make the information presented not misleading.

 

6
 

  

The Company’s unaudited condensed consolidated financial statements reflect all material adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations of the Company for the periods shown. Results shown for the interim periods are not necessarily indicative of the results to be obtained for a full fiscal year or for any future period. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results might differ from management’s estimates. The consolidated balance sheet information as of December 31, 2013 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, 2013, These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s most recently audited financial statements and the notes thereto in such above referenced Annual Report on Form 10-K. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the useful lives of tangible and intangible assets, depreciation and amortization, allowances for doubtful accounts and loan losses, valuation of common and preferred stock issuances, and the valuation allowance on deferred tax assets. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.

 

Notes and Short-Term Receivable

 

The notes and short-term receivable are carried at cost, which approximates fair value. The Company measures the impairment of loans based on its historical loan collection experience and existing economic conditions. Impairment is recognized when management believes it is probable that payments will not be received on some portion of the loan, which is determined on an individual loan basis. The Company evaluates loans for impairment on an annual basis or when there are indications that the loan may not be collected. When management determines that a loan is impaired it is placed on non-accrual status, and an allowance for loan losses is established to recognize the estimated amount of impairment. Payments received on non-accrual loans are generally applied to the outstanding principal balance. Loans are removed from non-accrual status when management believes that the borrower will resume making the payments required by the loan agreement.

 

Property and Equipment

 

Property and equipment are stated at cost and the related depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Expenditures for repairs and maintenance are charged to operations as incurred. Renewals and betterments are capitalized. Upon the sale or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized in the results of operations.

 

Leasehold improvements are amortized over the lesser of the estimated life of the asset or the lease term.

 

As required by U.S. GAAP for long-lived assets, the Company evaluates the fair value of its property and equipment on an annual basis or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Any impairment of value is recognized when the carrying amount of the asset exceeds its fair value. There were no impairment losses for the three months or for the nine months ended September 30, 2014 and 2013.

 

Fair value measurements

 

Financial instruments and certain non-financial assets and liabilities are measured at their fair value as determined based on the assets highest and best use. GAAP has established a framework for measuring fair value that is based on a hierarchy that requires that the valuation technique used be based on the most objective inputs available for measuring a particular asset or liability. There are three broad levels in the fair value hierarchy that describe the degree of objectivity of the inputs used to determine fair value. The fair value hierarchy is set forth below:

 

Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. They are based on best information available in the absence of level 1 and 2 inputs.

 

The carrying value of financial instruments, which include cash and cash equivalents, notes receivable, notes payable, and accrued expenses, approximate their fair values due to the short-term nature of these financial instruments.

 

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Treasury Stock

 

Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital. During 2011, the Company bought back 38,000 (8 post-split shares) of its own shares.

 

Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, 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. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount of tax benefits expected to be realized.

 

U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that would likely be sustained under examination. The Company had no uncertain tax positions as of September 30, 2014. The Company filed its 2013 tax returns.

 

The Company's federal income tax returns are no longer subject to examination by the IRS for the years prior to 2010, and the related state income tax returns are no longer subject to examination by state authorities for the years prior to 2010.

 

Revenue Recognition

 

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

 

During the nine months ended September 30, 2014, 100% of the Company’s revenue was related to consulting services provided to one company.

 

Share-Based Compensation

 

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively. No such expenses were recognized for the fiscal quarter ended September 30, 2014.

 

Derivative Financial Instruments

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

 

Earnings (Loss) Per Share

 

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. Because of the Company’s net losses, the effects of stock options, convertible notes, and convertible preferred stock would be anti-dilutive and accordingly, is excluded from the computation of earnings per share. Diluted loss per share has not been computed for the three and nine months ended September 30, 2014 and 2013 because any potential additional common shares would reduce the reported loss per share and therefore have an antidilutive effect.

 

8
 

  

The number of such shares excluded from the computations of diluted loss per share totaled 15,887,639 shares and 249,523,503 shares issuable upon the conversion of convertible debt, for the nine months ended September 31, 2014 and 2013, respectively.

 

3. Liquidity and Going Concern

 

As reflected in the accompanying financial statements, the Company has generated revenues in the nine months ended September 30, 2014, but has had recurring losses from operations since inception, and has a negative working capital as of September 30, 2014. As of September 30, 2014, the Company has an accumulated deficit of $2,353,718.  As the Company continues to incur losses, transition to profitability is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings. Based on the Company’s operating plan, existing working capital at September 30, 2014 was not sufficient to meet the cash requirements to fund planned operations through December 31, 2014 without additional sources of cash. This raises substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty.

 

4. Investments, Acquisitions, and Divestiture

 

Joint Venture – Vulcan Oil & Gas Inc.

On February 13, 2012, Direct JV Investments Inc. ("JV"), a wholly-owned subsidiary of the Company entered into a Joint Venture Agreement (the "JV Agreement") with Vulcan Oil & Gas Inc. ("Vulcan"), whereby the Company would from time to time provide financing to certain Vulcan alternative, green and solar energy projects (the "Projects") with the goal of sharing in any rebates awarded by the government on any of the Projects. Pursuant to the JV Agreement, JV provided Vulcan with $68,000 in cash (the Funding") and credit for inventory valued at $31,328 for a total investment value of $99,328 (the "Investment").

 

On January 7, 2013, effective December 31, 2012, the Company, JV and Vulcan entered into an agreement pursuant to which the JV Agreement was terminated. The Company issued to Vulcan a 4% convertible promissory note in the principal amount of $500,000 (the "Forex Note") and Vulcan issued to the Company a 10% Secured and Collateralized Promissory Note in the principal amount of $400,000 (the "Vulcan Note" and collectively with the Forex Note, the "Notes") in consideration of the Forex Note. The Investment of $99,328 was written off as of December 31, 2012. After closing the Notes and recording of the difference as a debt discount, there are no further balances due between the parties and the JV Agreement is null and void.

 

The Forex Note maturity date is December 31, 2013, which can be extended by the Company for an additional one year at which point the 4% interest rate will increase to 10% per annum. The Forex Note is currently in default. The Forex Note conversion price is the Variable Conversion Price, which is defined as 50% multiplied by the average of the lowest three trading prices of the Company's common stock on the OTCBB during the 10-day trading period ending on the latest complete day of trading on the OTCBB prior to the date of conversion. The Variable Conversion Price cannot be less than $0.002. At no time will Vulcan convert any amount of the Forex Note into common stock that would result in Vulcan owning more than 4.9% of the common stock outstanding of the Company.

 

The Vulcan Note has a 10% one-time interest charge on the principal sum. The interest rate will be increased by an additional 4% per annum (e.g. 14% per annum) in the event the principal is not paid by the December 31, 2013 maturity date.

 

5. Notes and Short-term Receivables

 

At September 30, 2014 and December 31, 2013, the only note receivable was from Vulcan, which had a balance of $482,000 at September 30, 2014 which includes accrued interest of $82,000.

 

6. Property and Equipment, Net

 

Property and equipment consisted of the following as of September 30, 2014 and December 31, 2013:

 

9
 

  

   Estimated        
   Useful    
   Lives  2014   2013 
Computers and equipment  3 years  $12,539   $12,539 
Furniture  7 years   9,431    9,431 
       21,970    21,970 
Less accumulated depreciation      18,240    16,936 
      $3,730   $5,034 

 

Depreciation expense was $1,304 and $3,383 for the nine months ended September 30, 2014, and for the fiscal year ended December 31, 2013, respectively.

 

7. Other Assets

 

License agreement

 

On January 2, 2014, and effective December 31, 2013, the Company and Micrologic Design Automation, Inc. ("MDA") signed a letter agreement whereby MDA provided for a perpetual, royalty free, exclusive license of the Licensed Technology, as defined in the Evaluation License Agreement dated September 1, 2013. In connection with this agreement, the Company agreed to issue 200,000,000 shares (40,000 post-split) of common stock having a value of $600,000 based upon recent market value ($0.003 per share) (See Note 10).

 

8. Notes Payable

 

At September 30, 2014 and December 31, 2013, notes payable and accrued interest consisted of:

 

   September 30,
2014
   December 31,
2013
    
Notes payable and accrued interest - Rasel  $74,969   $145,847   a.
Note payable and accrued interest - Glendon   61,120    97,552   b.
Note payable and accrued interest - Third Party Financier 1   33,294    43,925   c.
Note payable and accrued interest - Third Party Financier 2   7,635        d.
Note payable and accrued interest - Blackbridge (net of debt discount of $2,657)   87,343        e.
Note payable and accrued interest - Vulcan (net of debt discount of $0  and $100,000 as of September 30, 2014 and December 31, 2013, respectively)   557,500    520,000   f.
              
   $821,861   $807,324    

 

a) Convertible Notes Payable

 

On October 6, 2009, the Company signed a note payable for $25,000 to Rasel Ltd due on October 6, 2010, bearing interest at 4% per annum. The proceeds were used to pay for half of existing accounts payable for legal fees incurred at the Company’s inception. On October 20, 2009, the Company signed a note payable for $50,000 payable to Rasel due on October 20, 2010, bearing interest at 4% per annum (collectively, the “Rasel Note”). These proceeds were used to pay for startup costs, audit fees and future expenses. On January 22, 2010, the Company signed a note payable for $50,000 payable to Rasel due on October 30, 2011, bearing interest at 4% per annum. These proceeds were used for working capital and expenditures. On January 22, 2010, the Company signed an amendment to extend the maturity date of the promissory notes in the amount of $25,000 and $50,000 dated October 6, 2009 and October 20, 2009, respectively, to October 30, 2011. On March 2, 2011, the Company and Rasel agreed to extend the maturity of all notes to December 31, 2012, in consideration of adding a conversion feature to the notes with either a 5% discount to the market price or a fixed price of $0.60. The extension of maturity was effective as of December 30, 2010.

 

The balance of the notes as of September 30, 2014 and December 31, 2013, was $74,969 and $145,847. About 50% of the note balance at December 31, 2013 ($73,812.50) was paid off in 2014 by Financier 2. The remainder of the note is currently in default since the beginning of 2013; and the Company will attempt to reach an amicable settlement with the counterparty. The Company has accrued $2,935 of interest expense in 2014.

 

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b) Note Payable

 

On December 31, 2012, the Company converted a payable in the amount of $155,242 to a note payable. The note bears annual interest at 10%, and was to mature on December 31, 2012. The Company has negotiated an extension to the maturity date until December 31, 2013. The note is currently in default; the Company will attempt to reach an amicable settlement with the counterparty.

 

The balance at September 30, 2014 and December 31, 2013, including accrued interest, is $61,120 and $97,552, respectively. The note was reduced for revenue received during the nine months ended September 30, 2014 from the Note holder.

 

c) Issuance of note payable to third party

 

On July 24, 2013, the Company entered into a Securities Purchase Agreement with a third party financing source ("Financer 1"), for the issuance of an 8% convertible note in the principal amount of $42,500 (the "July 2013 Note"), of which $2,500 was for legal fees associated with the transaction.  The financing closed on July 31, 2013.

 

The July 2013 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on April 29, 2014.  The July 2013 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00009.  In the event the Company prepays the July 2013 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.

 

Financer has agreed to restrict its ability to convert the July 2013 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received from this offering was $42,500, less $2,500 in attorney’s fees. As of the date of the July 2013 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The July 2013 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

In April 2014, Financier converted the entire remaining note balance, and released the company from its debt, which is a zero balance. On or about September 3, 2014, the Company issued another note to the Financier payable for $32,500 (“September 2014 Note”), of which $2,500 was for legal fees associated with the transaction. The terms of the new note were similar to the terms described above, with a maturity of March 5, 2015.

 

The September 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on March 5, 2015.  The September 2014 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00001.  In the event the Company prepays the September 2014 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.

 

Financer has agreed to restrict its ability to convert the September 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received from this offering were $32,500, less $2,500 in attorney’s fees pursuant to the terms of this convertible agreement. As of the date of the September 2014 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The September 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

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The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

In 2014, the Company has accrued $1,069 of interest on the September 2014 Note. The Company anticipates that Financier 1 will convert the September 2014 Note, as it converted the July 2013 Note. During the nine months ended September 30, 2014, Financier 1 converted $44,200 of the July 2013 Note into 31,994,477 shares of common stock (6,399 shares post-split) at an average conversion price of $0.0014 per share ($7.00 on a post-split basis).

 

d) Third Party Note Payable

 

On May 13, 2014, the Company entered into an agreement with a third party financing source ("Financier 2"), for the issuance of an 8% convertible note in the principal amount of $147,625 (the "May 2014 Note").  In conjunction with the issuance of the May 2014 Note, an existing note holder (Rasel, owner of the Rasel Notes) agreed to have the proceeds of the May 2014 Note used to offset the amounts owed to them as evidenced by the Assignment of Convertible Debenture agreement dated May 12, 2014, between the holders of the Rasel Notes and Financier 2. The Assignment of Convertible Debenture agreement calls for the Financier 2 to make two payments of $73,812.50 each to the existing note holder (Rasel Notes). On May 13, 2014, the Financier 2 made the first payment to the existing note holder (Rasel Notes), however, Financier 2 defaulted on their obligation to make the second payment per the Assignment of Convertible Debenture agreement. As a result, Forex and Financier 2 have mutually agreed to release Financier 2 from its’ obligation for the second payment, and the other half of the note in the amount of $73,812.50 reverted back to Rasel.

 

The May 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on September 1, 2014.  The May 2104 Note is convertible into common stock, at Financer 2’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.0001.

 

Financer 2 has agreed to restrict its ability to convert the May 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   As of the date of the May 2014 Note, the Company is obligated on the Note issued to Financer 2 in connection with the offering. The May 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended  (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company  and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

During the nine months ended September 30, 2014, Financier converted 322,000,000 shares (64,400 shares on a post-split basis) at an average valuation of approximately $0.00021 per share ($1.05 on a post-split basis). There is currently a balance on the note of approximately $7,635.

 

e) Convertible note payable to Blackbridge

 

On June 16, 2014, the Company entered into a set of agreements (collectively, the “Blackbridge Agreement”) with Blackbridge, a financial services firm. The Company and Blackbridge were discussing an equity line of credit, and the Company agreed to pay Blackbridge a commitment fee of 90,000,000 shares (18,000 shares post-split), and also issued a convertible note for $90,000 having a 5% interest rate that matures on December 16, 2014. The note can be converted after the maturity date. The conversion price is 90% multiplied by the market price, which is defined in the agreement as the lowest of the daily trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.

 

The` Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

 

Expected dividends    0 %
Expected volatility    15848 %
Expected term: conversion feature    183 days  
Risk free interest rate    0.11 %

 

The fair value of the embedded conversion option on the commitment date was $6,314. The Company recorded a related debt discount of $6,314, which is amortized over the life of the debt. For the nine months ended September 30, 2014, the Company amortized $3,657 of debt discount.

 

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At September 30, 2014, the Company remeasured the derivative liability and recorded a fair value of $10,000. As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as an expense totaling $3,686 for the nine months ended September 30, 2014. The following management assumptions were considered:

 

Exercise price  $ 0..45  
Expected dividends    0 %
Expected volatility    11582 %
Risk fee interest rate    0.11 %
Expected life in days    77  

 

The Company does not believe that the debt is valid, but has accrued the notes on its financial statements to be conservative. The reason that it does not believe the Blackbridge Agreement to be valid is that the parties agreed at the time that the Blackbridge Agreement was signed that it would take 90-120 days to file an S-1 to register the shares needed for the equity line of credit and that such commitment fee would not be payable until such time. The Blackbridge Agreement states, however, that the Company has only 60 days from the date that the Agreement was signed to file an S-1 to register the shares, which the parties agreed was an impossible requirement to meet. The failure to meet that requirement was an event of default in the Blackbridge Agreement, and the counterparty, which could terminate the Blackbridge Agreement at its sole discretion, did not grant a waiver of this clause, despite knowing that that requirement was unrealistic, particularly given the Company’s thin cash position. The inability to register the shares within the required timeframe guaranteed the default of the Company under the Blackbridge Agreement from the outset. As such, the Company believes that said Agreement is null and void, because it lacked the capacity to perform under the Blackbridge Agreement.

 

If the Company does not satisfy Blackbridge, the counterparty may litigate against the Company. There is the potential, though not the likelihood, of litigation in this dispute.

 

f) Convertible Note Payable

 

On January 7, 2013, effective December 31, 2012, the Company, JV and Vulcan entered an agreement pursuant to which the JV Agreement was terminated, the Company issued to Vulcan a 4% convertible promissory note in the principal amount of $500,000 (the "Forex Note") and Vulcan issued to the Company a 10% Secured and Collateralized Promissory Note in the principal amount of $400,000. The Company recognized a debt discount in the amount of $100,000 for the difference in the face value of the note issued and the note received from the same party. The face value of the note payable is shown net of the debt discount. This debt discount will be amortized over the one-year life of the note. The note has a maturity date of December 31, 2013, and can be extended by the Company for an additional one year at which point the 4% interest rate will increase to 10% per annum. The Forex Note may be prepaid without penalty. The Forex Note conversion price is the Variable Conversion Price, which is defined as 50% multiplied by the average of the lowest three trading prices of the Company's common stock on the OTCBB during the 10-day trading period ending on the latest complete day of trading on the OTCBB prior to the date of conversion. The Variable Conversion Price cannot be less than $0.002 ($10,00 on a post-split basis). At no time will Vulcan convert any amount of the Forex Note into common stock that would result in Vulcan owning more than 4.99% of the common stock outstanding of the Company.

 

As of December 31, 2013, the entire debt discount has been amortized in the accompanying financial statements, and $20,000 of interest expense was accrued during the year ended December 31, 2013. Another $37,500 of interest expense was accrued in the nine months ended September 30, 2014. The Company is negotiating an offset of the Forex Note against the note receivable from Vulcan as final satisfaction, and will recognize a gain or loss on its financial statements at that time.

 

10. Stockholders’ Equity

 

Authorized Shares

 

Effective April 4, 2014, the Company filed with the State of Nevada a Certificate of Amendment to Articles of Incorporation changing the Company’s number of authorized shares to 600,000,000. On or about September 10, 2014, the Company filed with the State of Nevada a Certificate of Amendment to Articles of Incorporation changing the Company’s number of authorized shares to 2,000,000,000. On or about October 3, 2014, the Company received implemented a 5,000-1 reverse split, with no fractional shares allowed.

 

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The Company has 2,000,000,000 authorized shares of its $0.00001 par value common stock and 20,000,000 shares of its $0.00001 par value Preferred Stock Series B as of September 30, 2014. On September 26, 2012, the Company authorized 10,000 Preferred Stock Series C shares, par value $0.00001.

 

Common Shares:

 

On September 2, 2013, effective September 1, 2013, the Company entered into an Evaluation License Agreement (the "ELA") with Micrologic Design Automation, Inc. ("MDA"), pursuant to which MDA temporarily licensed to the Company, on a non-exclusive and royalty-free basis, certain technology and related materials for any purpose related to evaluating NanoDRC, NanoRV and NanoLVS technology (the “Technology”).  On January 2, 2014, and effective December 31, 2013, the Company and MDA signed a letter agreement whereby MDA provided for a perpetual, royalty free, exclusive license of the Licensed Technology, as defined in the Evaluation License Agreement dated September 1, 2013, in exchange for 200 million shares (40,000 shares post-split) of common stock (the “Shares”) of the Company.  MDA is not permitted to sell, assign, hypothecate or transfer the Shares in any way prior to the Company generating at minimum $50,000 in revenue through the use of the Technology (the “Revenue Target”).  A stop transfer legend shall be affixed to the certificate representing the Shares.  If the Revenue Target is achieved, then such stop transfer legend shall be removed.  The shares of common stock were issued under Section 4(2) of the Securities Act of 1933, as amended. (See Note 7)

 

During the nine months ended September 30, 2014, Financier 1 converted $44,200 of its July 2013 Note into 31,994,477 shares of common stock (6,399 shares post-split) at an average conversion price of $0.0014 per share.

 

During the nine months ended September 30, 2014, Financier 2 converted $66,178 of its note into 322,000,000 shares of common stock (64,400 shares post-split) at an average conversion price of $0.00021 per share.

 

During the nine months ended September 30, 2014, GV Global Communications, Inc converted 7,770 of its Series C Preferred Stock into 64,551,667 common shares (12,910 shares post-split). During the third quarter, the Company received an additional 21,021,900 common shares (4,204 shares post-split) to adjust the shares issued to reflect the amount that both they and the Company believed that they were owed.

 

Treasury Stock

 

On April 25, 2011, the Company issued a press release announcing that its Board of Directors approved a share repurchase program. Under the program, the Company is authorized to purchase up to 1,000,000 of its shares of common stock in open market transactions at the discretion of management. All stock repurchases will be subject to the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended and other rules that govern such purchases. As of December 31, 2013 and December 31, 2012, the Company had repurchased 38,000 of its common shares in the open market, which were returned to treasury (8 shares post-split).

 

   Total Number of   Average   Shares Purchased   Shares Remaining 
   Shares Purchased   Price Paid   Under Repurchase Plan   Under Repurchase Plan 
Month                    
                     
May 2011   23,500   $0.4095    23,500    976,500 
August 2011   9000   $0.1007    9,000    967,500 
November 2011   5500   $0.0964    5,500    962,000 
                     
Weighted-average price paid per share   38,000   $0.2910    38,000      

 

Series B Preferred Shares

 

On November 1, 2011, the Company and certain creditors entered into a Settlement Agreement (the "Settlement Agreement") whereby without admitting any wrongdoing on either part, the parties settled all previous agreements and resolved any existing disputes. Under the terms of the Settlement Agreement, the Company agreed to issue the creditors 45,000 shares of Series B Preferred Stock of the Company on a pro-rata basis. Following the issuance and delivery of the shares of Series B Preferred Stock to said creditors, as well as surrendering the undelivered shares, the Settlement Agreement resulted in the settlement of all debts, liabilities and obligations between the parties.

 

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The Series B Preferred Stock has a stated value of $100 per share and is convertible into the Company’s common stock at a conversion price of $1,500 per share representing 3,000 common shares. Furthermore, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights. These rights were subsequently removed, except in cases of stock dividends or splits.

 

Series C Preferred Shares

 

On April 29, 2011, GV Global Communications, Inc. (“GV”) provided funding to the Company in the aggregate principal amount of $111,000 (the “Loan”).  On September 25, 2012, the Company and GV entered into a Conversion Agreement pursuant to which the Company agreed to convert the Loan into 10,000 shares of Series C Preferred Stock of the Company, which was approved by the Board of Directors.

 

Each share of Series C Preferred Stock is convertible, at the option of GV, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined below) by the Conversion Price (as defined below).  The Conversion Price for each share is equal to a 50% discount to the average of the lowest three lowest closing bid prices of the Company’s common stock during the 10 day trading period prior to the conversion with a minimum conversion price of $0.002 ($10 on a post-split basis).  The stated value is $11.00 per share (the “Stated Value”).  The Series C Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series C Preferred Stock shall be entitled to one vote for each share of common stock that the Series C Preferred Stock shall be convertible into.   GV has contractually agreed to restrict its ability to convert the Series C Preferred Stock and receive shares of the Company's common stock such that the number of shares of the Company's common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of the Company's common stock.

 

Effective October 21, 2013, GV notified the Company of its intention to convert 345 of Series C Preferred into 1,897,500 shares of common stock of the Company, representing a conversion price of $0.002 per share ($10 on a post-split basis). The Company instructed its transfer agent to issue the required shares to GV. On November 5, 2013, 2013, GV notified the Company of the additional conversion of 380 of Series C Preferred into 2,090,000 shares of common stock of the Company ($418 on a post-split basis). On November 11, 2013, GV notified the Company of the additional conversion of 380 of Series C Preferred into 2,090,000 (418 post-split) shares of common stock of the Company. On November 26, 2013,GV notified the Company of the additional conversion of 425 of Series C Preferred into 2,337,500 (468 post-split) shares of common stock of the Company.

 

During the nine months ended September 30, 2014, GV Global Communications, Inc converted 7,770 of its Series C Preferred Stock into 64,551,667 common shares (12,910 shares post-split). During the third quarter of 2014, the Company received 21,021,900 common shares (4,204 shares post-split) to adjust the shares issued to reflect the amount that both they and the Company believed that they were owed.

 

The following table shows how the conversions were accounted for within the Series C and Common Stock Additional Paid in Capital accounts. This table shows the share amounts before and after the reverse split that took effect on or around October 3, 2014:

 

   Series C               Series C     
   Convertible Preferred               Convertible Preferred     
   Stock   Common Stock (pre-split)   Common Stock (post-split)   Stock   Common Stock 
                           Additional Paid   Additional Paid 
   Shares   Amount   Shares   Amount   Shares   Amount   In Capital   In Capital 
                                 
Balances at December 31, 2013   8,470   $-    247,303,586   $2,473    49,461   $2,473   $188,322   $2,050,621 
                                         
Conversion of Series C Preferred Stock to Common Stock   (7,770)        64,551,667    646    12,910    646    (172,758)   172,112 
Adjustment to Series C Preferred Stock             21,021,900    210    4,204    210         (210)
Stock issued for services             90,000,000    900    18,000    900         98,100 
Conversion of note payable to common stock             353,994,477    3,540    70,799    3,540         106,838 
                                         
Balances at September 30, 2014   700   $-    776,871,630   $7,769    155,374   $7,769   $15,564   $2,427,461 

 

This presentation shows the impact on the Additional Paid-in Capital account for the Series C Preferred and Common Stock, whereas the financial statements present the Additional Paid-in Capital as one combined account.

 

The issuance of the Series C Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder.  GV is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.  

 

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11. Related Parties

 

Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences.

 

Effective January 2, 2012, Erik Klinger was appointed by the Company to serve as the Chief Financial Officer, on a part-time basis, and a Director of the Company. Mr. Klinger earned fees of $32,000 and $49,200, in the nine months ended September 30, 2014 and the fiscal year ended December 31, 2013, respectively.

 

Robert Morris Price was appointed by the Company to serve as the President, Chief Executive Officer, and Treasurer as well as Chairman of the Company in April 2012. On May 20, 2013, Robert Price resigned as CEO of the Company to pursue other opportunities. This decision was not the result of any disagreement with the Company. Erik Klinger became the Chief Executive Officer effective the same day.

 

During the nine months ended September 30, 2014, the Company paid no rent for the use of prior headquarters in El Segundo, California, though it did pay minimal fees for office expenses.

 

12. Contingencies

 

Legal Proceedings

 

On June 16, 2014, the Company entered into a set of agreements (collectively, the “Blackbridge Agreement”) with Blackbridge, a financial services firm. The Company and Blackbridge were discussing an equity line of credit, and the Company agreed to pay Blackbridge a commitment fee of 90,000,000 shares (18,000 shares post-split), and also issued a convertible note for $90,000 having a 5% interest rate that matures on December 16, 2014. The note can be converted after the maturity date. The conversion price is 90% multiplied by the market price, which is defined in the agreement as the lowest of the daily trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.

 

The Company does not believe that the debt is valid, but has accrued the notes on its financial statements to be conservative. The reason that it does not believe the Blackbridge Agreement to be valid is that the parties agreed at the time that the Blackbridge Agreement was signed that it would take 90-120 days to file an S-1 to register the shares needed for the equity line of credit and that such commitment fee would not be payable until such time. The Blackbridge Agreement states, however, that the Company has only 60 days from the date that the Agreement was signed to file an S-1 to register the shares, which the parties agreed was an impossible requirement to meet. The failure to meet that requirement was an event of default in the Blackbridge Agreement, and the counterparty, which could terminate the Blackbridge Agreement at its sole discretion, did not grant a waiver of this clause, despite knowing that that requirement was unrealistic, particularly given the Company’s thin cash position. The inability to register the shares within the required timeframe guaranteed the default of the Company under the Blackbridge Agreement from the outset. As such, the Company believes that said Agreement is null and void, because it lacked the capacity to perform under the Blackbridge Agreement.

 

If the Company does not satisfy Blackbridge, the counterparty may litigate against the Company. There is the potential, though not the likelihood, of litigation in this dispute.

 

13. Per Share Information

 

Loss per share

 

Basic loss per share of common stock is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding.  Diluted loss per share of common stock (“Diluted EPS”) is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents and convertible securities then outstanding.  At September 30, 2014 and 2013, there were 15,887,639 and 249,523,503 of potentially dilutive common stock equivalents outstanding, respectively. The potentially dilutive common stock equivalents at September 30, 2014 arise from (i) the issuance on December 7, 2011 of 45,000 Series B Preferred Shares which are convertible into 15,000,000 common shares, (ii) the issuance of the Rasel note which is convertible into 258,514 shares, (iii) the issuance of 10,000 Series C Preferred Shares having a stated value of $100 per share, of which 700 shares remain unconverted, which remaining unconverted shares are convertible into 30,800 common shares, given recent market prices, and notwithstanding a restriction against owning more than 4.99% of the Company’s stock, and (iv) the issuance of a $500,000 convertible note payable to Vulcan netted against the note receivable from Vulcan, which is convertible into 151,000 shares, given recent market prices, and notwithstanding a restriction against owning more than 4.99% of the Company’s stock, (iv) the issuance of a note to a third party Financier, which based on a theoretical conversion at September 30, 2014 would have converted into 112,517 shares of common stock, and (v) the issuance of a note payable to a Third Party, of which the remaining balance at September 30, 2014 is $7,635, which at current market prices converts into 114,808 shares, and (vi) the issuance of a convertible note and derivative liability which converts into 220,000 shares. The potentially dilutive common stock equivalents at September 30, 2013 arise from (i) the issuance on December 7, 2011 of 45,000 Series B Preferred Shares which are convertible into 15 million shares, (ii) the issuance of the Rasel note which is convertible into 240,949 shares, (iii) the issuance of 10,000 Series C Preferred Shares having a stated value of $100 per share which are convertible into 40,000,000 common shares, given recent market prices, and notwithstanding a restriction against owning more than 4.99% of the Company’s stock, and (iv) the issuance of a $500,000 convertible note payable to Vulcan, which is convertible into 183,400,000 shares, given recent market prices, and notwithstanding a restriction against owning more than 4.99% of the Company’s stock, and (v) the issuance of a note to a third party Financier, which based on a theoretical conversion at September 30, 2013 would have converted into 10,882,554 shares of common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on the net loss per common share. 

 

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14. Subsequent Events

 

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition of disclosure as follows:

 

On or about October 3, 2014, the Company implemented a 5,000-1 reverse split, with no fractional shares allowed.

 

On or about October 8, 2014, Erik Klinger resigned as CEO and sole director to devote more time to other projects. On the same day, Andrew Cox assumed the position of CEO and sole director.

 

On or about November 6, 2014, Andrew Cox resigned to pursue other opportunities. Igwekali Reginald Emmanuel was appointed CEO and sole director.

 

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

 The following discussion and analysis summarizes the significant factors affecting our condensed consolidated results of operations, financial condition and liquidity position for the three and nine months ended September 30, 2014. This discussion and analysis should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for our year-ended December 31, 2013 and the condensed consolidated unaudited financial statements and related notes included elsewhere in this filing. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

 

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

 

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.

 

This section of the report should be read together with Notes of the Company unaudited consolidated financials. The unaudited consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013 are compared in the sections below:

 

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General Overview

 

Forex International Trading Corp. (the “Company”) was incorporated on July 22, 2009 under the laws of the State of Nevada and is headquartered in Rockville Centre NY. The Company’s principal business activities have been to engage in foreign currency market trading for non-US resident professionals and retail clients over its web-based trading systems. While these trading operations have been closed, the Company continues to operate in the consulting segment of the foreign currency market, leveraging its contacts and knowledge, and earned revenue in the first nine months of 2014 by leveraging its consulting expertise in the area of foreign exchange. In addition, the Company is analyzing investments in joint ventures and is selectively pursuing acquisitions.

 

On September 2, 2013, effective September 1, 2013, the Company entered into an Evaluation License Agreement (the "MDA Agreement") with Micrologic Design Automation, Inc. ("MDA"), pursuant to which MDA will temporarily license to the Company, on a non-exclusive and royalty-free basis, certain technology and related materials for any purpose related to evaluating NanoDRC, NanoRV and NanoLVS technology. The MDA Agreement expires on November 1, 2013 and contains standard confidentiality terms. Upon expiration of the MDA Agreement, the Company must return the licensed technology to MDA. In the event the Company breaches the confidentiality provision in the MDA Agreement, the Company is required to issue 300 million shares of common stock and deliver the shares to MDA. On November 6, 2013, the parties agreed to extend the MDA Agreement until December 31, 2013.

 

Results of Operations:

 

Three months ended September 30, 2014 and 2013

 

A comparison of the consolidated statements of operations for the three months ended September 30, 2014 and 2013 is as follows:

 

Revenues:

The following table summarizes our revenues for the three months ended September 30, 2014 and 2013:

 

Three months ended September 30,  2014   2013 
Total revenues  $30,000   $30,000 

 

The Company was able to leverage its consulting expertise in the area of foreign exchange in the third quarter of 2014. This revenue was generated by one customer. There was no change between the periods.

 

Operating expenses:

The following table summarizes our operating expenses for the three months ended September 30, 2014 and 2013:

 

Three months ended September 30,  2014   2013 
Total operating expenses  $224,342   $66,639 

 

The increase in operating expenses in the third quarter is due to the commitment fee due to Blackbridge, which is a convertible note. The Company does not consider the debt to be valid, but has expensed on its financials to be conservative. Ignoring that charge for the commitment fee due to Blackbridge, which includes both the market value of 90,000,000 shares and the $90,000 commitment fee, the current period is lower than the prior period.

 

Other income (expenses):

The following table summarizes our other income (expenses) for the three months ended September 30, 2014 and 2013:

 

Three months ended September 30,  2014   2013 
Interest income  $14,000   $10,000 
Interest expense   (15,788)   (13,373)
Amortization of Debt Discount   (3,657)   - 
Change in fair value of embedded derivative liability   (3,686)   - 
Net other income/expense   (9,131)   (3,373)

 

During the third quarter, the difference between the interest expense owed and the interest income earned was less than $1,000. In the third period, the company earned roughly the same amount in interest income that it accrued in interest expense. During the second quarter, the Company began accounting for the Vulcan note payable at the default rate of interest which is 10%. The Company began accounting for the Vulcan note receivable at the default rate of 14%, thereby increasing both interest income and interest expense payable, but interest expense increased more due to the difference in face values of the notes. During the second quarter, the Company refinanced (via Financier 2) half of the Vulcan Note, which reduced interest expense in the current quarter. In the third quarter of 2014, the Company recorded additional expenses associated with convertible debt.

 

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Nine months ended September 30, 2014 and 2013

 

A comparison of the consolidated statements of operations for the nine months ended September 30, 2014 and 2013 is as follows:

 

Revenues:

The following table summarizes our revenues for the nine months ended September 30, 2014 and 2013:

 

Nine months ended September 30,  2014   2013 
Total revenues  $90,000   $100,000 

 

The Company was able to leverage its consulting expertise in the area of foreign exchange in the third quarter of 2014. This revenue was generated by one customer. There was no significant difference between the periods.

 

Operating expenses:

The following table summarizes our operating expenses for the nine months ended September 30, 2014 and 2013:

 

Nine months ended September 30,  2014   2013 
Total operating expenses  $314,014   $336,275 

 

The difference between nine-month periods is insignificant. The Company downsized its operations during the third quarter of 2014, compared to the same period in 2013, especially in the area of legal expenses. The increase in operating expenses in the third quarter is due to the commitment fee due to Blackbridge, which is a convertible note. The Company does not consider the debt to be valid, but has expensed on its financials to be conservative. Ignoring that charge for the commitment fee due to Blackbridge, which includes both the market value of 90,000,000 shares and the $90,000 commitment fee, the current period is lower than the prior period.

 

Other income (expenses):

The following table summarizes our other income (expenses) for the nine months ended September 30, 2014 and 2013:

 

Nine months ended September 30,  2014   2013 
Interest income  $42,000   $30,893 
Interest expense   (47,046)   (31,545)
Amortization of Debt Discount   (3,657)   - 
Change in fair value of embedded derivative liability   (3,686)   - 
Net other income/expense   (13,243)   652 

 

During the third quarter, the difference between the interest expense owed and the interest income earned was less than $1,000. In the third period, the company earned roughly the same amount in interest income that it accrued in interest expense.

 

During the second quarter, the Company began accounting for the Vulcan note payable at the default rate of interest which is 10%. The Company began accounting for the Vulcan note receivable at the default rate of 14%, thereby increasing both interest income and interest expense payable, but interest expense increased more due to the difference in face values of the notes. During the second quarter, the Company refinanced (via Financier 2) half of the Vulcan Note, which reduced interest expense in the current quarter. In the third quarter of 2014, the Company recorded additional expenses associated with convertible debt.

 

Liquidity and Capital Resources

 

Our cash and cash equivalents were $24 and $0 for the periods ended September 30, 2014 and September 30, 2013, respectively, an increase of $24.

 

Cash (used by) operating activities for the nine months ended September 30, 2014 and 2013 was $(82,398) and $(35,257), respectively.

 

Cash used by investing activities for the nine months ended September 30, 2014 and 2013 was $0 and $0, respectively.

 

Cash provided by financing activities for the nine months ended September 30, 2014 and 2013 was $82,422 and $40,364, respectively.

 

On February 13, 2012, DirectJV entered into a Joint Venture Agreement (the "JV Agreement") with Vulcan Oil & Gas Inc. ("Vulcan"), whereby the Company would from time to time provide financing to certain Vulcan alternative, green and solar energy projects (the "Projects") with the goal of sharing in any rebates awarded by the government on any of the Projects. Pursuant to the JV Agreement, Direct JV provided Vulcan with $68,000 in cash (the Funding") and credit for inventory valued at $31,328 for a total investment value of $99,328 (the "Investment").

 

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On January 7, 2013, effective December 31, 2012, the Company, DirectJV and Vulcan entered an agreement pursuant to which the Direct JV Agreement was terminated, the Company issued to Vulcan a 4% convertible promissory note in the principal amount of $500,000 (the "Forex Note") and Vulcan issued to the Company a 10% Secured Promissory Note in the principal amount of $400,000 (the "Vulcan Note" and collectively with the Forex Note, the "Notes") in consideration of the Forex Note.

 

The Forex Note maturity date is December 31, 2013, which can be extended by the Company for an additional one year at which point the 4% interest rate will increase to 10% per annum. The Forex Note may be prepaid without penalty. The Forex Note conversion price is the Variable Conversion Price, which is defined as 50% multiplied by the average of the lowest three trading prices of the Company's common stock on the OTCBB during the 10-day trading period ending on the latest complete day of trading on the OTCBB prior to the date of conversion. The Variable Conversion Price cannot be less than $0.002 ($10 on a post split basis). At no time will Vulcan convert any amount of the Forex Note into common stock that would result in Vulcan owning more than 4.99% of the common stock outstanding of the Company.

 

The Vulcan Note has a 10% one-time interest charge on the principal sum. The interest rate will be increased by an additional 4% per annum (e.g. 14% per annum) in the event the principal is not paid by the December 31, 2013 maturity date. The collateral or security of the Vulcan Note is 50,000 watts of solar modules. The Vulcan Note may be prepaid without penalty.

 

After closing the Notes and recording of the difference as a debt discount, there are no further balances between the parties and the JV Agreement is null and void. The Company has received Vulcan's consent (subject to a fee to be negotiated upon the Company entering an agreement, with a minimum fee in the amount of the Funding) to begin negotiations with private groups to purchase certain knowledge and assets for the production of proprietary solar modules, directly or via third party. While management is of the opinion that these discussions may successfully produce agreements, there can be no guarantee of this.

 

We plan to raise working capital that will allow us to conduct our business for the next twelve months. There is no guarantee regarding our ability to raise that capital. We expect to use the proceeds to fund our short-term capital requirements including paying administrative expenses associated with maintaining our public company’s filings for the next 12 months.    In order to implement our business plan and pay various administrative expenses on a minimal basis for the next 12 months, we expect that we will need approximately $25,000 per month, minimum.   We expect to be able to remain in operations for a period of 12 months with cash on hand and/or cash from collecting receivables and/or other debts.  The Company expects that its operating results will fluctuate significantly from quarter to quarter in the future and will depend on a number of factors including the state of the worldwide economy and financial markets, which are outside the Company's control.

 

Debt Financing Arrangements

 

a) Convertible Notes Payable

 

On October 6, 2009, the Company signed a note payable for $25,000 to Rasel Ltd due on October 6, 2010, bearing interest at 4% per annum. The proceeds were used to pay for half of existing accounts payable for legal fees incurred at the Company’s inception. On October 20, 2009, the Company signed a note payable for $50,000 payable to Rasel due on October 20, 2010, bearing interest at 4% per annum (collectively, the “Rasel Note”). These proceeds were used to pay for startup costs, audit fees and future expenses. On January 22, 2010, the Company signed a note payable for $50,000 payable to Rasel due on October 30, 2011, bearing interest at 4% per annum. These proceeds were used for working capital and expenditures. On January 22, 2010, the Company signed an amendment to extend the maturity date of the promissory notes in the amount of $25,000 and $50,000 dated October 6, 2009 and October 20, 2009, respectively, to October 30, 2011. On March 2, 2011, the Company and Rasel agreed to extend the maturity of all notes to December 31, 2012, in consideration of adding a conversion feature to the notes with either a 5% discount to the market price or a fixed price of $0.60. The extension of maturity was effective as of December 30, 2010.

 

The balance of the notes as of September 30, 2014 and December 31, 2013, was $74,969 and $145,847. About 50% of the note balance at December 31, 2013 ($73,812.50) was paid off in 2014 by Financier 2. The remainder of the note is currently in default since the beginning of 2013; and the Company will attempt to reach an amicable settlement with the counterparty. The Company has accrued $2,935 of interest expense in 2014.

 

b) Note Payable

 

On December 31, 2012, the Company converted a payable in the amount of $155,242 to a note payable. The note bears annual interest at 10%, and was to mature on December 31, 2012. The Company has negotiated an extension to the maturity date until December 31, 2013. The note is currently in default; the Company will attempt to reach an amicable settlement with the counterparty.

 

The balance at September 30, 2014 and December 31, 2013, including accrued interest, is $61,120 and $97,552, respectively. The note was reduced for revenue received during the nine months ended September 30, 2014 from the Note holder.

 

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c) Issuance of note payable to third party

 

On July 24, 2013, the Company entered into a Securities Purchase Agreement with a third party financing source ("Financer 1"), for the issuance of an 8% convertible note in the principal amount of $42,500 (the "July 2013 Note"), of which $2,500 was for legal fees associated with the transaction.  The financing closed on July 31, 2013.

 

The July 2013 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on April 29, 2014.  The July 2013 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00009 ($0.45 on a post split basis).  In the event the Company prepays the July 2013 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.

 

Financer has agreed to restrict its ability to convert the July 2013 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received from this offering was $42,500, less $2,500 in attorney’s fees. As of the date of the July 2013 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The July 2013 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

In April 2014, Financier converted the entire remaining note balance, and released the company from its debt, which is a zero balance. On or about September 3, 2014, the Company issued another note to the Financier payable for $32,500 (“September 2014 Note”), of which $2,500 was for legal fees associated with the transaction. The terms of the new note were similar to the terms described above, with a maturity of March 5, 2015.

 

The September 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on March 5, 2015.  The September 2014 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00001.  In the event the Company prepays the September 2014 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.

 

Financer has agreed to restrict its ability to convert the September 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received from this offering were $32,500, less $2,500 in attorney’s fees pursuant to the terms of this convertible agreement. As of the date of the September 2014 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The September 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company  and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

In 2014, the Company has accrued $1,069 of interest on the September 2014 Note. The Company anticipates that Financier 1 will convert the September 2014 Note, as it converted the July 2013 Note. During the nine months ended September 30, 2014, Financier 1 converted $44,200 of the July 2013 Note into 31,994,477 shares of common stock (6,399 shares post-split) at an average conversion price of $0.0014 per share ($7 on a post split basis).

 

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d) Third Party Note Payable

 

On May 13, 2014, the Company entered into an agreement with a third party financing source ("Financier 2"), for the issuance of an 8% convertible note in the principal amount of $147,625 (the "May 2014 Note").  In conjunction with the issuance of the May 2014 Note, an existing note holder (Rasel, owner of the Rasel Notes) agreed to have the proceeds of the May 2014 Note used to offset the amounts owed to them as evidenced by the Assignment of Convertible Debenture agreement dated May 12, 2014, between the holders of the Rasel Notes and Financier 2. The Assignment of Convertible Debenture agreement calls for the Financier 2 to make two payments of $73,812.50 each to the existing note holder (Rasel Notes). On May 13, 2014, the Financier 2 made the first payment to the existing note holder (Rasel Notes), however, Financier 2 defaulted on their obligation to make the second payment per the Assignment of Convertible Debenture agreement. As a result, Forex and Financier 2 have mutually agreed to release Financier 2 from its’ obligation for the second payment, and the other half of the note in the amount of $73,812.50 reverted back to Rasel.

 

The May 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on September 1, 2014.  The May 2104 Note is convertible into common stock, at Financer 2’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.0001 ($0.50 on a post split basis).

 

Financer 2 has agreed to restrict its ability to convert the May 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   As of the date of the May 2014 Note, the Company is obligated on the Note issued to Financer 2 in connection with the offering. The May 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

During the nine months ended September 30, 2014, Financier converted 322,000,000 shares (64,400 shares on a post-split basis) at an average valuation of approximately $0.00021 per share ($1.05 on a post split basis). There is currently a balance on the note of approximately $7,635.

 

e) Convertible note payable to Blackbridge

 

On June 16, 2014, the Company entered into a set of agreements (collectively, the “Agreement”) with Blackbridge, a financial services firm. The Company and Blackbridge were discussing an equity line of credit, and the Company agreed to pay Blackbridge a commitment fee of 90,000,000 shares (18,000 shares post-split), and also issued a convertible note for $90,000 having a 5% interest rate that matures on December 16, 2014. The note can be converted after the maturity date. The conversion price is 90% multiplied by the market price, which is defined in the agreement as the lowest of the daily trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.

 

The` Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

 

Expected dividends   0%
Expected volatility   15848%
Expected term: conversion feature   183 days 
Risk free interest rate   0.11%

 

The fair value of the embedded conversion option on the commitment date was $6,314. The Company recorded a related debt discount of $6,314, which is amortized over the life of the debt. For the nine months ended September 30, 2014, the Company amortized $3,657 of debt discount.

 

At September 30, 2014 the Company remeasured the derivative liability and recorded a fair value of $10,000. As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as an expense totaling $3,686 for the nine months ended September 30, 2014. The following management assumptions were considered:

 

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Exercise price  $0.45 
Expected dividends   0%
Expected volatility   11582%
Risk fee interest rate   0.11%
Expected life in days   77 

 

The Company does not believe that the debt is valid, but has accrued the notes on its financial statements to be conservative. The reason that it does not believe the Blackbridge Agreement to be valid is that the parties agreed at the time that the Blackbridge Agreement was signed that it would take 90-120 days to file an S-1 to register the shares needed for the equity line of credit and that such commitment fee would not be payable until such time. The Blackbridge Agreement states, however, that the Company has only 60 days from the date that the Agreement was signed to file an S-1 to register the shares, which the parties agreed was an impossible requirement to meet. The failure to meet that requirement was an event of default in the Blackbridge Agreement, and the counterparty, which could terminate the Blackbridge Agreement at its sole discretion, did not grant a waiver of this clause, despite knowing that that requirement was unrealistic, particularly given the Company’s thin cash position. The inability to register the shares within the required timeframe guaranteed the default of the Company under the Blackbridge Agreement from the outset. As such, the Company believes that said Agreement is null and void, because it lacked the capacity to perform under the Blackbridge Agreement.

 

If the Company does not satisfy Blackbridge, the counterparty may litigate against the Company. There is the potential, though not the likelihood, of litigation in this dispute.

 

f) Convertible Note Payable

 

On January 7, 2013, effective December 31, 2012, the Company, JV and Vulcan entered an agreement pursuant to which the JV Agreement was terminated, the Company issued to Vulcan a 4% convertible promissory note in the principal amount of $500,000 (the "Forex Note") and Vulcan issued to the Company a 10% Secured and Collateralized Promissory Note in the principal amount of $400,000. The Company recognized a debt discount in the amount of $100,000 for the difference in the face value of the note issued and the note received from the same party. The face value of the note payable is shown net of the debt discount. This debt discount will be amortized over the one-year life of the note. The note has a maturity date of December 31, 2013, and can be extended by the Company for an additional one year at which point the 4% interest rate will increase to 10% per annum. The Forex Note may be prepaid without penalty. The Forex Note conversion price is the Variable Conversion Price, which is defined as 50% multiplied by the average of the lowest three trading prices of the Company's common stock on the OTCBB during the 10-day trading period ending on the latest complete day of trading on the OTCBB prior to the date of conversion. The Variable Conversion Price cannot be less than $0.002. At no time will Vulcan convert any amount of the Forex Note into common stock that would result in Vulcan owning more than 4.99% of the common stock outstanding of the Company.

 

As of December 31, 2013, the entire debt discount has been amortized in the accompanying financial statements, and $20,000 of interest expense was accrued during the year ended December 31, 2013. Another $37,500 of interest expense was accrued in the nine months ended September 30, 2014. The Company is negotiating an offset of the Forex Note against the note receivable from Vulcan as final satisfaction, and will recognize a gain or loss on its financial statements at that time.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Critical Accounting Policies and Estimates

 

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

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Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the useful lives of tangible and intangible assets, depreciation and amortization, allowances for doubtful accounts and loan losses, valuation of common and preferred stock issuances, and the valuation allowance on deferred tax assets. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.

 

Notes and Short-Term Receivable

 

The notes and short-term receivable are carried at cost, which approximates fair value. The Company measures the impairment of loans based on its historical loan collection experience and existing economic conditions. Impairment is recognized when management believes it is probable that payments will not be received on some portion of the loan, which is determined on an individual loan basis. The Company evaluates loans for impairment on an annual basis or when there are indications that the loan may not be collected. When management determines that a loan is impaired it is placed on non-accrual status, and an allowance for loan losses is established to recognize the estimated amount of impairment. Payments received on non-accrual loans are generally applied to the outstanding principal balance. Loans are removed from non-accrual status when management believes that the borrower will resume making the payments required by the loan agreement.

 

Revenue Recognition

 

Income from foreign currency operations is earned by referring potential customers to foreign exchange trading companies. Foreign exchange trading companies remit a percentage of their revenues to the Company in exchange for customer leads, which the Company recognizes when the exchange trading occurs.

 

The Company recognizes consulting fees when services have been rendered.

 

Share-Based Compensation

 

The Company calculates stock-based compensation expense including compensation expense for all share-based payment awards made to employees and directors including employee stock options, stock appreciation rights and restricted stock awards based on their estimated grant date fair values. The value of the portion of the award that is ultimately expected to vest is recognized as an expense on a straight-line basis over any required service period. No such expenses were recognized for the three months or for the nine months ended September 30, 2014 and 2013.

 

(R) Derivative Financial Instruments

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

 

Earnings (Loss) Per Share

 

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. Because of the Company’s net losses, the effects of stock options, convertible notes, and convertible preferred stock would be anti-dilutive and accordingly, is excluded from the computation of earnings per share. Diluted loss per share has not been computed for the three and nine months ended September 30, 2014 and 2013 because any potential additional common shares would reduce the reported loss per share and therefore have an antidilutive effect.

 

24
 

  

The number of such shares excluded from the computations of diluted loss per share totaled 15,887,639 shares and 249,523,503 shares issuable upon the conversion of convertible debt, for the nine months ended September 31, 2014 and 2013, respectively.

 

Dividends

The Company has not yet adopted any policy regarding payment of dividends.  No dividends have been paid or declared since the Date of Inception.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the year covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of the end of the applicable period to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.


As a smaller reporting company, without a viable business and revenues, the Company does not have the resources to install a dedicated staff with deep expertise in all facets of SEC disclosure and GAAP compliance. As is the case with many smaller reporting companies, the Company will continue to consult with its external auditors and attorneys as it relates to new accounting principles and changes to SEC disclosure requirements. The Company has found that this approach worked well in the past and believes it to be the most cost effective solution available for the foreseeable future. The Company will conduct a review of existing sign-off and review procedures as well as document control protocols for critical accounting spreadsheets. The Company will also increase management's review of key financial documents and records.

 

As a smaller reporting company, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities within the accounting function. However, Company management does review, and will increase the review of, financial statements on a monthly basis, and the Company's external auditor conducts reviews on a quarterly basis. These actions, in addition to the improvements identified above, will minimize any risk of a potential material misstatement occurring.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal controls over financial reporting during the first three months of 2014 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Legal Proceedings

 

On June 16, 2014, the Company entered into a set of agreements (collectively, the “Blackbridge Agreement”) with Blackbridge, a financial services firm. The Company and Blackbridge were discussing an equity line of credit, and the Company agreed to pay Blackbridge a commitment fee of 90,000,000 shares (18,000 shares post-split), and also issued a convertible note for $90,000 having a 5% interest rate that matures on December 16, 2014. The note can be converted after the maturity date. The conversion price is 90% multiplied by the market price, which is defined in the agreement as the lowest of the daily trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.

 

The Company does not believe that the debt is valid, but has accrued the notes on its financial statements to be conservative. The reason that it does not believe the Blackbridge Agreement to be valid is that the parties agreed at the time that the Blackbridge Agreement was signed that it would take 90-120 days to file an S-1 to register the shares needed for the equity line of credit and that such commitment fee would not be payable until such time. The Blackbridge Agreement states, however, that the Company has only 60 days from the date that the Agreement was signed to file an S-1 to register the shares, which the parties agreed was an impossible requirement to meet. The failure to meet that requirement was an event of default in the Blackbridge Agreement, and the counterparty, which could terminate the Blackbridge Agreement at its sole discretion, did not grant a waiver of this clause, despite knowing that that requirement was unrealistic, particularly given the Company’s thin cash position. The inability to register the shares within the required timeframe guaranteed the default of the Company under the Blackbridge Agreement from the outset. As such, the Company believes that said Agreement is null and void, because it lacked the capacity to perform under the Blackbridge Agreement.

 

If the Company does not satisfy Blackbridge, the counterparty may litigate against the Company. There is the potential, though not the likelihood, of litigation in this dispute.

 

 

25
 

  

Item 1A. Risk Factors.

 

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

 

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

 

Recent Issuances of Unregistered Securities

 

On July 24, 2013, the Company entered into a Securities Purchase Agreement with a third party financing source ("Financer 1"), for the issuance of an 8% convertible note in the principal amount of $42,500 (the "July 2013 Note"), of which $2,500 was for legal fees associated with the transaction.  The financing closed on July 31, 2013.

 

The July 2013 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on April 29, 2014.  The July 2013 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00009.  In the event the Company prepays the July 2013 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.

 

Financer has agreed to restrict its ability to convert the July 2013 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received from this offering was $42,500, less $2,500 in attorney’s fees. As of the date of the July 2013 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The July 2013 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

In April 2014, Financier converted the entire remaining note balance, and released the company from its debt, which is a zero balance. On or about September 3, 2014, the Company issued another note to the Financier payable for $32,500 (“September 2014 Note”), of which $2,500 was for legal fees associated with the transaction. The terms of the new note were similar to the terms described above, with a maturity of March 5, 2015.

 

The September 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on March 5, 2015.  The September 2014 Note is convertible into common stock, at Financer’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.00001.  In the event the Company prepays the September 2014 Note in full, the Company is required to pay to Financer an amount in cash equal to all principal, interest and any other amounts owing multiplied by (i) 112% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing and (iii) 126% if prepaid 61 days following the closing through 90 days following the closing and (iv) 131% if prepaid 91 days following the closing through 120 days following the closing and (v) 136% if prepaid 121 days following the closing through 150 days following the closing and (vi) 141% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.

 

Financer has agreed to restrict its ability to convert the September 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received from this offering were $32,500, less $2,500 in attorney’s fees pursuant to the terms of this convertible agreement. As of the date of the September 2014 Note, the Company is obligated on the Note issued to Financer in connection with the offering. The September 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

26
 

  

In 2014, the Company has accrued $1,069 of interest on the September 2014 Note. The Company anticipates that Financier 1 will convert the September 2014 Note, as it converted the July 2013 Note. During the nine months ended September 30, 2014, Financier 1 converted $44,200 of the July 2013 Note into 31,994,477 shares of common stock (6,399 shares post-split) at an average conversion price of $0.0014 per share ($7 on a post split basis).

 

d) Third Party Note Payable

 

On May 13, 2014, the Company entered into an agreement with a third party financing source ("Financier 2"), for the issuance of an 8% convertible note in the principal amount of $147,625 (the "May 2014 Note").  In conjunction with the issuance of the May 2014 Note, an existing note holder (Rasel, owner of the Rasel Notes) agreed to have the proceeds of the May 2014 Note used to offset the amounts owed to them as evidenced by the Assignment of Convertible Debenture agreement dated May 12, 2014, between the holders of the Rasel Notes and Financier 2. The Assignment of Convertible Debenture agreement calls for the Financier 2 to make two payments of $73,812.50 each to the existing note holder (Rasel Notes). On May 13, 2014, the Financier 2 made the first payment to the existing note holder (Rasel Notes), however, Financier 2 defaulted on their obligation to make the second payment per the Assignment of Convertible Debenture agreement. As a result, Forex and Financier 2 have mutually agreed to release Financier 2 from its’ obligation for the second payment, and the other half of the note in the amount of $73,812.50 reverted back to Rasel.

 

The May 2014 Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on September 1, 2014.  The May 2104 Note is convertible into common stock, at Financer 2’s option, at the greater of a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion or $0.0001.

 

Financer 2 has agreed to restrict its ability to convert the May 2014 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.   As of the date of the May 2014 Note, the Company is obligated on the Note issued to Financer 2 in connection with the offering. The May 2014 Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act") for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Financer is an accredited investor, Financer had access to information about the Company and their investment, Financer took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

 

During the nine months ended September 30, 2014, Financier converted 322,000,000 shares (64,400 shares on a post-split basis) at an average valuation of approximately $0.00021 per share ($1.05 on a post split basis). There is currently a balance on the note of approximately $7,635.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4.  Mine Safety Disclosures

 

Not Applicable.

 

Item 5.  Other Information

 

On April 29, 2011, GV Global Communications, Inc. (“GV”) provided funding to the Company in the aggregate principal amount of $111,000 (the “Loan”).  On September 25, 2012, the Company and GV entered into a Conversion Agreement pursuant to which the Company agreed to convert the Loan into 10,000 shares of Series C Preferred Stock of the Company, which was approved by the Board of Directors.

 

Each share of Series C Preferred Stock is convertible, at the option of GV, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined below) by the Conversion Price (as defined below).  The Conversion Price for each share is equal to a 50% discount to the average of the lowest three lowest closing bid prices of the Company’s common stock during the 10 day trading period prior to the conversion with a minimum conversion price of $0.002.  The stated value is $11.00 per share (the “Stated Value”).  The Series C Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series C Preferred Stock shall be entitled to one vote for each share of common stock that the Series C Preferred Stock shall be convertible into.   GV has contractually agreed to restrict its ability to convert the Series C Preferred Stock and receive shares of the Company's common stock such that the number of shares of the Company's common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of the Company's common stock.

 

27
 

  

Effective October 21, 2013, GV notified the Company of its intention to convert 345 of Series C Preferred into 1,897,500 shares of common stock of the Company, representing a conversion price of $0.002 per share ($100 on a post split basis). The Company instructed its transfer agent to issue the required shares to GV. On November 5, 2013, 2013, GV notified the Company of the additional conversion of 380 of Series C Preferred into 2,090,000 (418 on a post split basis) shares of common stock of the Company. On November 11, 2013, 2013, GV notified the Company of the additional conversion of 380 of Series C Preferred into 2,090,000 (418 on a post split basis) shares of common stock of the Company. On November 26, 2013, 2013, GV notified the Company of the additional conversion of 425 of Series C Preferred into 2,337,500 (468 on a post split basis) shares of common stock of the Company. On January 2, GV notified the Company of the additional conversion of 1,800 of its Series C Preferred into 9,900,000 shares of common stock of the Company. After these conversions, GV holds 6,670 Series C Preferred shares as of March 31, 2014.

 

During the first two quarters of 2014, GV Global Communications, Inc converted 7,770 of its Series C Preferred Stock into 64,551,667 common shares (12,910 shares post-split). During the third quarter, the Company received 21,021,900 common shares (4,204 shares post-split) to adjust the shares issued to reflect the amount that both they and the Company felt that they were owed.

 

The following table shows how the conversions were accounted for within the Series C and Common Stock Additional Paid in Capital accounts. This table shows the share amounts before and after the reverse split that took effect on or around October 3, 2014:

 

   Series C               Series C     
   Convertible Preferred               Convertible Preferred     
   Stock   Common Stock (pre-split)   Common Stock (post-split)   Stock   Common Stock 
                           Additional Paid   Additional Paid 
   Shares   Amount   Shares   Amount   Shares   Amount   In Capital   In Capital 
                                 
Balances at December 31, 2013   8,470   $-    247,303,586   $2,473    49,461   $2,473   $188,322   $2,050,621 
                                         
Conversion of Series C Preferred Stock to Common Stock   (7,770)        64,551,667    646    12,910    646    (172,758)   172,112 
Adjustment to Series C Preferred Stock             21,021,900    210    4,204    210         (210)
Stock issued for services             90,000,000    900    18,000    900         98,100 
Conversion of note payable to common stock             353,994,477    3,540    70,799    3,540         106,838 
                                         
Balances at September 30, 2014   700   $-    776,871,630   $7,769    155,374   $7,769   $15,564   $2,427,461 

 

This presentation shows the impact on the Additional Paid-in Capital account for the Series C Preferred and Common Stock, whereas the financial statements present the Additional Paid-in Capital as one combined account.

 

The issuance of the Series C Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder.  GV is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.  

 

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

Exhibit No.   Description
3.1   Certificate of Incorporation of Forex International Trading Corp. (6)
3.2   Bylaws of Forex International Trading Corp. (6)
3.3   Certificate of Designation for Series A Preferred Stock (14)
3.4   Certificate of Designation for Series B Preferred Stock (21)
3.5   Certificate of Designation – Series C Preferred Stock (22)
3.6   Amendment to the Certificate of Designation for the Series B Preferred Stock (25)
3.7   Amendment to the Certificate of Designation for the Series C Preferred Stock(25)
4.1   Convertible Promissory Note issued by the Company to ATL dated July 8, 2010 (3)
4.2   Secured and Collateralized Promissory Note issued by ATL to the Company dated July 8, 2010 (3)
4.3   Collateral and Security Agreement by and between Forex International Trading Group and ATL dated July 7, 2010 (3)
4.4   Promissory Note issued to Rasel Ltd. Dated October 6, 2009(7)
4.5   Promissory Note issued to Rasel Ltd. Dated October 20, 2009 (7)
4.6   Letter Agreement between Rasel Ltd. and Forex International Trading Corp. dated January 22, 2011 (8)
4.7   Letter Agreement by and between Forex International Trading Group and ATL dated November 8, 2010(9)
 4.8   6% Convertible Note issued to APH (11)
4.9   6% Convertible Debenture issued to HAM  dated April 5, 2011 (14)
4.10   Promissory Note dated November 30, 2011 issued to Cordellia d.o.o. in the amount of $1,000,000 (18)
4.11   $500,000 Convertible Promissory Note issued by Forex International Trading Corp. (23)

 

28
 

  

4.12   $400,000 Secured and Collateralized Promissory Note issued by Vulcan Oil & Gas Inc. (23)
4.13   Securities Purchase Agreement dated July 24, 2013 entered with Asher Enterprise Inc. (26)
4.14   Convertible Promissory Note issued to Asher Enterprises Inc. (26)
10.1   Software Licensing Agreement dated April 12, 2010, by and between Forex International Trading Corp and Triple (1)
10.2   Employment Agreement dated April 23, 2010, by and between Forex International Trading Corp and Darren Dunckel (2)
10.3   Letter Agreement by and between Forex International Trading Corp. and Anita Atias, dated July 29, 2010 (4)

 

10.4   Letter Agreement by and between Forex International Trading Corp. and Stewart Reich, dated July 29, 2010 (4)
10.5   Letter Agreement by and between Forex International Trading Corp. and Mr. William Glass, dated August 6, 2010 (5)
10.6   Share Exchange Agreement by and between Forex International Trading Corp. and APH (10)
10.7   Letter Agreement by and between Forex International Trading Corp., APH, Medirad Inc. and Rasel Ltd. (11)
10.8   Letter Amendment by and between Forex International Trading Corp. and William Glass, dated March 4, 2011 (13)
10.9   Letter Amendment by and between Forex International Trading Corp. and Stewart Reich, dated March 4, 2011 (13)
10.10   Employment Agreement by and between Forex International Trading Corp. and Liat Franco, dated March 7, 2011 (13)
10.11   Agreement between Forex International Trading Corp. and APH dated April 5, 2011 (14)
10.12   Conversion Agreement between MP and Forex International Trading Corp. dated April 5, 2011 (14)
10.13   Share Exchange Agreement between Forex International Trading Corp. and dated April 5, 2011 (14)
10.14   Agreement to Unwind and Mutual Release dated as of July 11, 2011 by and between Forex International Trading Corp., Forex NYC and Wheatley Investment Agreement by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated September 27, 2011 (16)
10.15   Registration Rights Agreement with Centurion by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated September 27, 2011 (16)
10.16   Intentionally Left Blank
10.17   Settlement Agreement by and between Forex International Trading Corp., A.T. Limited, Watford Holding Inc. and James Bay Holdings, Inc. dated November 1, 2011 (17)
10.18   Settlement and Foreclosure Agreement between Forex International Trading Corp., AP Holdings Limited, H.A.M Group Limited and Cordellia d.o.o.(18)
10.19   Annulment of Share Purchase Agreement dated December 5, 2011 between Triple 8 Limited, AP Holdings Limited, H.A.M Group Limited and 888 Markets (Jersey) Limited (18)
10.20   Promissory Note issued to Forex International Trading Corp. dated December 13, 2011 (19)
10.21   Stock Pledge Agreement executed by Fortune Market Media Inc. dated December 13, 2011 (19)
10.22   Conversion Agreement between the Company and GV Global Communications, Inc. (22)
10.23   Agreement by and between and Direct JV Investments Inc., Forex International Trading Corporation and Vulcan Oil & Gas Inc. dated January 7, 2013 (23)
10.24   Evaluation License Agreement dated September 2, 2013, by and between Forex International Trading Corp and Micrologic Design Automation, Inc. (27)
10.25   Letter Agreement dated January 2, 2014, by and between Forex International Trading Corp and Micrologic Design Automation, Inc. (28)
21.1   List of Subsidiaries (24)
31.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS*  

XBRL Instance Document

     

101.SCH*

 

XBRL Taxonomy Extension Schema

     

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase

     

101.DEF*

 

XBRL Taxonomy Extension Definition  Linkbase

     

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase

     

101.PRE*

 

XBRL Taxonomy Extension Presentation Document

 

*  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. 

(1)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2010
(2)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 28, 2010
(3)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 13, 2010
(4)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 3, 2010
(5)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 9, 2010

 

29
 

  

(6)   Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on September 9, 2009.
(7)   Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on November 2, 2009.
(8)   Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on January 29, 2010.
(9)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 22, 2010
(10)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 17, 2010
(11)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2011
(12)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2011

 

(13)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2011
 (14)   Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 6, 2011
(15)   Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 20, 2011
(16)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 29, 2011
(17)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 9, 2011
(18)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 12, 2011
(19)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 16, 2011
(20)   Incorporated by referenced to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 13, 2012
(21)   Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 14, 2012
(22)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 27, 2012.
   
(23)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 9, 2013.
(24)   Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 15, 2013.
(25)   Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 20, 2012.
(26)    Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 1, 2013.
(27)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 4, 2013.
(28)   Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2014.

 

30
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 

 

FOREX INTERNATIONAL TRADING CORP.

(Registrant)

 
       
Date: November 18, 2014 By: /s/ Igwekali Reginald Emmanuel  
    Igwekali Reginald Emmanuel  
    Chief Executive Officer  
    and Sole Director (Principal Executive, Financial and Accounting Officer)  

 

In accordance with 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   NAME   TITLE   DATE
             
/s/ Igwekali Reginald Emmanuel   Igwekali Reginald Emmanuel   CEO and Sole Director   November 18, 2014
        (Principal Executive, Financial and Accounting Officer)    

 

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